World Bank Releases $1.5Bn Loan to Nigeria in Support of Tax Bills
World Bank has just released $1.5 billion loan to Nigeria, less than six months after approval.
This is in support for the Reforms for Economic Stabilisation to Enable Transformation (RESET) Development Policy Financing initiative.
The loan, approved on June 13, 2024, was released in record time following Nigeria’s implementation of critical reforms, including the removal of fuel subsidies and comprehensive tax policies.
This fast disbursement contrasts with other loan programmes, which typically experience delays due to slow or partial implementation of conditions.
For instance, the World Bank has also disbursed $1.88 million of a $750 million loan for the Accelerating Resource Mobilization Reforms (ARMOR) project, approved alongside the RESET programme.
The first tranche of $750 million, a credit facility under the International Development Association (IDA) with a 12-year maturity and six-year grace period, was disbursed on July 2, 2024.
The second tranche of $750 million, issued by the International Bank for Reconstruction and Development (IBRD) with a 24-year maturity and 11-year grace period, followed in November 2024.
The World Bank document read: “This document summarizes the progress made under the Reforms for Economic Stabilization to Enable Transformation Development Policy Financing for the Federal Republic of Nigeria (Borrower or Recipient), which was approved by the Executive Directors on June 13, 2024.
“The DPF is a standalone operation comprised of two tranches: (1) first tranche comprising US$750 million credit from the International Development Association (Association) (Shorter Maturity Loan terms with 12-year maturity and grace period of 6 years, Credit No. 7567-NG); and (2) second tranche comprising US$750million loan from the International Bank for Reconstruction and Development (Bank) (US dollar-denominated, commitment-linked loan with 24-year maturity and grace period of 11 years, Loan No.9683-NG). The Financing Agreement and Loan Agreement were signed and declared effective on June 19, 2024 and June 26, 2024, respectively. The first tranche was released on July 2, 2024.”
A major trigger for the second tranche was the removal of fuel subsidies.
The reforms allowed petrol prices to reflect international market rates and exchange rates, effectively ending implicit subsidies that strained public finances.
The deregulation, which began in mid-2023, saw petrol prices increase more than fivefold, drawing praise for fiscal discipline but sparking criticism over the rising cost of living.
The World Bank commended the government for not only meeting the condition but exceeding expectations by fully deregulating the fuel market.
The document noted: “In terms of implementation, while the TRC [Tranche Release Conditions] formulation required introducing the change over a specified time-bound implementation period, the Borrower has moved ahead and made the change immediately, thereby overachieving the TRC in this respect.
“Effective October 2024, the price of PMS has been determined by the international market and the exchange rate set by the Central Bank of Nigeria.
