President Bola Ahmed Tinubu’s efforts at stabilising the economy and scaling up support for the most vulnerable citizens have received a $2.25 billion World Bank boost.
Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, broke the news of two major financial support packages in a statement last night.
They include $1.5 billion for the Nigeria Reforms for Economic Stabilisation to Enable Transformation (RESET) Development Policy Financing Programme (DPF) and $750 million for the Nigeria Accelerating Resource Mobilisation Reforms (ARMOR) Programme-for-Results (P-for-R).
The statement reads: “This combined total of $2.25 billion will offer essential financial and technical support as the government continues to address economic distortions.
“These reforms will create quality jobs and economic opportunities for all Nigerians.
“We welcome the support of the RESET and ARMOR programmes as we further consolidate and implement our policy reforms, consistent with accelerating investment and using public resources more sustainably to achieve our development goals.”
When it took the baton last year, the Tinubu Administration faced huge economic challenges.
It recognised the need for urgent reforms to reboot the economy and strengthen Nigeria’s financial outlook.
The unification of the multiple exchange rates and the stoppage of opaque subsidy payments on petrol were the initial measures taken to rescue the economy.
The Central Bank of Nigeria (CBN) has refocused on its core mandate of price stability, tightening monetary policy by increasing interest rates to reduce inflation.
A targeted cash transfer programme is being rolled out to cushion the impact of high inflation on poor and economically insecure households.
Ousmane Diagana, the World Bank Vice President for Western and Central Africa, hailed Nigeria’s efforts, stating: “Nigeria’s comprehensive macro-fiscal reforms are placing the country on a new path that can stabilise the economy and lift people out of poverty.
“It is essential to maintain the momentum of these reforms and continue to provide support to the poor and vulnerable to mitigate the impact of the cost-of-living crisis.
“This financing package strengthens the World Bank’s strong partnership with Nigeria and supports efforts to rejuvenate the economy and expedite poverty reduction, serving as an example for Africa.”
The focus areas of the programmes are RESET DPF, designed to strengthen the economic policy framework, create fiscal space and protect the poor and vulnerable.
The ARMOR P-for-R supports tax and excise reforms, improves tax revenue and customs administration, and safeguards oil revenues.
The International Development Association (IDA), the World Bank’s fund for the poorest countries, provides highly concessional funding with a 40-year term and an interest rate of just over one per cent.
IDA resources help boost economic growth, reduce poverty, and improve lives in the world’s 76 poorest countries, 39 of which are in Africa.
The approval of these financial packages marks a significant step in Nigeria’s efforts to stabilise its economy and create a sustainable path for growth and poverty reduction.
In April, Edun said Nigeria was seeking up to $2.25 billion facility from the World Bank and in a television chat monitored in Lagos on June 2, the minister hinted that the loan would be ready in two weeks. He assured Nigerians that in no distant time, the various reforms introduced by the government, will return the economy to the path of sustainable growth and drive down inflation drastically.
Edun listed the milestone achievements triggered by the reforms as including the gradual return of domestic and foreign investors’ confidence to the economy.
He said the government has paid N7.3 trillion overdraft from the Central Bank of Nigeria (CBN) under the “Ways and Means” policy in line with government’s fiscal discipline priorities.
On declining inflation and naira stability, the minister added that more foreign capitals have made inroads to the economy to boost FX liquidity.
He said: “I would say Mr. President Bola Tinubu has in his first year achieved relative stability of the economy. He has put it on a track of growth. And he has put together a package of intervention measures in agriculture in particular, which needs to be redoubled.
“They need to be re-emphasised and they need to be further extended in order to have the full effect. So, on the one hand, the macroeconomic measures which everybody knows were taken to save the economy, basically and bring it back from the edge of financial bankruptcy and in the foreign exchange markets from chaos, and illiquid.”
He, however, admitted that the initial measures taken to stabilise the economy has led to an inflationary spike in terms of the cost of fuel and secondly, in terms of the exchange rate, and also in terms of interest rates.
According to him, the CBN’s measures against inflation have started bearing fruit at a time when interest rates are high, which normally means that businesses find it hard to borrow and invest.
He said: “The economy is growing. People are finding sources of funding sources of equity, including government, putting in its own share of private public sector, funding for infrastructure in particular, and that is helping to create jobs and grow the economy.
“But on the other hand, inflation is high at 33.69 per cent and food inflation at 40.5 per cent, which is worrisome, but the fact is that inflation is coming down month by month, for it’s down to about 2.3 per cent month-on-month from nearly three per cent.”
