Nigeria Receives $1.5 Billion World Bank Loan Following Key Reforms
The World Bank has fully disbursed a $1.5 billion loan to Nigeria after the Federal Government implemented significant reforms, including the removal of fuel subsidies and the introduction of comprehensive tax policies. This loan, part of the Reforms for Economic Stabilisation to Enable Transformation Development Policy Financing initiative, is notable for its rapid disbursement, with both tranches released within six months.
Loan Details and Disbursement
- Approval: Approved on June 13, 2024.
- First Tranche: $750 million disbursed on July 2, 2024.
- Second Tranche: Disbursed in November 2024, following the fulfillment of specific economic reform conditions.
- Loan Structure:
- First Tranche: $750 million credit from the International Development Association (IDA) with a 12-year maturity and a 6-year grace period.
- Second Tranche: $750 million loan from the International Bank for Reconstruction and Development (IBRD) with a 24-year repayment period and an 11-year grace period.
Key Reforms
- Fuel Subsidy Removal: The government fully deregulated the fuel market, allowing prices to align with international market rates and exchange rates. This move, while praised for its fiscal prudence, has significantly increased fuel prices, impacting living costs.
- Tax Reforms: The Nigeria Tax Bill 2024 proposes a gradual increase in the Value Added Tax (VAT) rate to 10% by 2025, along with measures to simplify tax compliance and expand input tax credits for businesses.
World Bank Commendation
The World Bank commended the government for exceeding expectations in fuel subsidy removal, noting that the immediate deregulation surpassed the initial reform conditions.
Contrast with Other Loans
This rapid disbursement contrasts with other loan programs, which often experience delays due to slow or partial implementation of conditions.
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