New Telegraph

Finally, World Bank Breaks Silence On Buhari $800m Loan Request

The World Bank has finally broken the silence on the news report that President Muhammadu Buhari-led government is borrowing a whopping sum of $800 million from the multilateral institution.

The Director of the World Bank in Nigeria, Shubham Chaudhuri who spoke on Monday in an interview with This Day said it is not a fresh one.

New Telegraph reports that the World Bank Official disclosed that the $800 million facility was actually approved by the board of directors of the World Bank in December 2021.

The Director also stated that the decision to withdraw the loan facility would rest with the incoming Bola Tinubu government, adding that the National Assembly has the power to approve the loan request or not.

He further explains that securing the National Assembly’s approval would make it easy for the incoming government to easily deploy palliatives if it decides to phase out the country’s controversial fuel subsidy policy.

Chaudhuri, however, reiterated the need to eliminate the payment for fuel subsidies to create fiscal space for other activities that would directly impact the welfare of the citizens.

He said: “If the incoming government commits to removing fuel subsidy, the whole point of having the National Assembly approval is that it can immediately start providing relief to ordinary Nigerians. That is actually the smart thing to do.

“The outgoing government is saying look, ’we have this facility waiting, you (incoming government) don’t have to go through the process of getting National Assembly approval.’ If this had not gone to the National Assembly, the new government would have to wait for approval from our board which takes at least six months.

“So, the decision to draw down the facility rests with the incoming government. If it decides not to, it can be cancelled. Also, the National Assembly approving it does not mean the incoming government must draw it down.

“The only time this will translate to actual debt for Nigeria is only when it is drawn down and that decision rests with the incoming government.”

Chaudhuri said the loan facility is an additional round of financing for the National Social Safety Net Programme which had already been in operation for seven years and which started with an original $500 million.

He further explained that the National Social Safety Net Programme was part of the support for Nigeria’s vision for establishing a social protection system.

He added: “This was spearheaded by the Vice President, Prof. Yemi Osinbajo and the idea being that like more and more developing countries around the world and even here in Africa –Ethiopia, Kenya, etc, the government needs to have a programme that can do two things – Help poor people climb out of poverty.

“So, think of it as a ladder and what global evidence shows is that regular cash transfers targeted at the poorest and most vulnerable people who are really caught in a poverty trap, can help them climb out of poverty. Another reason for a social security programme is to prevent people who are near poor such that when they are hit by shock – price increases, natural disasters, or economic crises – it keeps them from falling into poverty.

“So, the original $500 million was approved in 2017, and it was targeted at a larger programme. The first task was to register people after identifying the poorest and most vulnerable all around the country.

“Many NGOs were involved in the process and it was a bottom-up process as communities were asked to identify the most vulnerable among them. Now that register has over 16 million households nationwide and it is maintained by the National Social Safety Coordination Office (NASSCO).

“In 2021, the government approached us that they want to do away with fuel subsidy. This was actually a sub-committee of the National Economic Council, chaired by Governor Nasir El-Rufai of Kaduna State. They asked us to support them and we put together a proposal. I advised that they can take out fuel subsidy and roll out cash transfer programme to help some fraction of the population deal with the fact that prices would go up when fuel subsidy is removed.”

He said the $800 million loan facility was meant to be more of a safety net, stressing that the loan has been approved by the World Bank board, but not a single dollar has been drawn down.

Chaudhuri further stated that until the National Assembly approves the loan request as part of the country’s external borrowing plan, it cannot be drawn down.

He said: “That was the consent in which we accelerated the preparation and designed the proposal. There were some conditions attached. It was agreed that all payments had to be digital, either through a bank account or mobile wallet, and that it must not be caught. Everything was to be identified biometrically either through BVN or National Identity Number.

“The idea was that the minute that the government decides to eliminate fuel subsidy, the cash transfers would be rolled out. The idea was that if fuel subsidy is eliminated and savings made, the government would then use some of the recovered revenues to reduce its fiscal deficit and how much.

“This $800 million has been approved by our board, but not a single dollar has been drawn down. So, until the National Assembly approves it as part of the country’s external borrowing plan, it cannot be drawn down.

“Also, until the facility is drawn down, there is no obligation. Our financing is highly concessional. Not only that, you can sign a financing agreement, and if you change your mind and decide not to draw it down, then there won’t be any charge. A lot of the concern that has been expressed comes from the general distrust of government and also not a clear understanding of how the World Bank financing works.”

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