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FG in talks with World Bank for yet another $1bn loan for IDPs, others

Federal Government is in talks with the World Bank to complete the processes of obtaining over $1bn loans to address the challenges facing Internally Displaced Persons and their host communities, as well as bolster rural access and agricultural marketing in the country.

The request is contained in World Bank documents titled, ‘Solutions for the Internally Displaced and Host Communities Project’ and ‘Rural Access and Agricultural Marketing Project – Scale Up.’

While the IDP loan is put at $500m, the rural access and agricultural marketing project loan is estimated at $550m.

According to the documents provided on the bank’s website, the IDP initiative is meant to improve access to resilient and inclusive basic services and economic opportunities for IDPs and their host communities in displacement-affected local government areas in the northern part of the country.

The Solutions for the Internally Displaced and Host Communities Project, estimated for an appraisal date of February 11, 2025, and slated for approval on April 8, 2025, represents a targeted effort to improve the lives of millions affected by internal displacement due to conflict, violence, and climate challenges.

The Washington-based lender added that the Federal Ministry of Budget and Economic Planning would act as the borrower for Nigeria, while the National Commission for Refugee Migrants and Internally Displaced Persons and the North East Development Commission are the implementing agencies.

A breakdown of the funding showed that $30m was proposed to be spent on the project management and support for the implementation of the national policy while $120m will be expended on community development, income-generating opportunities, and social cohesion.

Also, strategic investments for climate-resilient economic development will gulp $320m and $30m on strengthening state and LG institutions for improved service delivery.

The document from the Washington-based lender read, “The proposed project will utilise a three-pronged approach to develop sustainable solutions for IDPs and host communities in Northern Nigeria. First, the proposed project aims to provide tailored solutions for each of the targeted states and communities, recognizing that each internal displacement situation is specific and localised, with conflict, violence and/or climate challenges presenting a different level and set of vulnerabilities for host communities.

“Gender, age, and special needs of individuals also play a role, as well as the length of displacement, number of times displaced and other factors. Thus, responses will be adapted to address the specific needs of vulnerable populations within displacement-affected states and communities. Second, the proposed project will follow a “People-in-Place” approach, integrating the needs of the people and the impacts on the place where they settle.

“Project activities will aim to improve the provision of infrastructure and basic services as well as livelihood opportunities in an integrated way, moving beyond capital investments to supporting operational improvements and sectoral reforms, and fostering income-generating opportunities within host communities.”

According to a review by a World Bank team, Northern Nigeria, especially in the states of Borno, Adamawa, and Yobe, has experienced the highest numbers of internally displaced persons.

This is primarily due to the ongoing conflict involving Boko Haram, as well as other factors such as banditry and conflicts between farmers and herders, leading to the displacement of over 3.5 million people.

Borno State alone hosts nearly 1.7 million IDPs, which is over a quarter of its total population and almost half of the total IDP population in Northern Nigeria.

The bank said “Nigeria is considered an FCV country and has one of the largest and fast-growing populations of internally displaced persons in the world, as a result of conflict and natural events. In Northern Nigeria alone, conflict and violence have led to the displacement of over 3.5 million people.

“Over 65 per cent of IDPs in Northern Nigeria are in the NE region (approximately 2.3 million IDPs as of June 2023) 5 and 95 per cent of them are in Borno, Adamawa and Yobe (the “BAY states”). Borno, which has been the epicentre of fighting involving Boko Haram since 2014, hosts the highest number of IDPs of any state in the North, with nearly 1.7million IDPs, representing over a quarter of the state’s total population and almost half of the total IDPs in the North.”

The bank added that the inflow of IDPs had put additional pressure on already strained and obsolete infrastructure and services in the host communities highlighting that, “In Maiduguri, IDP inflows have put serious pressure on water supply and sanitation infrastructure and services already under strain before 2014. Due to the inflow of IDPs, daily solid waste generation increased from an estimated 390 tons to 570 tons per day. Solid waste management in Maiduguri is insufficient, with over 60 per cent of residents lacking access.”

The situation is further compounded by the weakening of poverty reduction efforts due to the conflicts and increasing climate shocks, making Nigeria one of the countries with the largest and fastest-growing IDP populations worldwide.

The World Bank’s intervention through the requested loan aims to mitigate the effects by fostering economic opportunities and improving access to basic services, thus contributing to a more stable and prosperous future for IDPs and their host communities in Nigeria.

The recent development suggests that Nigeria’s debt could rise further. It is understood that most of the current foreign loans had been initiated under the former administration of President Muhammed Buhari, Nigeria’s total debt as of the end of September 2023 was N87.91tn, according to data from the Debt Management Office.

Breakdown of this debt revealed total external debt as N31.98tn ($41.59bn) and total domestic debt of N55.93tn.

