In a bid to mitigate the impact of petrol subsidy removal on Nigerians, the Federal Government has initiated steps to secure a new $400 million loan from the World Bank. This funding is earmarked for a conditional cash transfer program benefiting 15 million households.
The total loan amount for this purpose would reach $1.2 billion, considering the earlier acquisition of an $800 million loan for the same initiative.
President Bola Tinubu announced this cash transfer program during the Independence Day address on October 1, emphasizing its role in alleviating the economic challenges resulting from the subsidy removal, which has led to a significant increase in the cost of living.
In addition to the cash transfer initiative, President Tinubu disclosed the commencement of a monthly payment of N25,000 to 15 million households for the last three months of 2023. This move follows negotiations with labor unions and stakeholders, aiming to raise the federal minimum wage without causing undue inflation.
It’s noteworthy that the preceding administration under President Muhammadu Buhari had previously secured an $800 million loan from the International Bank for Reconstruction and Development (World Bank) to provide post-subsidy palliatives for over 50 million Nigerians. The repayment of this loan was intended to be facilitated by the succeeding administration.
Addressing concerns raised by various groups, President Tinubu also approved a provisional N35,000 wage award for all treasury-paid Federal Government workers for six months, following further consultations with labor leaders.
Regarding Nigeria’s international financial standing, the country maintained its fourth position on the World Bank’s list of top 10 International Development Association (IDA) borrowers. Despite this, Nigeria’s IDA debt increased from $13 billion in June 2022 to $14.3 billion in June 2023.
In the World Bank’s Fiscal Year 2023 Annual Report, Nigeria was identified as the ninth-highest beneficiary, with a commitment of $1.55 billion for the fiscal year 2023. This follows recent reports of the Federal Government engaging the World Bank for a fresh $1.5 billion loan titled ‘Nigeria Human Capital for Opportunities and Empowerment,’ aimed at enhancing basic education and primary health services in participating states. The loan is set to be implemented in 2024, pending approval by the World Bank Group’s board.
Despite these financial engagements, concerns about Nigeria’s rising debt levels have been raised. As of June 30, 2023, Nigeria’s total debt reached approximately $14.51 billion, with $14.03 billion in IDA debt and $485.75 million in IBRD debt.
The Debt Management Office has cautioned that the government’s debt service-to-revenue ratio is high and poses a threat to sustainability. Efforts to increase revenue and explore alternative financing options, including private sector participation and asset privatization, have been suggested to address these challenges.