Loan Aims to Stabilize Economy and Support Vulnerable Populations
The World Bank has provided Nigeria with a $1.5 billion loan, in response to the country’s recent economic reforms, including the cessation of fuel subsidies and the introduction of new tax measures.
Two-Pronged Funding Strategy Under RESET and ARMOR Programs
This financial support forms part of a larger $2.25 billion initiative, which includes the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing Program and the Nigeria Accelerating Resource Mobilization Reforms (ARMOR) Program-for-Results. The funds are designed to provide immediate financial and technical aid to stabilize Nigeria’s economy and enhance support for those most economically vulnerable.
Loan Structure and Disbursement Details
The loan is split into two tranches. The first tranche, amounting to $750 million from the International Development Association, has a 12-year maturity with a 6-year grace period. The second tranche, also $750 million from the International Bank for Reconstruction and Development, offers a 24-year repayment term with an 11-year grace period. The first tranche was disbursed on July 2, 2024, while the second was released in November 2024 after meeting specific economic reform conditions.
Reforms and Their Impact
The RESET program focuses on bolstering Nigeria’s economic policy framework, aiming to create fiscal space and safeguard the welfare of the economically insecure. Meanwhile, the ARMOR program supports the execution of tax reforms and strengthens tax and customs administration to ensure oil revenue security.
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Government’s Commitment to Reform
Nigeria has taken decisive steps towards economic recovery by unifying exchange rates and adjusting fuel prices to eliminate subsidies. The Central Bank of Nigeria has also tightened monetary policy to combat inflation, with a targeted cash transfer program introduced to mitigate the impact on the poor.
Statements from Key Figures
Wale Edun, Nigeria’s Finance Minister, emphasized the government’s commitment to macroeconomic stability and inclusive growth, welcoming the support from the World Bank. Ousmane Diagana, World Bank Vice President for Western and Central Africa, praised Nigeria’s reform efforts as a potential model for economic stabilization and poverty alleviation in Africa.
Exceeding Expectations in Reform Implementation
Nigeria has not only met but surpassed the conditions set for the loan’s release by fully deregulating the fuel market ahead of schedule. This action has led to the price of Premium Motor Spirit (PMS) being market-determined, reflecting the country’s proactive approach to economic reform.
