To begin with, the $2.25 billion loan which is divided into $1.5 billion RESET and $750 million ARMOUR is targeted at four major operations: (i) raising fiscal oil revenues from 1.8 per cent of GDP in 2022 to 2.7 per cent by 2025; (ii) increasing non-oil fiscal revenues from 5.3 per cent to 7.3 per cent during this same period; (iii) expanding social safety nets to help 67 million vulnerable Nigerians; and (iv) increasing the value of imported goods that were previously prohibited from appreciating, from $11.3 million to $54.6 million by 2025. 

 The first operation is to be achieved through the enhanced protection of the crude industry against vandalization of pipelines, theft of crude products and unlicensed oil exploration, and augmentation for more productivity. The second will be achieved through the development of other contributors to the economy, like agriculture and mining. For instance, Businessday’s June 2024 report revealed that more than 70 kilograms of gold sourced in Nigeria, has been refined for exports, with a contribution of over $5 million to the country’s foreign reserve from the sales of this mineral. This speaks to the presence of other viable economic sources other than crude and agriculture, which must be explored. Other operations will come in the form of grants, sustainable development for small and midsize enterprises and business empowerment. 

The implementation of these reforms is under the wings of the Ministry of Finance, with oversight and supervision from the World Bank in collaboration with key national stakeholders like the Central Bank of Nigeria and the Ministry of Humanitarian Affairs and Poverty Alleviation to evaluate the advancement and impact of the reforms. A part of the loan is projected to be expended into four identified transformational projects: the Lagos-Calabar coastal road, the proposed Sokoto-Badagry road, the completion of ongoing railway projects for which the federal government has not yet provided funding, and the rehabilitation and expansion of dams and irrigation schemes to boost agricultural production. 

While the World Bank has approved financing totalling $2.25 billion, only $751.88 million has been disbursed as of writing. This disbursement forms part of the $1.5 billion tranche for the RESET DPF initiative. The $1.5 billion tranche is made up of two distinct contracts between Nigeria and the World Bank: first a $750 million financing from the International Development Association (IDA), and second a $750 million loan from the International Bank for Reconstruction and Development (IBRD). The $750 million IDA financing and $1.88 million from IBRD financing have been distributed, with an undistributed sum of $748.13 million. While backing Nigeria on this, the World Bank said: 

Nigeria has embarked on critical reforms to address economic distortions and strengthen its fiscal outlook. The country has taken initial critical steps to restore macroeconomic stability, boost revenues, and create the conditions to reignite growth and poverty reductions. 

In light of this, one would ask: what are the critical reforms the government embarked on to address economic distortions?  

The fuel subsidy removal for one, which in agreement, is an economically smart decision. Subsidizing fuel had been a source of corruption, inefficiency, and fiscal burden for the country, costing the government over ₦2 trillion annually. The Nigerian Economic Summit Group, a non-profit, non-partisan private sector organization with a mandate to promote and champion the reform of the Nigerian economy into a globally competitive economy, reported that in 2022, the sum of ₦2.74 trillion was paid as fuel subsidy, while just over ₦600 billion was made in oil revenue. In 2023, ₦3.36 trillion was provided for the fuel subsidy up till June 2023. Removing the fuel subsidy now means that funds that would ordinarily go into the subsidy can now be diverted into infrastructure, health, education, and welfare programmes. The downside, however, is that consumers will pay triple what they paid in the previous year for crude products. 

Another critical reform the Nigerian government has embarked on to address economic distortions is the unification of the naira by developing the available-buyer-available-seller model for the FX market, as opposed to the previous flat rate model, which caused the huge price margin and round-tripping between the official market and the black market. Since the institution of this policy, the exchange rate has been determined by the demand for FX and the supply of same. The positive side is the clearance of all foreign exchange backlog totalling about $7 billion, and restoring the naira’s value, which improved from one of 2023’s worst-performing currencies, to the best-performing currency in April 2024. This achievement could not however be sustained as the currency has since fallen to the worst performing currency in the world.  

These reforms, from the lens of logic, do not justify the approval of the loan, because if subsidy is being removed on fuel, the funds diverted are supposed to be injected into other aspects of development requiring capital, like infrastructure, health, education, security, and lots more. So why take more loans to attend to these areas? The fuel subsidy programme costs Nigeria over ₦2 trillion a year; if this is the second consecutive year of its removal, going by today’s exchange rate on the dollar, that must mean that we have diverted roughly $2.25 billion into other areas of the economy, which is exactly the sum of the loan granted by the World Bank, not to mention the excessive tax reforms that have been making the rounds to increase revenue. It begs the question—what are we missing? Is it possible the loan was granted not on a thoroughly investigated basis, but on a developmental basis since the World Bank is a developmental bank?