World Bank Lends Nigeria For The 7th Time In One-year

The World Bank has approved a $2.25 billion loan for Nigeria to support economic reforms that have contributed to the uncomfortable cost-of-living crisis in the country.

Recall that in one of the episodes on MarketSquare, I shared about the fact that the government had applied for this loan and anticipated a response about this application in June, 2024.

The Minister of Finance, Wale Edun, at the spring meetings of the International Monetary Fund and the World Bank had announced that the nation had qualified for processing a loan.

The loan package approved by the Board of Directors of the World Bank, offers a 40-year term with a 10-year moratorium and a nominal one per cent interest rate and a 1% of interest. 

If you break the package of $2.25bn into two parts, $1.5bn of the loan is to be used for Nigeria Reforms for Economic Stabilisation to Enable Transformation Development Policy Financing Program and the $750 million Nigeria Accelerating Resource Mobilization Reforms Program-for-Results.

To make it clear, the $1.5 billion loan will help protect millions who have faced growing poverty since a year ago when President Bola Tinubu came to power and took drastic steps to fix the country's non-performing economy.

President Tinubu from the inauguration ceremony declared an end to the decades long but costly fuel subsidies. He also unified the multiple exchange rates through the Central Bank of Nigeria. 

This brought with it surging inflation that is at a 28-year high.

The remaining $750 million will support tax reforms and revenue and safeguard oil revenues threatened with limited production caused by chronic theft.

The government intends to do that through the principal Program Development Objective which will enhance non-oil revenues and protect oil and gas revenues from 2024 to 2028 at the federal level, focusing on significant tax, excise, and administrative reform.

This is not the first time the World Bank has approved Nigeria’s loan request. 

In 2023, the World Bank passed 6 loans. 

Loan for power of $750 million, loan for women empowerment of $500 million, loan for girls education of $700 million, loan for renewable energy of $750 million, loan for economic stabilisation reforms for $1.5 billion and loan resource mobilisation reforms ($750 million).

In total, under the administration of President Bola Tinubu has secured $4.95 billion in loans from the World Bank amidst concerns over the country’s rising external debt servicing costs.  

This high debt burden will already limit how much money the government can spend from its earnings. 

It is expected that the impact of this new secured loan should fulfil the goal of softening the impact of the policies being implemented by the Government. 

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