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FG seeks fresh $750m World Bank loan to boost economic stability

The federal government is pressing for a $750 million loan from the World Bank.

This loan project is a part of the broader $2.25 billion approved by the World Bank for Nigeria on June 13, 2024, to bolster Nigeria’s economic stability and support its vulnerable populations.

The other second part of the loan package was for the Nigeria Reforms for Economic Stabilization to Enable Transformation, Development Policy Financing Programme project.

Already, an agreement for the loan has been signed between Nigeria (through the Ministry of Finance) and the World Bank.

The agreement document read in part, “The bank agrees to lend to the borrower the amount of $750,000,000 as such amount may be converted from time to time through a currency conversion (“Loan”), to assist in financing the programme described in Part 1 of Schedule 1 to this Agreement (“Programme”) and the project described in Part 2 of Schedule 1 to this Agreement (“Project”, and together with the Programme, hereinafter jointly referred to as the “Operation”).

“The borrower may withdraw the proceeds of the loan in accordance with Section IV of Schedule 2 to this Agreement. All withdrawals from the loan account shall be deposited by the Bank into an account specified by the Borrower and acceptable to the bank.”

According to the Disbursement Linked Indicators set out in the loan agreement, the loan will only be released upon achieving measurable progress in key areas.

These include raising VAT collection through improved regulations, increasing excise taxes on health and environmental products, and boosting corporate tax compliance through enhanced digital infrastructure.

Central to the ARMOR programme is the government’s plan to increase VAT rates and expand taxpayer compliance.

Some of the loan targets include increasing VAT collections to 1.8 per cent of non-oil Gross Domestic Product, unlocking $105 million of the loan.

The World Bank said despite recent reforms, Nigeria’s non-oil tax revenues underperform due to low tax rates, poor compliance, a narrow tax base, and high tax expenditures.