The World Bank, headquartered in Washington, has disbursed a $1.5 billion loan to Nigeria to support the federal government’s initiatives, including fuel subsidy removal and tax reforms.
This was revealed in a recent World Bank report detailing the progress of the loan, which was implemented under the Reforms for Economic Stabilisation to Enable Transformation Development Policy Financing program.
The loan, approved on June 13, 2024, was released in two tranches. The first tranche of $750 million was disbursed on July 2, 2024, while the second tranche, tied to specific economic reforms, was disbursed in November 2024.
Structured with varying repayment terms, the loan included a $750 million credit from the International Development Association, featuring a 12-year repayment period and a six-year grace period. The second tranche, a $750 million loan from the International Bank for Reconstruction and Development, has a 24-year maturity and an 11-year grace period.
The World Bank highlighted that Nigeria met the loan’s conditions by implementing significant reforms, such as removing fuel subsidies, harmonizing exchange rates, and introducing comprehensive tax policies.
In October 2024, the Federal Government submitted a tax reform bill to the National Assembly. This proposal, aimed at overhauling the VAT system and simplifying tax laws and administration, sparked months of debate and resistance, particularly from Northern leaders.
The World Bank report also noted that fuel market deregulation had been achieved, allowing retail prices to be determined by market dynamics and fostering competition in the sector. The government also committed to ending deficit monetization and relying on standard debt instruments to finance deficits.
These reforms, while receiving praise for their potential to stabilize the economy, have faced criticism due to their adverse effects on the cost of living. Fuel prices increased fivefold, and the unified exchange rate caused significant currency devaluation, leading to inflation rates of 34.60% (headline) and 39.93% (food).
Although the government introduced measures to mitigate these impacts, such as distributing ₦25,000 to fewer than two million households and launching the Compressed Natural Gas Initiative as a cheaper alternative to fuel, these efforts have yet to reach full implementation, leaving many Nigerians grappling with rising costs.