Nigeria has formally requested an 18-month extension on the closing date of the World Bank’s $800 million palliative loan. This strategic move is intended to bolster the country’s social safety net programs in response to escalating inflation and economic challenges.
As detailed in a restructuring paper document on the project from the World Bank, “the Nigerian government has requested to extend the closing date of the project from June 30, 2024, to December 31, 2025.” This extension is not just a matter of shifting dates but is aimed at allowing the government to realign project timelines and enhance the efficacy of the National Social Safety Net Program-Scale Up (NASSP-SU).
By extending the timeline, Nigeria aims to ensure that the funds are utilized more effectively to support vulnerable populations who are most affected by the current economic downturn. The NASSP-SU program is a crucial component of Nigeria’s broader strategy to mitigate the adverse effects of economic instability on its citizens. This extension will provide additional time to implement necessary measures, evaluate ongoing efforts, and make adjustments as needed to maximize the impact of the loan.
Overall, the extension request underscores Nigeria’s commitment to strengthening its social safety nets and protecting its most vulnerable citizens during these challenging times.
The document read: “This paper seeks approval from the Country Director for a Level II restructuring of the National Social Safety Net Program Scale-Up project (NASSP-SU, P176935, Credit No. 7019-NG), an US$800 million Investment Project Financing (IPF). The restructuring will extend the project closing date by 18 months from June 30, 2024 to December 31, 2025. 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.”
Rationale for the Extension
The extension request is rooted in Nigeria’s ongoing battle with high inflation, which peaked at an alarming 33.2% in early 2024. This surge in inflation was exacerbated by two significant factors: the removal of fuel subsidies and the depreciation of the exchange rate. These economic pressures have severely impacted the population, pushing millions into poverty. Consequently, there is an urgent need to expand and sustain support for vulnerable groups to mitigate these adverse effects.
In a letter dated March 4, 2024, the Federal Ministry of Finance formally requested the extension to ensure the comprehensive implementation of project activities. The government’s ambitious economic reforms, including the removal of gasoline subsidies and the introduction of a unified foreign exchange policy, are expected to be beneficial in the long run. However, in the short term, they have resulted in heightened economic hardships. The requested extension aims to provide additional time to effectively roll out and manage cash transfers, as well as to strengthen social safety net delivery systems.
Project Status
The NASSP-SU project, initiated 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 achieved significant progress. As of May 2024, it has covered approximately 30 million beneficiaries, with around three million poor and vulnerable households receiving cash transfers.
The project’s implementation faced a temporary halt from January to March 2024 due to a governmental review. Following recommendations from a multi-ministerial panel, the project resumed with a renewed emphasis on biometric verification of beneficiaries. This measure is crucial for ensuring the accurate targeting of aid. The project is now poised to extend its reach further by leveraging the integration of the National Social Register (NSR) with the National Identification Number (NIN) system to enhance targeting accuracy.
So far, only 39.38% of the entire loan has been released to Nigeria, leaving a pending balance of about $485 million. This underscores the need for an extension to fully utilize the available resources and achieve the project’s objectives.
What You Should Know
To mitigate 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 aimed at strengthening the social registry.
The project restructuring will align with the government’s program, adjusting benefit sizes and durations of support. It will also enhance collaboration between the Federal Ministry of Humanitarian Affairs and Poverty Alleviation (FMHAPA) and the National Identity Management Commission (NIMC) for beneficiary verification. Additionally, the restructuring includes changes in institutional oversight, with the National Steering Committee now chaired by the Minister of Finance.
This strategic realignment is essential for addressing the immediate needs of Nigeria’s most vulnerable populations while ensuring the long-term sustainability and effectiveness of the social safety net programs.
