Nigeria to spend 25yrs repaying new $800m World Bank loan

The Federal Government of Nigeria had recently secured $800 million loan from the World Bank to provide palliatives for over 50 million Nigerians after the removal of fuel subsidies.

The money is to be shared to vulnerable persons captured in its National Social Safety Net Programme.

While the move looked generous, a finance document seen by Ripples Nigeria reveals that it will take Nigeria 25 years to complete the full repayment.

The document also showed that the financing agreement was a concessional finance and was signed on August 16, 2022, by the Nigerian Finance Minister and the World Bank Country Director for Nigeria, Shubham Chaudhuri.

Concessional loans are called soft loans because they have more generous terms than market loans.

These generally include below-market interest rates, grace periods in which the loan recipient is not required to make debt payments for several years or a combination of low interest rates/grace periods.

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Based on the document, the $800m loan obtained by the Federal Government attracts a maximum commitment charge rate of one-half of one per cent per annum on the Unwithdrawn Financing Balance, and a service charge of three-fourths of one per cent per annum on the withdrawn credit balance, according to the document.

It also disclosed that the interest charge is one and a quarter per cent per annum on the withdrawn credit balance.

Also, a percentage of the principal amount of the loan is expected alongside the other charges, and this will increase over time.

While the first payment will be 1.65 percent of the principal amount, the last payment will be 3.40 percent of the principal amount.

Also, the agreement between the federal government and the World Bank has a repayment plan which will be made from 2027 to 2051, twice a year.

The next administration, led by President-Elect Bola Ahmed Tinubu, is expected to begin the repayments for the $800 million loan, when it assumes office.

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