•Warns of potential cancellation
As the federal government salivates over the anticipated $1.5 billion loan from the World Bank, the global lender has indicated the facility may be cancelled if the country fails to meet specific conditions outlined in the financing agreements. This information is detailed in the financing documents for the Nigeria Reforms for Economic Stabilisation to Enable Transformation (RESET) Development Policy Financing Program (DPF) project, as reported by Nairametrics.
These documents were signed by Nigeria’s Minister of Finance, Wale Edun, and the World Bank’s Acting Country Director for Nigeria, Taimur Samad.
The $1.5 billion loan is divided into two parts: a $750 million credit from the International Development Association (IDA) and a $750 million loan from the International Bank for Reconstruction and Development (IBRD).
According to the agreements, the borrower (Nigeria) can only withdraw funds if the World Bank is satisfied with several criteria, including the progress of the program, the adequacy of the macroeconomic policy framework, and the completion of specific actions detailed in the agreement. If the World Bank is not satisfied after a review, it may issue a notice to Nigeria. If Nigeria does not address the concerns within 90 days, the World Bank may cancel all or part of the remaining loan balance.
The $750 million IDA credit is to be repaid in equal installments of 8.33334% of the principal amount, starting on October 15, 2030, and concluding on April 15, 2036. The final installment will be slightly adjusted to 8.33326%. There is also a maximum commitment charge rate of 0.5% per annum on the unwithdrawn financing balance.
For the IBRD, the $750 million loan is to be repaid semi-annually at 3.85% of the principal amount from October 15, 2035, to April 15, 2048, with a slight adjustment to 3.75% for the final payment. The loan includes a front-end fee of 0.25% of the loan amount ($1,875,000) and a commitment charge of 0.25% per annum on the unwithdrawn balance.
Records show that Nigeria has shown progress in some reform areas, such as increasing gasoline prices and implementing cash transfer programmes.
However, continuous adherence to the agreed reforms is essential to ensure the availability of the remaining funds. The World Bank team will closely monitor Nigeria’s compliance with the conditions to ensure transparency and accountability.
Failure to implement these reforms could result in the loss of the $1.5 billion loan, which is crucial for Nigeria’s economic stability and growth. Both financing agreements include stringent audit and reporting requirements to ensure proper use and management of the funds.
The World Bank’s warning highlights the importance of Nigeria’s commitment to the specified economic reforms. Continued compliance and transparency are essential for maintaining the financial support necessary for the country’s development and economic stabilisation.