FG IN DISCUSSIONS WITH THE WORLD BANK FOR $1 BILLION LOANS
The Federal Government is currently in negotiations with the World Bank to finalize procedures for securing loans exceeding $1 billion. These funds are intended to tackle the issues confronting Internally Displaced Persons and their host communities, alongside enhancing rural access and agricultural marketing within the nation. This request is detailed in World Bank documents titled ‘Solutions for the Internally Displaced and Host Communities Project’ and ‘Rural Access and Agricultural Marketing Project – Scale Up.’
the idp loan amounting to $500m is complemented by the rural access and agricultural marketing project loan totaling $550m.
Several World Bank loans currently under discussion have reportedly originated during the previous administration of President Muhammadu Buhari.
As per documents available on the bank’s website, the aim of the IDP initiative is to enhance access to resilient and inclusive basic services and economic opportunities for internally displaced persons (IDPs) and their host communities in displacement-affected local government areas in the northern region of the country.
Scheduled for appraisal on February 11, 2025, and set for approval on April 8, 2025, the Solutions for the Internally Displaced and Host Communities Project is a focused endeavor to uplift the lives of millions impacted by internal displacement due to conflict, violence, and climate-related challenges.
The Washington-based lender also noted that Nigeria’s Federal Ministry of Budget and Economic Planning will serve as the borrower, with the National Commission for Refugee Migrants and Internally Displaced Persons and the North East Development Commission acting as the implementing agencies.
The funding breakdown indicates a proposed allocation of $30 million for project management and support to implement the national policy, with an additional $120 million earmarked for community development, income-generating opportunities, and social cohesion.
Furthermore, $320 million is designated for strategic investments in climate-resilient economic development, along with $30 million allocated to strengthening state and local government institutions to enhance service delivery.
The document from the Washington-based lender outlines a three-pronged approach for developing sustainable solutions for IDPs and host communities in Northern Nigeria. Firstly, the project aims to tailor solutions for each targeted state and community, recognizing the specific and localized nature of each internal displacement situation, with varying levels of vulnerability due to conflict, violence, or climate challenges.
Considerations such as gender, age, special needs, length of displacement, and frequency of displacement will inform the adaptive responses to address the specific needs of vulnerable populations within affected states and communities.
Secondly, the project adopts a “People-in-Place” approach, integrating the needs of individuals with the impacts on the places where they settle. Project activities will focus on improving infrastructure, basic services, livelihood opportunities, and fostering income generation within host communities, moving beyond mere capital investments to support operational improvements and sectoral reforms.
Northern Nigeria, particularly in Borno, Adamawa, and Yobe states, has witnessed the highest numbers of internally displaced persons (IDPs). This is primarily attributed to ongoing conflicts involving Boko Haram, as well as other factors such as banditry and disputes between farmers and herders, resulting in the displacement of over 3.5 million individuals.
Borno State hosts nearly 1.7 million IDPs, which accounts for over a quarter of its total population and almost half of the total IDP population in Northern Nigeria.
The World Bank characterizes Nigeria as an FCV (Fragile and Conflict-Affected) country with one of the largest and fastest-growing populations of internally displaced persons globally, stemming from conflict and natural events. In Northern Nigeria alone, conflict and violence have led to the displacement of over 3.5 million people.
The majority of IDPs in Northern Nigeria, approximately 65%, are situated in the Northeast region, with approximately 2.3 million IDPs as of June 2023. Furthermore, 95% of these IDPs are located in Borno, Adamawa, and Yobe states, collectively known as the “BAY states.” Borno, the epicenter of the Boko Haram conflict since 2014, harbors the highest number of IDPs in the North, with nearly 1.7 million individuals, representing over a quarter of the state’s total population and nearly half of the total IDP population in the region.
The influx of IDPs has exacerbated the strain on already stressed and outdated infrastructure and services in host communities. In Maiduguri, for instance, the influx of IDPs has significantly strained water supply and sanitation infrastructure and services, which were already under pressure before 2014. Consequently, daily solid waste generation has increased from an estimated 390 tons to 570 tons per day. Moreover, solid waste management in Maiduguri remains insufficient, with over 60% of residents lacking access.
The compounded situation is exacerbated by the weakening poverty reduction efforts due to conflicts and increasing climate shocks, placing Nigeria among the countries with the largest and fastest-growing IDP populations globally.
The World Bank’s intervention through the requested loan aims to alleviate these effects by fostering economic opportunities and enhancing access to basic services, thereby contributing to a more stable and prosperous future for IDPs and their host communities in Nigeria.
