The World Bank has approved a $1.5-billion package to help Nigeria build a resilient recovery post-COVID19.
The loan was approved to help Nigeria reduce its growing population of poor people and promote sustained private sector-led growth.
The loan was approved for two separate projects.
First, Nigeria Covid-19 Action Recovery and Economic Stimulus – Program for Results (Nigeria CARES).
This program will help increase access to social transfers and basic services, as well as provide grants to poor and vulnerable households. It will also strengthen food supply chains for poor households while facilitating recovery and enhancing capabilities of MSMEs.
This is financed through an International Development Association (IDA) credit of $750 million.
The second project is the State Fiscal Transparency, Accountability and Sustainability Program for Results (SFTAS) Additional Financing.
This loan was given towards building on the progress made across 36 States, the original SFTAS program will be expanded and scaled up in response to COVID-19.
The Additional Financing will help meet the financing gap in the Program Expenditure Framework, due to the sharp reduction in government revenues associated with the crisis.
It will help increase the efficiency in spending, strengthen revenue mobilization, and enhance accountability and transparency in public resource management to further strengthen state-level COVID-19 response.
The project is financed through an International Development Association (IDA) credit of $750 million.
“To achieve sustainable post-COVID economic recovery, the country needs to strengthen reforms that support private sector solutions and crowd in private sector finance,” said Merli Baroudi, Director at MIGA for Economics and Sustainability.
“In close coordination with the World Bank and IFC, MIGA will continue to expand its support for cross-border private investment into Nigeria”.
What this means for Nigeria
A relief for poor and vulnerable households
The Nigeria CARES project targets the most vulnerable households to provide them with grants and other basic services.
The Bank predicted before COVID-19 began that about 2 million Nigerians were expected to fall into poverty in 2020 as the population growth outpaced economic growth.
The recession is likely to push an additional 6.6 million Nigerians into poverty in 2020, bringing the total newly poor to 8.6 million this year.
This increases the total number of poor Nigerians from about 90 million in 2020 to about 100 million in 2022.
A boost in external reserves
Nigeria’s external reserves has fallen to its lowest level since May at $34.97 billion. This means the Central Bank has lower capacity to defend the Naira which has already been devalued three times already this year.
The $1.5bn loan could offer some form of relief by boosting the reserves.