Nigeria has officially requested an 18-month extension on the World Bank’s $800 million palliative loan to bolster its social safety net programmes amid rising inflation and economic challenges.
The extension would push the project’s closing date from June 30, 2024, to December 31, 2025, according to a restructuring paper from the World Bank.
The extension aims to realign the timelines of the National Social Safety Net Program-Scale Up (NASSP-SU) and enhance the effectiveness of cash transfers to vulnerable populations.
This move is seen as critical to mitigating the economic pressures on Nigerians.
Economic Challenges and Government Reforms
Nigeria’s economy has been struggling with high inflation, which reached 33.2 per cent in early 2024. The removal of fuel subsidies and the depreciation of the exchange rate have exacerbated these issues, pushing millions into poverty.
The Federal Ministry of Finance, in a letter dated March 4, 2024, formally requested the extension to ensure the comprehensive implementation of project activities, Nairametrics reports.
According to the restructuring paper, “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.”
The Nigerian government has embarked on ambitious reforms, including the removal of gasoline subsidies and the adoption of a unified foreign exchange policy. While these reforms are expected to be beneficial in the long term, they have intensified short-term economic hardships.
Progress and Implementation of NASSP-SU
The NASSP-SU project, designed 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 a delayed start due to legislative hurdles, the project has made significant strides. As of May 2024, approximately 30 million beneficiaries have been covered, with around three million poor and vulnerable households receiving cash transfers.
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However, the project faced a temporary halt from January to March 2024 due to a governmental review. After recommendations from a multi-ministerial panel, the project resumed with an emphasis on biometric verification of beneficiaries. The project is now set to extend its reach by integrating the National Social Register (NSR) with the National Identification Number (NIN) system to improve targeting accuracy.
Funding and Future Initiatives
So far, only 39.38 per cent of the total loan amount has been disbursed, leaving a balance of about $485 million. To combat 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 requested extension aims to provide additional time for rolling out and managing cash transfers, as well as strengthening the social safety net delivery systems.
The project restructuring will align with the government’s programme, 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.
Additionally, the chairmanship of the project’s National Steering Committee will shift from the Minister of Humanitarian Affairs and Poverty Alleviation to the Minister of Finance, marking the first restructuring and extension of the project’s closing date.
The requested extension for the World Bank loan aims to provide Nigeria with the necessary time and resources to manage economic challenges and support its vulnerable populations effectively. By realigning project timelines and enhancing delivery systems, Nigeria hopes to mitigate the adverse impacts of recent economic reforms and inflation.