Recent developments indicate a potential further increase in Nigeria’s debt. Most of the current foreign loans were initiated under the former administration of President Muhammed Buhari. Nigeria’s total debt stood at N87.91 trillion by the end of September 2023, according to data from the Debt Management Office, with total external debt at N31.98 trillion ($41.59 billion) and total domestic debt at N55.93 trillion.
In June, the international financial institution approved the first loan of $750 million for Nigeria under President Bola Tinubu’s government to enhance the country’s power sector through the Power Sector Recovery Performance-Based Operation. The loan, financed by the International Bank for Reconstruction and Development, provides $449 million, with the International Development Association contributing $301 million.
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, recently announced ongoing talks between the Federal Government and the World Bank for a $1.5 billion loan to support the budget and provide liquidity in the forex market.
Meanwhile, the Federal Government is on the brink of securing a $500 million loan from the World Bank to bolster rural access and agricultural marketing in the country. This initiative, known as the Rural Access and Agricultural Marketing Project – Scale Up, aims to bridge the gap between rural communities and the broader marketplace, facilitating smoother access to agricultural markets, schools, and hospitals, while promoting social cohesion among rural populations.
Although the project’s estimated cost is $550 million, the World Bank is committing $500 million, which is 79% higher than the initial commitment amount of $280 million for the parent project.
The Federal Ministries of Agriculture and Rural Development are designated as the lead coordinating bodies, with support from various State Ministries, Departments, and Agencies, including those focused on Works, Environment, and Women’s Affairs.
The RAAMP-SU project aims to enhance the infrastructural and institutional framework necessary for developing, maintaining, and managing Nigeria’s rural road network, with implementation scheduled to commence in the fiscal year 2025.
The RAAMP-SU initiative broadens the scope of the original RAAMP project to encompass additional states previously excluded due to fiscal constraints arising from inflation and currency fluctuations. Its primary objective is to enhance connectivity and strengthen transport infrastructure, aiming to establish direct links between rural communities and vital agro-logistics hubs, as well as essential social amenities.
The scale-up emphasizes not only the physical construction of rural access roads but also institutional reinforcement through the establishment of operational Rural Access Road Agencies and State Road Funds, the implementation of Road Asset Management Systems, and the enhancement of road safety management protocols.
Furthermore, the project is anticipated to enhance digital outcome monitoring, facilitate skill development for rural road management, and create gender-targeted opportunities, reflecting a holistic approach to rural development.
With a previous World Bank funding commitment of $280 million out of a total project cost of $575 million, the fresh funding aims to expand the project’s reach from 19 to all 36 states of Nigeria, heralding a new era of rural development and agricultural efficiency.
Meanwhile, the World Bank’s International Development Association is seeking a record financing amount to address mounting debt and climate crises.
According to a report by the Financial Times, there is a pressing need for increased funding to address the dual challenges of escalating debt and climate change-induced crises.
Dirk Reinermann, Head of Resource Mobilization at the bank, stressed the urgent need for the International Development Association to secure its largest-ever replenishment in financial resources.
This replenishment is essential to facilitate the provision of affordable loans and grants to 75 developing countries.
Reinermann did not specify a target, but in its last round of fundraising in 2021, IDA raised about $23.5 billion from donor countries, which was increased to $93 billion after tapping capital markets.
Analysts noted that a wave of sovereign debt crises and the costs associated with mitigating the effects of climate change will necessitate significant increases in development funding, while elections and cuts to aid budgets limit the spending capabilities of IDA’s major donor nations such as the US and UK.
IDA, with $235 billion in total assets, is viewed by governments and policy groups as one of the most effective aid providers in the global fight against poverty, given its ability to leverage capital markets to triple its annual windfall and provide those funds to poor countries at concessional or marginal rates.
The fund, according to Annalisa Prizzon, a principal research fellow at development think-tank ODI, offers good value for money to donor countries compared to other grant-based facilities.
Every three years, IDA must turn to wealthier countries to raise capital because its assistance generates minimal financial returns.
Many countries facing a debt crisis will have to repay more to existing lenders and bondholders than they will receive in new loans. China, a significant bilateral creditor, has scaled back lending, reducing another source of funding for IDA recipient countries.
Reinermann stated that this increased funding is expected to prompt IDA to reach the leverage ceiling imposed by its triple-A credit rating sooner than anticipated.
When IDA raised donor money in 2021, Reinermann noted that the point at which they could fully leverage their capital at triple-A was projected to be in 2034.
From the News Source: Techeconomy
