The Federal Government of Nigeria is seeking an additional $400 million loan from the World Bank for conditional cash transfers to 15 million households. This move is part of an effort to alleviate the impact of removing petrol subsidies, which has led to a significant rise in living costs for Nigerians.
This new loan request raises the total amount borrowed by the Federal Government from the World Bank for cash transfers to $1.2 billion. Previously, an $800 million loan was secured for the same purpose.
President Bola Tinubu had announced the conditional cash transfer program in his nationwide address on Nigeria's independence day, October 1. Under this program, the government plans to provide N25,000 per month to 15 million households for three months, from October to December 2023.
The cash transfer initiative is aimed at mitigating the effects of subsidy removal on petrol, which has resulted in higher living costs. It is also part of the government's efforts to support citizens during this economic transition.
While the move to secure additional funding for the cash transfer program is seen as an attempt to provide relief to households, it also highlights the financial challenges the government is facing. The debt levels in the country continue to rise, and Nigeria is among the top borrowers from the World Bank's International Development Association (IDA).
This development also comes at a time when Nigeria is grappling with debt sustainability concerns, high debt service-to-revenue ratios, and revenue generation challenges. To address these issues, the government will need to focus on raising revenue through reforms and initiatives and consider alternative sources of funding for projects.
Additionally, the government is near its self-imposed debt limit of 40 percent, which may limit its borrowing capacity. As a result, the private sector and public-private partnerships may play a more significant role in financing infrastructure projects, and the government might explore privatization and asset sales to reduce borrowing.
