World Bank approves $1.5b to Nigeria after subsidy removal, tax bill reforms

This loan is part of a $2.25 billion financing package approved by the World Bank, which includes two programs: $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing (DPF) and $750 million for the Nigeria Accelerating Resource Mobilization Reforms (ARMOR) Program-for-Results (PforR).

According to the World Bank, this package aims to provide immediate financial and technical support for stabilizing Nigeria’s economy while addressing the needs of its most vulnerable citizens.

A document dated June 13, 2024, highlights that the loan supports Nigeria’s broader efforts to enhance non-oil revenue generation, protect oil revenues, ensure fiscal sustainability, and improve public service delivery.

The $1.5 billion loan was issued in two tranches: a $750 million credit from the International Development Association with a 12-year maturity and a six-year grace period, and another $750 million loan from the International Bank for Reconstruction and Development, featuring a 24-year repayment term and an 11-year grace period.

The first tranche was released on July 2, 2024, and the second tranche, tied to the fulfillment of specific reform conditions, followed in November 2024.

The RESET DPF focuses on strengthening Nigeria’s economic policy framework by creating fiscal space and protecting vulnerable groups, while the ARMOR PforR supports tax reforms, revenue enhancement, and safeguarding oil revenues.

The World Bank noted that Nigeria has taken significant steps to stabilize its economy, including unifying exchange rates, phasing out fuel subsidies, and implementing tighter monetary policies to curb inflation. To mitigate inflation’s impact on low-income households, a targeted cash transfer program is also being rolled out.

The document commended Nigeria for exceeding reform expectations, particularly by fully deregulating the fuel market ahead of schedule.

Effective October 2024, fuel prices have been determined by international market rates, and the exchange rate is now managed by the Central Bank of Nigeria.

World Bank Vice President for Western and Central Africa, Ousmane Diagana, lauded Nigeria’s bold macro-fiscal reforms, stating that they have set the country on a path to economic stability and poverty alleviation.

He emphasized the importance of sustaining these reforms to expand protections for vulnerable groups and accelerate economic recovery.

The financing package, he noted, underscores the World Bank’s strong partnership with Nigeria in its journey toward inclusive growth and poverty reduction.