$800m Loan for ‘Palliatives’: Civil Society Organisations Fault Nigerian Government, Doubt Transparency

Civil Society Organisations under the auspices of Open Alliance have raised serious concerns over the $800m loan agreement between Nigeria and the World Bank.

Open Alliance, a coalition of civil society organisations working together to improve openness and accountability in government, in a statement expressed serious concerns over the plan of the Nigerian government to acquire a loan of $800m from the World Bank to distribute through cash transfers to vulnerable and poor Nigerians.

Recall that the federal government earmarked N3.36tn for petroleum subsidy for the first six months of 2023, with a commitment to end the subsidy in June 2023.

Furthermore, it stated that the savings resulting from the termination of the fuel subsidy would be utilised in providing palliatives to the most vulnerable Nigerians to cushion the eff ects of the subsidy removal.

Open Alliance is taken aback by the announcement of an $800m World Bank loan to be distributed through cash transfers to 50m Nigerians in 10m households captured in the National Social Register (NSR).

Available documents on the World Bank website reveal that the Bank approved the loan on December 16, 2021, more than six months before the Nigerian government had announced a terminal date for the petrol subsidy regime.

The financing agreement of the loan reveals that the agreement was signed on August 16, 2022, with a repayment schedule commencing in 2027 and ending in 2051.

As seen in the loan’s implementation and results report, while $747m out of the $800m will be disbursed through economic shock responsive and extended regular cash transfer, $53m will be spent on project management and system strengthening.

It is essential to note the aforestated loan is the second phase of a National Social Safety Nets Project that commenced in 2017. In 2017, Nigeria acquired a $500m loan from the World Bank to provide access to targeted transfers to poor and vulnerable households under an expanded national social safety nets

As of August 2022, $493.32m had been disbursed to Nigeria, and as of February 2023, Nigeria had repaid a principal amount of $32.1m 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 capital projects and human capital development.

Furthermore, Nigeria’s National 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 worsened across several development indicators despite the funds deployed. While 133m Nigerians were adjudged to have been multidimensionally 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 N500bn to be distributed to the vulnerable and poor under the Social Investment Program. The results, according to available data shows that between 2018 and 2019 the level of poverty rose from 39.1% in 2018 to 40.1% in 2019 and 63% in 2022.

Seeing that Nigeria has begun to repay the principal and interest on the $500m 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 a 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 get to the intended beneficiaries. Thirdly, considering the devaluation risk of such an endeavour, 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 ease to Nigeria’s macroeconomic environment?

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 ineffi cient subsidies like the petrol subsidy.

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.

Anything short of this will further impoverish Nigeria and provide the enabling environment for state capture. As a matter of urgency, the Open Alliance calls on the Nigerian government to review this action as it does not mean well for the citizens of Nigeria.

The Open Alliance encourages the government to cut its appetite for borrowing, as 96% of Nigeria’s revenue is already used to service debts. The Open Alliance has clarified that the Nigerian government must shun borrowing for consumption and invest in enterprises that can repay the debts.

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