Following the withdrawal of fuel subsidies, the Federal Government of Nigeria recently obtained a $800 million loan from the World Bank to provide palliative care for more than 50 million Nigerians.
Last week, the Minister of Finance, Budget and National Planning, Zainab Ahmed, revealed to State House journalists that the Federal Government has acquired $800m from the World Bank to provide post-petroleum subsidy palliatives for over 50 million Nigerians ahead of June 2023.
The money is to be redistributed to vulnerable folks recorded in its National Social Safety Net Programme.
The purpose of the project is to enhance coverage of shock-responsive safety net support among the poor and vulnerable and strengthen Nigeria’s national safety net delivery system till June 30, 2024.
The agreement was signed by the Nigerian finance minister and the World Bank Country Director for Nigeria, Shubham Chaudhuri, on August 16, 2022, and disclosed that the loan was concessional financing.
Because they have more lenient terms than market loans, concessional loans are sometimes known as soft loans.
These typically contain grace periods during which the loan recipient is not compelled to make debt payments for a number of years or below-market interest rates combined with grace periods.
According to the document, the Federal Government’s $800 million loan has a maximum commitment fee rate of 0.5 percent annually on the Unwithdrawn Financing Balance and a service charge of 0.7 percent annually on the Withdrawn Credit Balance.
It further noted that the interest fee is one and a quarter per cent per annum on the withdrawn credit balance.
Also, a percentage of the principal amount of the loan is expected alongside the other costs, and this will increase over time.
While the first payment will be 1.65 percent of the loan amount, the last payment will be 3.40 percent of the main amount.
Also, the agreement between the federal government and the World Bank involves a repayment plan which will be made from 2027 to 2051, twice a year.
When the new administration, headed by President-elect Bola Ahmed Tinubu, takes office, it is anticipated that the loan of $800 million will start to be repaid.