Northern Nigerian Breaking News

EXPLAINER: Why Nigerian govt seeks 18-month extension for $800M World Bank palliative

By Quadri Adejumo

The Nigerian Government has submitted a request to extend the period of its $800 million World Bank palliative scheme by 18 months, with the new closing date being December 31, 2025.

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

According to reports on Wednesday, a government document claimed that the project has covered 1,652 urban wards through a targeting system developed under the initiative.

The report read; “Since its start, about 30 million beneficiaries have been covered by social safety net programs, and about three million poor and vulnerable households have received shock responsive cash transfers as of May 2024.”

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It claimed that of these beneficiaries, 700,000 households were from rural areas, and about 2.5 million households were from urban areas.

Digital payment mechanism

The World Bank’s restructuring paper outlines a planned digital payment delivery mechanism, using straight-through processing to deliver transfers directly to beneficiaries’ accounts or wallets.

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Additionally, the National Social Register is being integrated with the National Identification Number to further strengthen the targeting system.

Background and challenges

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.

The Federal Government plans to run a cash transfer program on a monthly basis for vulnerable and poor Nigerians, particularly those who have been impacted by recent policies like the removal of fuel subsidies.

However, a Ministry of Humanitarian Affairs and Poverty Alleviation investigation into alleged mismanagement of the program resulted in the abrupt termination of the program.

Restructuring efforts

As part of the restructuring efforts, the government has sought approval to change the chairmanship of the project’s national steering committee from the Minister of Humanitarian Affairs and Poverty Alleviation to the Minister of Finance.

This change is driven by 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.

The document partly read; “This paper seeks approval from the Country Director for a Level II restructuring of the National Social Safety Net Program Scale-Up project, an $800m Investment Project Financing. 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.

“Despite earlier delays, the project remains central to the government’s ambitious plan to provide temporary cash transfer support to the population affected adversely by high inflation, particularly in the wake of the fuel subsidy removal and other macroeconomic reforms the government is undertaking.

The document also clarifies that no financial or audit reports are pending, and there are no changes in audit requirements. Although there have been delays in procuring key service providers, efforts are being made to improve contract management practices and build the capacity of the Project Implementation Unit’s (PIU) procurement team.

It says the World Bank continues to provide embedded support to enhance financial management and procurement practices.

Remaining funds and future plans

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

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.

The benefit size for cash transfers will be increased from N30,000 per household, spread over six months, to N75,000, spread across three months.

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“The ESR-CT, will provide total benefit amounts of seventy-five thousand Naira (N75,000) to each beneficiary household, spread across three months. To be in line with the government’s announced program, and in response to increased inflation in recent years, the benefit size for cash transfers will be increased from thirty thousand Naira (N30,000) per beneficiary household, spread over six months,” the document further stated.

Security and risk management

Meanwhile, the World Bank has commenced the preparation of a Security Risk Assessment and Management Plan to advise on adequate measures for mitigating security risks.

This follows two fatal incidents involving project staff: one staff member died in a road accident, and another was murdered by suspected armed bandits. Another road accident involving project staff resulted in leg injuries.

Loan charges and repayments

The $800 million loan obtained by the Federal Government attracts a maximum commitment charge rate of 0.5% per annum on the Unwithdrawn Financing Balance and a service charge of 0.75% per annum on the withdrawn credit balance.

The interest charge is 1.25% per annum on the withdrawn credit balance. Additionally, a percentage of the principal amount of the loan is expected to increase over time, starting at 1.65% for the first payment and rising to 3.40% for the final payment.

 

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