The federal ministry of finance, budget and national planning is expected to spend $53 million on hiring consultancy firms out of the $800 million the Federal Government has secured from the World Bank to mitigate the effects of petrol subsidy removal on vulnerable Nigerians.
According to the financing agreement document between the Federal Republic of Nigeria and the International Development Association of the World Bank, the next administration after the regime of the President Muhammadu Buhari will begin the repayment of the $800m loan approved by the World Bank as a subsidy palliative.
A breakdown of the fund showed the Nigerian government is expected to spend $23.3 million on consultancy fees for the project expected to expand coverage of shock-responsive safety net support among the poor and vulnerable and strengthen Nigeria’s national safety net delivery system till June 30, 2024.
A breakdown of the $23.3 million consultancy fee showed expenses of $10.74 million will be incurred for goods, works, non-consulting services, consulting services, and operating costs for the National Social Safety-Nets Coordinating Office and other projects while $12.58 million will be for goods, works, non-consulting services, operating costs for the National Cash Transfer Office and other operating costs.
“It is imperative to engage the services of an independent consulting firm, as national agencies such as the ministry of finance or development finance institutions are not equipped to perform the duties of a consultant,” Tajudeen Ibrahim, director of research and strategy, ChapelHill Denham said.
The document signed by the Nigerian finance minister and the World Bank country director for Nigeria, Shubham Chaudhuri, on August 16, 2022, revealed that the loan was concessional financing.
According to the World Bank, concessional finance is below-market-rate finance provided by major financial institutions, such as development banks and multilateral funds, to developing countries to accelerate development objectives. 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per annum on the Unwithdrawn Financing Balance, and a service charge of three-fourths of one per cent per annum on the withdrawn credit balance, according to the document.
It also disclosed that the interest charge is one and a quarter per cent per annum on the withdrawn credit balance.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, which 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.
The payment dates are January 15 and July 15 in each year, starting from January 15, 2027, with payments in dollars.
The repayment will be made in instalments, with the first payment due on January 15, 2027, and the last payment due on July 15, 2051.
Nigeria is expected to have a new president from May 29, 2023, who is expected to be at the helm of affairs of the country until May 29, 2027. The president-elect, Bola Tinubu, is expected to be sworn in on May 29, 2023.
This means that the next administration is expected to begin the repayments for the $800m loan.
Last Wednesday, Zainab Ahmed, Nigeria’s finance minister, announced that Nigeria secured an $800 million grant from the World Bank for cash hand-outs to the poor as part of efforts to end a costly fuel subsidy by June.
“The first tranche of funding from the Washington-based lender “will enable us to give cash transfers to the most vulnerable in our society that have now been registered in a national social register,” Ahmed said.