Nigeria's Federal Government has obtained $751.88m out of the recently approved $1.5bn World Bank facility under the Nigeria Reforms for Economic Stabilisation to Enable Transformation, Development Policy Financing Programme project.
The loan was disbursed on June 28, 2024, documents from the Bretton Wood's institution.
This loan project is a part of the broader $2.25bn approved by the World Bank for Nigeria on June 13, 2024, to bolster Nigeria’s economic stability and support its vulnerable populations.
The $1.5bn loan comprises two separate agreements between Nigeria and the World Bank: An International Development Association credit of $750m, and an International Bank for Reconstruction and Development loan of $750m.
The amount disbursed includes the entire $750m from the IDA loan and $1.88m from the IBRD of the World Bank, with an undisbursed balance of $748.13m. It also had fee charges of $1.88m.
The proposed DPF for Nigeria consists of a standalone operation with two tranches designed to support significant reforms in alignment with the government’s economic stabilisation and recovery priorities.
This operation is structured around four key results distributed across two pillars, which include increasing fiscal oil revenues from 1.8 per cent of Gross Domestic Product in 2022 to 2.7 per cent by 2025, boosting non-oil fiscal revenues from 5.3 per cent to 7.3 per cent over the same period, expanding social safety nets to assist 67 million vulnerable Nigerians, and raising the import value of previously banned products from $11.3m to $54.6m by 2025.
The Federal Ministry of Finance is tasked with the implementation of these reforms, working under the oversight of the World Bank, which collaborates with other key national stakeholders such as the Central Bank of Nigeria and the Ministry of Humanitarian Affairs and Poverty Alleviation to monitor and assess the progress and impact of these reforms.
The World Bank will provide supervision and support throughout the implementation process, ensuring that the operation’s goals are met efficiently and effectively.
Nigeria, according to the financing agreement documents for the loan, is expected to meet certain conditions to get the entire funds.
Both IDA Credit and IBRD loan agreements have the same requirements, according to the loan agreement documents obtained from the World Bank.
Some of the actions to be undertaken under this loan project include a presidential executive order mandating all fiscal transfers to the Federal Government, including those from crude oil sales and gasoline imports, to be executed at the prevailing market exchange rate within a specified implementation period.
The submission of a draft bill to the National Assembly to progressively increase the VAT rate to at least 12.5 per cent by 2026 and allow input tax credits for capital and services.
Also, the World Bank included a submission of a revised bill to the National Assembly mandating the use of the national social registry as the primary targeting tool for social investment programmes.
The documents read, “No withdrawal shall be made of the single withdrawal tranche unless the bank is satisfied, after an exchange of views as described in paragraphs (a) and (b) of Section 3.01 of Article III of this agreement based on evidence satisfactory to the bank with the progress achieved by the borrower in carrying out the programme;
“That the macroeconomic policy framework of the borrower is adequate;
that the actions described in Section I.B [which are the key requirements presented in the next section of this report] of this schedule have been taken.
“If, after this exchange of views, the bank is not so satisfied, it may give notice to the Borrower to that effect and, if within 90 days after the notice, the borrower has not taken steps satisfactory to the bank, concerning paragraphs (a), (b) and (c) above, then the bank may, by notice to the borrower, cancel all or any part of the unwithdrawn loan balance.”
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