From a newly approved $1.5 billion loan, the World Bank has given Nigeria $751.88 million. The sum was paid out under the Development Policy Financing Program (DPF) initiative, Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET).
This loan project is a portion of the larger $2.25 billion in reforms approved by the World Bank for Nigeria on June 13, 2024. The $1.5 billion loan is made up of two distinct contracts between Nigeria and the World Bank: a $750 million credit from the International Development Association (IDA) and a $750 million loan from the International Bank for Reconstruction and Development (IBRD). The entire $750 million from the IDA loan and $1.88 million from the World Bank were distributed, with an undisbursed balance of $748.13 million.
About the RESET project
Two tranches of a standalone operation intended to assist major changes in line with the government’s aims for economic stabilization and recovery make up the planned DPF for Nigeria.
The four main goals of this operation are broken down into two pillars: raising fiscal oil revenues from 1.8% of GDP in 2022 to 2.7% by 2025; increasing non-oil fiscal revenues from 5.3% to 7.3% during the same period; expanding social safety nets to help 67 million vulnerable Nigerians; and increasing the value of imported goods that were previously prohibited from going up from $11.3 million to $54.6 million by 2025.
The Federal Ministry of Finance (MOF) 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 (CBN) and the Ministry of Humanitarian Affairs and Poverty Alleviation (MHAPA) 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.
What you should know
According to the financing agreement documents for the loan, Nigeria 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.
The actions to be undertaken under this loan project include the following:
- Presidential Executive Order: A mandate for 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.
- Value-Added Tax (VAT) Reforms: Submission of a draft bill to the National Assembly to progressively increase the VAT rate to at least 12.5% by 2026 and allow input tax credits for capital and services.
- National Social Investment Program Bill: 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 programs.
So far, Nigeria has made progress in some areas, such as increasing gasoline prices and beginning the implementation of cash transfer programs.
However, continuous monitoring and adherence to the agreed reforms will be done to ensure the continued availability of funds. The World Bank team is expected to closely monitor Nigeria’s compliance with these conditions.
