World Bank Disburses $1.5bn to Nigeria Amid Reforms
Nigeria has secured the full disbursement of a $1.5 billion loan from the World Bank following the Federal Government’s swift implementation of pivotal economic reforms, including the elimination of fuel subsidies and the introduction of comprehensive tax policies.
The loan, under the Reforms for Economic Stabilisation to Enable Transformation (RESET) initiative, was disbursed in two tranches within six months, a rare feat for such financing programs. The first $750 million tranche was released in July 2024, while the second followed in November after Nigeria met key reform conditions, including full deregulation of the fuel market.
Economic Reforms Unlock Funds
The World Bank commended Nigeria’s bold reforms, which allowed petrol prices to align with international markets, effectively ending the implicit subsidies that had strained public finances for decades. Fuel prices have since risen more than fivefold, drawing both praise for fiscal discipline and criticism for exacerbating living costs.
Another cornerstone reform was the Nigeria Tax Bill 2024, which aims to boost non-oil revenue by gradually raising the Value Added Tax (VAT) rate to 10% by 2025. This bill, submitted to the National Assembly, also seeks to simplify tax compliance and expand input tax credits for businesses.
The World Bank noted that these measures represent significant progress toward diversifying Nigeria’s historically oil-dependent economy. “The reforms have laid the groundwork for sustainable economic transformation, addressing structural inefficiencies and ensuring fiscal resilience,” the bank stated.
Public Backlash and Socioeconomic Strains
Despite the accolades, the reforms have sparked widespread public dissent. The removal of fuel subsidies has triggered soaring petrol prices, causing transportation and living costs to skyrocket. Protests have erupted in major cities, including Lagos, Abuja, and Kano, as citizens decry the rising economic hardship.
To cushion the impact, the government introduced relief measures, including direct cash transfers of N25,000 to 15 million vulnerable households. However, implementation has lagged, with only four million households receiving the promised support.
President Bola Tinubu defended the reforms, arguing that subsidy savings would be redirected toward infrastructure, social welfare, and economic diversification. Efforts to promote compressed natural gas (CNG) as a cheaper alternative to petrol are also underway, with a target of converting one million vehicles within three years.
Mixed Reactions to Accelerated Debt Financing
The rapid disbursement of the $1.5 billion RESET loan contrasts sharply with the sluggish progress of another $750 million loan for the Accelerating Resource Mobilisation Reforms Programme, of which less than 1% has been disbursed.
Amid these developments, Nigeria’s external debt profile has come under scrutiny. The Federal Government has secured $6.95 billion in loans from the World Bank over the past 18 months, raising concerns about the nation’s debt sustainability. The World Bank’s share of Nigeria’s total external debt now stands at $16.32 billion, representing 38% of the country’s obligations.
Path Ahead
While the World Bank praised the Tinubu administration’s commitment to economic transformation, it stressed the importance of sustaining reforms to address persistent structural challenges. Upcoming World Bank-funded projects targeting displaced persons, education, and nutrition are expected to inject an additional $1.65 billion into Nigeria’s economy by 2025.
For Nigeria, the stakes are high. The reforms offer a chance to break free from an oil-dependent economic model, but the social and political costs of these changes may test the government’s resolve. As public pressure mounts, the challenge will be balancing fiscal prudence with measures to alleviate the immediate burden on citizens.
