- FG is seeking a fresh $50 million loan to fund prepaid metres, solar projects and others to boost Nigeria’s power sector
- The World Bank has also disbursed $751.88 million for RESET, DPF project
- The loan requests raise concerns about the number of times the Tinubu government has borrowed to fund projects
The Federal Government is seeking a fresh $50 million loan to support state governments in installing solar plant pilots and infrastructure upgrades, tariff frameworks, market reforms and co-financing the Transmission Company of Nigeria’s Performance Improvement Plan.
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated this while chairing a meeting with World Bank delegates led by Dr Ndiamé Diop, Country Director for Nigeria and Ms Olu Verheijen, Special Adviser to the President on Energy, in his office on Monday, July 15.
Edun said the meeting discussed innovative ways to accelerate Nigeria’s power sector, including the roll-out of 3.5 million metres to enhance power distribution.
He added that the World Bank-supported initiatives, including the Power Sector Recovery Operation (PSRO) and the Distribution Sector Recovery Programme (DISREP), aimed at improving power distribution and management systems in order to ensure economic growth and development.
A statement by Mohammed Manga, the ministry’s Director, Information and Public Relations, said, “In its renewed determination to drive economic growth and development in the country, the Federal Government has continued to engage with relevant stakeholders to boost power sector investments as a major priority area for achieving desired objective.
“Key highlights from the meeting include plans to roll out 3.5 million metres to enhance power distribution, $50 million funding for state solar plant pilots and infrastructure upgrades, measures to support tariff frameworks, market reforms and co-financing the Transmission Company of Nigeria’s Performance Improvement Plan.”
Edun and the World Bank delegates expressed their commitment to working together to achieve the goals, which aim to strengthen Nigeria’s power sector, enhance energy access, promote economic growth and development, improve job creation, and alleviate poverty in line with President Bola Tinubu’s ‘Renewed Hope’ agenda.
World Bank disburses $751.88m for RESET, DPF project
Meanwhile, the World Bank has disbursed $751.88 million to Nigeria from a $1.5 billion loan recently approved for the Reforms for Economic Stabilisation to Enable Transformation, Development Policy Financing Programme (DPF) project.
The $1.5 billion loan consists of two separate agreements between Nigeria and the World Bank: an International Development Association (IDA) credit of $750 million and an International Bank for Reconstruction and Development (IBRD) loan of $750 million.
The amount disbursed so far is the entire $750 million from IDA and $1.88 million from IBRD, while $748.13 million is yet to be disbursed.
The loan is part of a $2.25 billion approved by the World Bank on June 13 to bolster economic stability and support vulnerable populations.
Is President Tinubu on a borrowing spree?
The fresh loan being sought by the Federal Government comes days after the Senate, on Thursday, July 11, approved a request from President Tinubu to borrow $800 million from the World Bank to help ameliorate the impact of high fuel prices, caused by his administration’s removal of fuel subsidy.
In a letter to the Senate, Tinubu sought the lawmakers’ approval to get the loan, which had been approved by former President Muhammadu Buhari’s government to assist in scaling up the National Social Safety Net Programme.
Tinubu said under the programme, 12 million poor households will be paid N8,000 per month for six months, adding that, “The purpose of the facility is to expand coverage of shock responsive safety net support among the poor and vulnerable Nigerians.”
On May 30, the Federal Government secured a $500 million loan from the World Bank to strengthen the country’s electricity distribution sector.
According to the Bureau of Public Enterprises (BPE), the loan will help tackle the challenges facing electricity distribution companies (DisCos) and focus on key areas of improvement such as bulk procurement of customer/retail metres and metre data management systems, implementation of Data Aggregation Platform and strengthen governance and transparency within the DisCos.
A statement by BPE’s Head of Public Communication, Amina Othman, said, “Approved on February 4, 2021 by the World Bank board of directors, this funding supports the Nigerian Distribution Sector Recovery Programme aimed at improving the financial and technical performance of DisCos through capital investment and the financing of key components of their Performance Improvement Plans, which have been approved by the Nigerian Electricity Regulatory Commission.”
