The repayment of the $800 million loan approved by the World Bank as a subsidy palliative will start under the administration following that of President Muhammadu Buhari.
Zainab Ahmed, the minister of finance, budget, and national planning, revealed last week to State House reporters that the federal government had received $800 million from the World Bank to provide over 50 million Nigerians with post-petroleum subsidy palliatives before June 2023.
The project’s goals are to strengthen Nigeria’s national safety net delivery system through June 30, 2024, and to increase coverage of shock-responsive safety net support among the poor and vulnerable.
The loan was disclosed to be concessional financing in the document dated August 16, 2022 and signed by the Nigerian finance minister and Shubham Chaudhuri, the country director for Nigeria at the World Bank.
Concessional financing, according to the World Bank, is financing given to developing nations at rates below market to accelerate development goals. These institutions include development banks and multilateral funds.
According to the document, the Federal Government’s $800 million loan has a maximum commitment charge rate of 0.5 percent annually on the Unwithdrawn Financing Balance and a service charge of 0.7 percent annually on the Withdrawn Credit Balance.
The interest rate on the withdrawn credit balance, which is 1.25% annually, was also disclosed.
Along with the other fees, a percentage of the loan’s principal amount is also anticipated, and it will rise over time.
The first payment will be 1.65% of the total principal, and the final payment will be 3.40% of the total principal.
Starting on January 15, 2027, there will be two payment dates per year: January 15 and July 15. All payments will be made in US dollars.
In an effort to promote a cashless economy, the Central Bank of Nigeria had suggested using eNaira for cash transfers during the National Social Safety Net Programme Scale Up.
This was stated in the National FinTech Strategy document that was downloaded from the CBN website.
“The central bank can use a pre-programmed eNaira to pay intended beneficiaries on the social register,” the document stated. “This eNaira may only be accepted for a specific purpose and at specifically authorized locations.
“This use case will guarantee the appropriate use of social funds, ensure that high-quality data can be gathered on the effectiveness of these programs, and help to prevent money leakage or diversion. In financial services and related ecosystems where it is important to preserve the integrity of funds and the purposes for which they are used, this capability could be expanded to other use cases.
