Nigeria has successfully received a $1.5 billion loan from the World Bank, marking a significant step in the government’s strategy to implement fuel subsidy removal and overhaul the tax system.
According to the latest World Bank report on the loan’s progress, the financial institution approved the loan under the Reforms for Economic Stabilisation to Enable Transformation Development Policy Financing initiative.
Naija News gathered that the loan was formally approved on June 13, 2024, with an initial disbursement of $750 million made on July 2, 2024.
The second tranche, also valued at $750 million, was released in November 2024, following the government’s fulfilment of specific economic reform targets.
This brings the total loan disbursement to $1.88 billion, contributing to the government’s economic stabilisation efforts.
The $1.5 billion loan was structured into two separate tranches, each with different repayment terms.
The first tranche, a $750 million credit, comes from the International Development Association and has a 12-year maturity period with a six-year grace period.
The second tranche, also worth $750 million, is from the International Bank for Reconstruction and Development, with a 24-year repayment period and an 11-year grace period.
The World Bank highlighted that Nigeria met the loan approval conditions by successfully implementing major reforms, including the removal of fuel subsidies, the harmonisation of exchange rates, and the introduction of tax policy changes.
A key milestone in the reform process was the President Bola Tinubu‘s submission of a comprehensive tax reform bill to the National Assembly in October 2024, despite opposition from some northern leaders.
The World Bank’s document further noted, “The borrower has prepared and submitted to the National Assembly on October 3, 2024, a comprehensive package of tax reforms, which not only reform the VAT regime but also simplify tax policy laws and tax administration.
“This document summarises the progress made under the Reforms for Economic Stabilisation 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) the first tranche comprising $750m credit from the International Development Association (Association) (shorter maturity loan terms with a 12-year maturity and grace period of 6 years, Credit No. 7567-NG); and (2) the second tranche comprising a $750m loan from the International Bank for Reconstruction and Development (Bank) (US dollar-denominated, commitment-linked loan with a 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.
“Reforms have also been implemented to fully deregulate the fuel market, ensuring that retail prices are determined by market conditions and opening the sector to competition. The authorities are following through on their commitment to cease deficit monetisation, relying instead on standard debt instruments to finance the deficit.”
