• Monday, May 27, 2024
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Nigeria to exit World Bank IDA lending window


Nigeria will in the near future stop accessing funds through the World Bank International Development Association (IDA) lending window for low income countries, having attained some higher economic conditions that now make it eligible to borrow internationally on commercial terms.

But it will then transit to the International Bank for Reconstruction and Development (IBRD) lending programme of the global bank, which comes with some interests attached, unlike the IDA.

Announcing this Monday in Abuja, Marie Francoise Marie-Nelly, World Bank Country Director for Nigeria, said discussions on this are currently being held, and that if the plan pulls through, Nigeria will, after the next six to seven years, no longer obtain World Bank loans under those ‘cheap’ IDA conditions but will transit to the the bank’s IBRD window which is not as lenient.

Marie-Nelly spoke while briefing journalists on the outcomes of the recent Spring Meetings of the International Monetary Fund (IMF) and the World Bank.

She said the transition would take between six and seven years, during which Nigeria would be classified a ‘blind country’, a status which places it in between the two windows and will give it access to both IDA and IBRD outlets.

She said, “Nigeria has been an IDA country only, and IDA applies only to countries with Gross National Income per capita that is assessed each year. Te most recent one is $1,170 and Nigeria is just above that, at $1,200 and it has been above for the past two years and willing to enter the third year, we hope that will continue like that.

“So, when a country moves to the status, they do not go strictly to IBRD on commercial terms, there is a transition period during which Nigeria continues to get its IDA allocation, but start also to access resources from the IBRD window. But for IDA, the terms will change, instead of having 40 years repayment period, it will now be 25 years repayment.

“The grace period also moves down from 10 years to 5 years and then you also have an interest rate, currently at about 1.3 percent. Nigeria will then continue to benefit from the resources but it is the condition that will change. Gradually, the IBRD will step in and gradually IDA will be reduced, till it is finally terminated. In general, this is done within a six to seven year period, so we should expect Nigeria to be in the blind status for what we call the IDA 17 which is a new cycle which will start in 2014 and in the IDA 18 as well.”

The World Bank is made up of two development institutions owned by their 187 member countries: the International Bank for Reconstruction and Development (IBRD), which is the Bank’s original lending arm and the International Development Association (IDA) which compliments the former.

While IDA is the concessional lending arm of the World Bank, which supports the efforts of the world’s poorest countries to reduce poverty, improve living conditions and boost economic growth, the IBRD focuses on middle income and creditworthy poor countries.

Loans and grants under the IDA (called credits) which are often termed ‘free money ‘ come with quite lenient conditions, including little or no interest rates, repayment period over 40 years, including a 10-year grace period and an administration.

A country can only access IDA resources if it has relative poverty, defined as Gross National Income (GNI) per capita below $ 1,135; lacks creditworthiness to borrow on market terms and therefore needs concessional resources to finance its development programme. It also needs to have a good policy performance, defined as the implementation of economic and social policies that promote growth and poverty reduction.

On the other hand, theIBRD loans do not come that cheap, but have some interest rates which are determined by the London Interbank Offered Rate, (LIBOR).

Speaking further at the event, Marie-Nelly disclosed that the World Bank is about completing its second developmental Country Partnership Strategy (CPS) for Nigeria, which focused on three pillars; sustainable and inclusive non-oil growth, human development and governance for results. About $1.2 billion was budgeted for Nigeria under this strategy.

The bank is now preparing the third one, which would apply between 2014 and 2017 under which it has also earmarked up to $1.2 billion developmental funding for the country.

She said with the CPS 1 & 11, the bank was able to significantly increase its engagement at the state level, and made governance an integral part of its activities, while moving towards a result- based approach, away from an input approach.

The country director said the new strategy would focus on efforts to support improved competitiveness and increased growth. The bank would also see to fostering social inclusion and reducing vulnerability supported by a strong governance programme.