Estimated reading time: 19 minute(s)
Civil Society Organizations in Nigeria, under the umbrella of Open Alliance, have expressed concerns over the Federal government’s plan to borrow $800m from the World Bank to distribute cash transfers to vulnerable and poor Nigerians.
The coalition has questioned the timing of the loan, as documents on the World Bank website show that the loan was approved in December 2021, more than six months before the Nigerian government announced the termination of the petrol subsidy regime.
The loan agreement is expected to be disbursed to 50 million Nigerians in 10 million households captured in the National Social Register (NSR).
In a statement signed by the National Open Alliance Coordinator, Iyanuoluwa Bolarinwa, the group expressed concern about the effectiveness of the cash transfer program and the lack of transparency in the National Social Register that warehouses the details of beneficiaries of the cash transfer program.
“As seen in the loan’s implementation and results report, $747m out of the $8oomn will be disbursed through economic shock responsive and extended regular cash transfer, and $53m will be spent on project management and system strengthening.
“It is essential to note the aforestated loan is the second phase of the National Social Safety Nets Project that commenced in 2017. In 2017, Nigeria acquired an S500m loan from the World Bank to provide access to targeted transfers to poor and vulnerable households under an expanded national social safety nets system.
“As of August 2022, $493.32m had been disbursed to Nigeria, and as of February 2023. Nigeria had repaid a principal amount of S32.1m and interest, charges, and fees summing up to $19.7m.
“Section 41 of Nigeria’s Fiscal Responsibility Act mandates the government at all levels to only borrow for projects and human capital development. Furthermore, Nigeria’s National. The Cash Transfer Program was established to improve the consumption levels of poor households, reduce poverty, prevent vulnerable households from becoming poorer, increase school enrolment, and improve child nutrition.
“Nigeria’s situation has crossed across several development indicators despite the funds deployed. While 133m Nigerians were adjudged to
have been multi-dimensionally poor in 2022, Nigeria’s out-of-school children have risen to about 20m.
“It’s important to note that in 2016, the government budgeted a sum of Nsoobn to be distributed to the vulnerable and poor under the Social Investment Program. The results, as seen between 2018 and 2019, show the level of poverty rose from 39.1% in 2018 to 4o.1% in 201g and 63% in 2022.
“Seeing that Nigeria has begun to repay the principal and interest on the S;o om loan acquired in 2017 and is on the verge of obtaining another $800m for cash transfers, it is crucial to evaluate the justification, appropriateness, and effectiveness of these sorts of multilateral loans and its implication for the fiscal sustainability of a country that is already neck-deep in fiscal crisis.
“Secondly, we are concerned about the monitoring and evaluation framework in place for the cash transfer program. Hence, the National Social Register, which warehouses the details of beneficiaries of the cash transfer program should be made public. This will aid accountability groups like Open Alliance to ensure that interventions like this to the intended beneficiaries.
“Thirdly, considering the devaluation risk of such an endeavor, we are shocked that the Federal Government would take a foreign debt to distribute palliatives to Nigerians. Why would Nigeria borrow in foreign currency for consumption purposes? Did we learn lessons from the foreign debt crisis settled in 2005? which provided significant cases in Nigeria’s macroeconomic environment?.” The group stressed
The coalition called on the Nigerian government to cut its appetite for borrowing, as 66% of Nigeria’s revenue is already used to service debts, urging the Nigerian government to review its decision to borrow the $800m loan from the World Bank.
“Considering the magnitude of expenditure inefficiency and the amount of waste in the budget, social protection programs like the National Social Safety Nets Program should rather be funded with savings from blocking revenue leakages, eliminating waste, and ending inefficient subsidies like the petrol subsidy.” It said
Bolarinwa emphasized that the government should focus on funding social protection programs with savings from blocking revenue leakages, eliminating waste, and ending inefficient subsidies like the petrol subsidy.
“Social protection programs like the National Social Safety Nets Program should rather be funded with savings from blocking revenue leakages, eliminating waste, and ending inefficient subsidies like the petrol subsidy,” Bolarinwa said.
It also called on the World Bank to lend responsibly to impoverished and fiscally challenged countries like Nigeria and involve citizens and other accountability actors in their decision-making process.
“We admonish the World Bank to live up to its name of being the World’s Bank by lending responsibly to already impoverished, fiscally challenged countries like Nigeria and involving citizens and other accountability actors in their decision-making process,” Bolarinwa added.
PLATFORM TIMES recalled that earlier in April, the Minister of Finance, Budget and National Planning, Zainab Ahmed, announced that the Federal Government had secured $800m from the World Bank to provide post-petroleum subsidy palliatives for over 50 million Nigerians ahead of June 2023.
The project aims to increase the scope of safety net assistance for those who are poor and vulnerable to shocks, as well as to improve Nigeria’s national safety net distribution system by June 30, 2024.
On August 16, 2022, the Nigerian finance minister and the World Bank Country Director for Nigeria, Shubham Chaudhuri, signed a document that disclosed the loan as concessional financing.
Concessional finance is provided by major financial institutions, such as development banks and multilateral funds, to developing countries at below-market rates to promote development goals, according to the World Bank.
The $800 million loan obtained by the Federal Government incurs a maximum commitment charge rate of 0.5% per annum on the Unwithdrawn Financing Balance and a service charge of 0.75% per annum on the withdrawn credit balance, as stated in the document.
The withdrawn credit balance incurs an interest charge of 1.25% per year, and additional charges will also apply, with the percentage of the loan principal increasing gradually over time. The initial payment will be 1.65% of the principal amount, while the final payment will be 3.40% of the principal amount.
Payment dates are set for January 15 and July 15 of each year, starting from January 15, 2027, and payments will be made in US dollars. Repayment will be in installments, starting on January 15, 2027, and ending on July 15, 2051.
As of May 29, 2023, a new president, Bola Ahmed Tinubu, is expected to take office in Nigeria and remain in power until May 29, 2027.
Consequently, the responsibility for repaying the $800m loan will fall on the incoming administration.
Estimated reading time: 1 minute(s)
FOOTNOTE: Do you want to share a story with us? Do you want to advertise with us? Do you need publicity for a product, service, or event? Contact us on WhatsApp +2348183319097 or email: firstname.lastname@example.org