World Bank approves $2.25bn financing package for Nigeria’s economic reforms

The World Bank has approved a funding package totaling $2.25 billion for Nigeria. The funding comprises two operations: a $1.5 billion Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing Program (DPF), and a $750 million Nigeria Accelerating Resource Mobilization Reforms (ARMOR) Program-for-Results (PforR). 

The World Bank’s $2.25 billion financing package, according to a statement titled “Supporting Nigeria’s Homegrown Reforms: New World Bank Financing for Inclusive Growth and Revenue Diversification”, aims to address Nigeria’s urgent need to stabilise its economy and provide support to the economically vulnerable, as well as assist the country’s long-term ambitions to increase non-oil revenues and safeguard oil revenues to ensure fiscal sustainability and adequate funding for public services.

Nigeria, facing an economically fragile situation, has initiated a series of critical reforms to address economic distortions and strengthen its fiscal outlook. These initial steps were essential to restore macroeconomic stability, increase government revenue, and create the necessary conditions for the country to re-energise economic growth and reduce poverty.

Nigeria’s reforms, designed to address its economic challenges, included unifying multiple exchange rates into one market-determined official rate, which aimed to bring clarity and transparency to the foreign exchange market. Additionally, the government made adjustments to petroleum prices, as a first step towards phasing out the non-transparent petrol subsidy. 

The Central Bank of Nigeria (CBN) has also taken action to support Nigeria’s economic stability by tightening monetary policy, including raising interest rates consecutively, in an effort to curb inflation and refocus on price stability.

The RESET DPF, with a focus on creating fiscal space and protecting vulnerable households, supports Nigeria’s efforts to strengthen its economic policy framework. The programme aims to provide financial assistance that enables the government to implement economic reforms and address the challenges facing the country.

Similarly, the ARMOR PforR supports the implementation of tax and excise reforms, strengthens tax and customs administrations, and safeguards oil revenues

Wale Edun, Nigeria’s minister of finance and coordinating minister of the economy, stated that  the government has embarked on bold and necessary reforms to restore macroeconomic stability and put the country back on a sustainable and inclusive economic growth path that will create quality jobs and economic opportunities for all Nigerians. 

Commenting on the World Bank’s funding package, he said,  “We welcome the support of the RESET and ARMOR programs as we further consolidate and implement our macro-fiscal and social protection policy reforms, consistent with accelerating investment and redirecting public resources sustainably to achieve development priorities.”  

Ousmane Diagana, the World Bank vice president for Western and Central Africa, remarked that Nigeria’s concerted efforts to implement far-reaching macro-fiscal reforms place it on a new path which can stabilise its economy and lift its people out of poverty. 

According to Diagana, it is critical to sustain the reform momentum and continue to scale up and expand protection to the poor and economically at risk to cushion the effects of cost-of-living pressures on citizens.

“This financing package reinforces the World Bank’s strong partnership with Nigeria, and our support towards reinvigorating its economy and fast-tracking poverty reduction, which can serve as a beacon for Africa,” he added.