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FULL LIST: Conditions for $15bn World Bank loan to Nigeria

The World Bank has indicated it might cancel a significant $1.5 billion loan if Nigeria fails to meet specific requirements outlined in the financing agreements per Nairametrics

This information comes from the financing agreement documents for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing Program (DPF) project, 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 consists of two separate agreements: an International Development Association (IDA) credit of $750 million and an International Bank for Reconstruction and Development (IBRD) loan of $750 million.

According to one of the documents, “No withdrawal shall be made of the Single Withdrawal Tranche unless the Bank is satisfied, after an exchange of views as described in paragraphs (a) and (b) of Section 3.01 of Article III of this Agreement based on evidence satisfactory to the Bank:

– with the progress achieved by the Borrower in carrying out the programme;
– that the macroeconomic policy framework of the Borrower is adequate;
– that the actions described in Section I.B [key requirements] of this Schedule have been taken.”

The document further states that if the World Bank is not satisfied with Nigeria’s progress, it may issue a notice to the Nigerian government. If concerns are not addressed within 90 days, the World Bank may cancel all or part of the remaining loan balance.

The document highlights several macroeconomic reforms Nigeria has already implemented, including:
– Increasing gasoline prices,
– Removing certain tax allowances,
– Introducing new taxes,
– Eliminating a negative import list to improve affordability and trade,
– Improving revenue remittance systems,
– Implementing a targeted cash transfer program to protect the poor and economically insecure.

Key Requirements for the Loan

The IDA Credit and IBRD loan agreements outline specific actions that Nigeria must undertake:

1. Presidential Executive Order: All fiscal transfers to the Federal Government, including those from crude oil sales and gasoline imports, must be executed at the prevailing market exchange rate within a specified implementation period.

2. Value-Added Tax (VAT) Reforms: A draft bill must be submitted 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.

3. National Social Investment Programme Bill: A revised bill must be submitted to the National Assembly mandating the use of the national social registry as the primary targeting tool for social investment programmes.

Loan Repayment Terms

IDA Credit Repayment Terms: The $750 million credit is to be repaid in equal instalments on April 15 and October 15 each year, commencing October 15, 2030, and concluding on April 15, 2036. Initial repayments will be 8.33334% of the principal amount, with the final instalment adjusted to 8.33326%. There is a maximum commitment charge rate of 0.5% per annum on the unwithdrawn financing balance.

IBRD Loan Repayment Terms: The $750 million loan is to be repaid semi-annually on April 15 and October 15 each year, starting October 15, 2035, and ending April 15, 2048. Each instalment will be 3.85% of the total principal amount, with the final payment slightly adjusted to 3.75%. There is 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 loan balance.

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