In November 2023, President Tinubu requested the Senate to approve the government’s plan to borrow $7.8 billion and €100 million as part of the 2022-2024 borrowing plan, raising concerns about the country’s rising debt profile.
Tinubu, in a letter to the Senate, said the request was a sequel to the approval given by President Muhammadu Buhari’s administration on May 15, 2023.
He said the projects to be covered by the loan cut across different sectors, such as infrastructure, agriculture, health, education, water supply, security, employment, and financial management reforms.
Between June and September 2023, the World Bank granted Nigeria a total of $1.95 billion loans to support various projects.
First, a $750 million loan was approved by the World Bank to boost Nigeria’s power sector through the Power Sector Recovery Performance-Based Operation on June 19, 2023.
The International Bank for Reconstruction and Development, the financier, would provide $449 million, while the International Development Association would provide $301 million.
Justifying the loan, the bank said, “Nigeria has the world’s largest absolute electricity access deficit. Lack of access to the electricity grid affects 45 per cent of the population (90 million people), making Nigeria the country with the largest number of people not connected to electricity. As such, Nigeria accounts for 12 per cent of the global access deficit.”
On June 27, 2023, the Federal Government secured a $500 million loan from the World Bank for Nigeria for Women Programme Scale Up (NFWP-SU) to help improve women’s livelihood, ensure better economic opportunities, education, health and build women’s communities’ resilience to climate change.
The World Bank Country Director for Nigeria, Shubham Chaudhuri, said, “We have seen promising outcomes from the parent NFWP, which has helped to create economic opportunities for thousands of rural women through the Women Affinity Groups.
“NFWP’s model is helping to improve livelihood opportunities for women, enhancing their capacity to adapt to climate change and participating in local administrations for policymaking related to community empowerment.”
In September 2023, the country secured a $700 million loan from the World Bank to support the Adolescent Girls Initiative for Learning and Empowerment programme among girls in select states.
The bank said, “The additional financing will scale up project activities from the current seven states to 11 additional states and increase the targeted beneficiaries to include out-of-school girls, those who are married and those who have disabilities.”
Domestic borrowings too
Within the first year of President Tinubu’s administration, the Federal Government borrowed N20.1 trillion from domestic investors, which is a 117 per cent increase year-on-year from the N9.275 trillion borrowed between June 2022 and May 2023.
The domestic borrowings were sourced through the issuance of Federal Government of Nigeria (FGN) Bonds, FGN Savings Bond and Sukuk Bonds by the Debt Management Office (DMO), in addition to the Nigeria Treasury Bills (NTBs) by the Central Bank of Nigeria (CBN).
Within the period, the Federal Government borrowed N13.235 trillion through NTBs, N6.476 trillion through FGN Bond auctions, N350 billion through Sukuk Bonds and N29.17 billion through FGN Savings Bonds.
The CBN is not left out
Between July and December, 2023, the Federal Government borrowed N2.94 trillion through Ways and Means Advances from the CBN. Ways and Means is a mechanism that allows the government to secure short-term or emergency financing from the CBN to address cash flow gaps.
Following the restructuring in June 2023, which saw the Federal Government’s debt to the CBN go down to N4.36 trillion, Tinubu’s N2.94 trillion borrowing further pushed the debt to N7.3 trillion. The figure has since gone up due to borrowings from the CBN’s Ways and Means Advances.
Bitter-sweet: Nigeria’s diaspora remittances have been on the increase and so is her debt profile
Meanwhile, TheRadar had reported that Nigeria’s diaspora remittances increased by $172 million, representing 90 per cent from $193.31 million in April to $365.44 million in May 2024, according to the Central Bank of Nigeria (CBN).
However, the country’s debt profile was equally rising, raising questions about debt sustainability and the cost of servicing debts.