In June, the international financial institution approved the first loan of $750m for Nigeria under President Bola Tinubu’s government to boost the country’s power sector through the Power Sector Recovery Performance-Based Operation. The loan is financed by the International Bank for Reconstruction and Development, which would provide $449m, and the International Development Association would provide $301mn.

Minister of Finance and Coordinating Minister of the Economy, Wale Edun, recently said that the Federal Government was in talks with the World Bank for a $1.5bn loan to support the budget and provide liquidity in the forex market.

Meanwhile, the Federal Government is on the verge of securing $500m loan from the World Bank to bolster rural access and agricultural marketing in the country.

The new loan project, with an estimated appraisal date of July 16, 2024, is expected to receive board approval on November 28, 2024.

According to information obtained from the bank, this initiative dubbed the Rural Access and Agricultural Marketing Project – Scale Up, is designed to bridge the gap between rural communities and the broader marketplace, facilitating smoother access to agricultural markets, schools, and hospitals and promoting social cohesion among rural populations.

Although the project is estimated to cost $550 million, the World Bank is offering a commitment amount of $500 million. The new commitment amount is 79 per cent higher than the initial World Bank commitment amount of $280 million for the parent project.

The Federal Ministries of Agriculture and Rural Development is designated as the lead coordinating body, with support extended by various State Ministries, Departments, and Agencies, including those focused on Works, Environment, and Women’s Affairs.

The RAAMP-SU project aims to enhance the infrastructural and institutional framework necessary for developing, maintaining, and managing Nigeria’s rural road network with implementation planned to begin in the fiscal year of 2025.

The RAAMP-SU initiative extends the scope of the original RAAMP project to encompass additional states previously omitted due to fiscal constraints resulting from inflation and currency fluctuations. Its primary focus lies in enhancing connectivity and bolstering transport infrastructure, aiming to establish direct links between rural communities and crucial agro-logistics hubs, as well as essential social amenities.

The scale-up emphasises not only the physical construction of rural access roads but also the institutional fortification through the establishment of operational Rural Access Road Agencies and State Road Funds, the implementation of Road Asset Management Systems, and the enhancement of road safety management protocols.

Moreover, the project is expected to boost digital outcome monitoring, skill development for rural road management, and the creation of gender-targeted opportunities, reflecting a comprehensive approach to rural development.

With a previous World Bank funding commitment of $280m out of a $575m total project cost, the fresh funding seeks to escalate the project’s impact from 19 to all 36 states of Nigeria, heralding a new era of rural development and agricultural efficiency.

W’Bank seeks funding

Meanwhile, the World Bank’s International Development Association is seeking a record financing haul to tackle mounting debt and climate crises.

A report by the Financial Times on Sunday said that there was an urgent need for increased funding to tackle the twin challenges of spiralling debt and crisis caused by climate change.

Head of resource mobilisation at the bank, Dirk Reinermann, emphasised the urgent need for the International Development Association to secure its “most substantial replenishment ever” in financial resources.

This replenishment is crucial to facilitate the provision of affordable loans and grants to 75 developing countries.

According to the report, Reinermann did not specify a target, but IDA during its last round of fundraising in 2021 raised about $23.5bn from donor countries. That sum was raised to $93bn after tapping capital markets.

A wave of sovereign debt crises and costs related to mitigating the effects of climate change will require big increases in development funding, analysts said, at the same time as elections and cuts to aid budgets limit the spending appetites of IDA’s biggest donor nations such as the US and UK.

“Some of its biggest traditional donors have stuff going on that makes it harder for them to cough up larger amounts [for IDA],” said a senior fellow at the Center for Global Development think-tank, Charles Kenny.

IDA, which has $235bn of total assets, is seen by governments and policy groups as one of the most effective aid providers in the global fight against poverty, both because it can leverage capital markets to triple its annual windfall and give those funds to poor countries at concessional or marginal rates.

The fund “offers good value for money to donor countries, more than other grant-based facilities”, said a principal research fellow, Annalisa Prizzon, at development think-tank ODI.

IDA has to turn to richer countries to raise capital every three years because its assistance generates little financial return.

Many countries that face a debt crisis will have to pay back more to existing lenders and bondholders than they will receive in new loans. China, a major bilateral creditor, has stepped back from lending, reducing another source of funding for IDA recipient countries.

“Because of the macroeconomic environment, more countries are in difficult economic situations, meaning that they get IDA funding at concession [rates], requiring IDA to deploy more strategic capital,” Reinermann said.

According to Reinermann, this increased line of funding is set to cause IDA to reach the leverage ceiling imposed by its triple-A credit rating sooner than expected.

When IDA raised donor money in 2021, “the zero point for being able to fully leverage our capital at triple-A was in 2034,” he said.

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