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Nigeria seeks 18-month deadline extension for World Bank’s $800 million palliative loan

Nigeria has requested an 18-month extension on the closing date of the World Bank’s $800 million palliative loan in a strategic move to bolster its social safety net programs amidst rising inflation and economic challenges.

According to a restructuring paper document on the project from the World Bank, the Nigerian government has requested to extend the closing date of the project from June 30, 2024, to December 31, 2025.

The extension seeks to realign project timelines and enhance the efficacy of the National Social Safety Net Program-Scale Up (NASSP-SU).

The document read: This paper seeks approval from the Country Director for a Level II restructuring of the National Social Safety Net Program Scale-Up project (NASSP-SU, P176935, Credit No. 7019-NG), an US$800 million Investment Project Financing (IPF). The restructuring will extend the project closing date by 18 months from June 30, 2024 to December 31, 2025. The benefit size and duration of the cash transfers under component 1 will also be changed.

Finally, the chairmanship of the project’s national steering committee will be changed from the Minister of Humanitarian Affairs and Poverty Alleviation to the Minister of Finance. This is the first restructuring and extension of the project’s closing date.”

Rationale for the Extension

The extension request stems from Nigeria’s ongoing battle with high inflation, which peaked at 33.2% in early 2024, exacerbated by the removal of fuel subsidies and exchange rate depreciation.

These economic pressures have pushed millions into poverty, necessitating expanded and sustained support for the vulnerable populations.

In a letter dated March 4, 2024, the Federal Ministry of Finance formally requested the extension to ensure comprehensive implementation of project activities.

The government’s ambitious reforms, including the removal of gasoline subsidies and a unified foreign exchange policy, while beneficial in the long run, have heightened short-term economic hardships.

The requested extension aims to provide additional time for rolling out and managing cash transfers, as well as strengthening the social safety net delivery systems.

Project Status

The NASSP-SU project, initiated to provide shock-responsive safety net support to Nigeria’s poor and vulnerable, was approved on December 16, 2021, and became effective on January 30, 2023.

Despite the delayed start due to legislative hurdles, the project has made significant strides. As of May 2024, the project has covered approximately 30 million beneficiaries, with around three million poor and vulnerable households receiving cash transfers.

The project’s implementation, however, faced a temporary halt from January to March 2024 due to a governmental review.

Following recommendations from a multi-ministerial panel, the project resumed with an emphasis on biometric verification of beneficiaries.

The project is now poised to extend its reach, leveraging the integration of the National Social Register (NSR) with the National Identification Number (NIN) system to enhance targeting accuracy.

So far, only 39.38% of the entire loan has been released to Nigeria, as there is a pending balance of about $485 million.

What you should know

To mitigate the adverse effects of inflation and economic reforms, the Nigerian government plans to reach 15 million households with N75,000 in temporary cash transfers, distributed in three monthly payments. This initiative is expected to be financed through the NASSP-SU project, which will also support reforms to strengthen the social registry.

The project restructuring will align with the government’s program, adjusting benefit sizes and durations of support, and enhancing collaboration between the Federal Ministry of Humanitarian Affairs and Poverty Alleviation (FMHAPA) and the National Identity Management Commission (NIMC) for beneficiary verification.

The restructuring also includes changes in institutional oversight, with the National Steering Committee now chaired by the Minister of Finance.


Source: Naijaonpoint.com.

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