In order to strengthen its social safety net initiatives, Nigeria has asked for an 18-month extension on the closing date of the $800 million palliative loan from the World Bank.
The appeal is in response to the nation’s struggle with growing inflation and other economic issues.
As to the World Bank’s restructuring paper document, the Nigerian government has proposed to extend the project’s closing date from June 30, 2024, to December 31, 2025.
The $800 million palliative loan has benefited almost three million impoverished and vulnerable households, according to the report.
The loan was issued by the apex bank to mitigate the impact of recent government actions, including the elimination of fuel subsidies.
Approximately 2.5 million of these recipients were from metropolitan regions, and 700,000 households were from rural areas.
The extension adds that 1,652 urban wards had been covered by the targeting system created under the project, and it aims to realign project timeframes and improve the effectiveness of the National Social Safety Net Program-Scale Up.
A portion of the document stated, “As of May 2024, over three million impoverished and vulnerable households had received shock-responsive cash transfers, and around 30 million people had been covered by social safety net programs since its inception. Approximately 2.5 million of these recipients were from metropolitan regions, and 700,000 households were from rural areas. The targeting method created for this project has covered 1,652 urban wards.
In order to further strengthen the targeting system, it also stated that a planned digital payment delivery mechanism had been implemented. This mechanism uses straight-through processing to deliver transfers directly to beneficiaries’ accounts or wallets while the National Social Register and the National Identification Number are being integrated.
The NASSP-SU project was approved on December 16, 2021, and went into effect on January 30, 2023. It was started to give Nigeria’s poor and vulnerable people shock-responsive safety net support.
The Federal Government intends to use this loan to fund a monthly cash transfer program for Nigerians who are poor and vulnerable and who have been severely impacted by recent policies like the elimination of fuel subsidies.
However, it was unexpectedly terminated after the Ministry of Humanitarian Affairs and Poverty Alleviation conducted an investigation into possible misconduct in the scheme’s management.
The government has requested permission to replace the Minister of Humanitarian Affairs and Poverty Alleviation as chairman of the project’s national steering committee with the Minister of Finance as part of the reorganization necessary to resume the cash transfer.
Additionally, it emphasized that the reason for the extension request is Nigeria’s continuous struggle with high inflation, which reached a height of 33.2% in early 2024 and was made worse by the elimination of fuel subsidies and depreciation of the currency.
A portion of the document said, “This paper requests clearance from the Country Director for a $800 million investment project financing, which involves a Level II restructuring of the National Social Safety Net Program Scale-Up project. Due to the reorganization, the project closure date will now be December 31, 2025, instead of June 30, 2024, by 18 months. There will be modifications to the duration and magnitude of the benefit of the cash transfers under component 1.
The project is still essential to the government’s ambitious plan to give temporary cash transfer support to those negatively impacted by high inflation, even after previous delays. This is especially true in light of the government’s removal of fuel subsidies and other macroeconomic reforms. There aren’t any outstanding financial or audit reports, and the audit requirements haven’t changed. The PIU’s procurement staff is becoming more capable, and contract management procedures are being enhanced. However, there have been some delays in acquiring important service providers. The World Bank will continue to support the project with embedded support to enhance procurement and financial management procedures.
Only 39.38% of the total loan amount has been disbursed to Nigeria thus far; the remaining balance is around $485 million.
The Nigerian government intends to provide 15 million households with N75,000 in temporary cash transfers, payable in three installments each month, in an effort to lessen the negative consequences of inflation and economic changes.
Each beneficiary household would receive a total benefit amount from the ESR-CT of seventy-five thousand Naira (N75,000), disbursed over three months. The benefit size for cash transfers will be increased from thirty thousand Naira (N30,000) per recipient household, distributed over six months, in accordance with the government’s announced policy and in response to growing inflation in recent years, it further added.
In the meanwhile, the bank has started working on a Security Risk Assessment and Management Plan that will provide guidance on the appropriate steps that stakeholders and project players should take to reduce security risks.
This is as a result of the bank’s recording of “two fatal incidents involving project staff.” One project worker was killed in his home by alleged armed bandits, and another project worker was involved in a car accident after returning from fieldwork. During a field exercise, a project staff member was involved in another vehicle accident that caused leg injuries, as stated by the project.
According to the document, the $800 million loan that the Federal Government obtained is subject to a maximum commitment fee rate of 0.5 percent annually on the unwithdrawn financing balance and a service charge of 0.75% annually on the withdrawn credit balance.
Additionally, it revealed that the withdrew credit balance carries an annual interest charge of 1.25%.
The final payment will be 3.40 percent, whereas the initial payment will be 1.65 percent of the principal amount.
In addition to the other fees, a portion of the loan principal—which will rise over time—is also anticipated.
