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World Bank Disburses $1.5 Billion Loan to Nigeria for Fuel Subsidy Removal, Tax Reforms

Published

3 days ago

Dec 30, 2024.

World Bank Loan Application
Nigeria Receives 1.5billion Loan
The Loan is Meant to Support Fuel Subsidy Removal and Tax System

The World Bank has given Nigeria a $1.5 billion loan to support the government’s efforts in removing fuel subsidies and reforming the tax system.

This loan is part of the “Reforms for Economic Stabilisation to Enable Transformation Development Policy Financing” program, which aims to help the country improve its economy.

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The loan, approved on June 13, 2024, was given in two parts.

The first $750 million was released on July 2, 2024, while the second $750 million was given in November 2024 after Nigeria met certain reform conditions.

These reforms included ending fuel subsidies, unifying the exchange rate, and improving tax policies.

The first part of the loan, from the International Development Association, must be repaid within 12 years, with a six-year grace period.

The second part, from the International Bank for Reconstruction and Development, has a longer repayment period of 24 years and an 11-year grace period.

In October 2024, the Nigerian government submitted a tax reform bill to the National Assembly. The bill, which caused debates and opposition in some parts of the country, aims to simplify tax laws and improve how taxes are collected.

The World Bank noted that Nigeria had fully deregulated the fuel market, allowing prices to be set by market forces and encouraging competition in the sector. However, these changes, along with the unification of the exchange rate, have caused fuel prices to rise fivefold and increased the cost of living for many Nigerians.

The government introduced measures to ease the burden, such as giving N25,000 to some households, but only a small number of people have benefited. Additionally, a plan to promote the use of cheaper Compressed Natural Gas (CNG) is still not fully in place.