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Home Lead-In

Nigeria Seeks 18-Month Deadline Extension for World Bank’s $800 Million Palliative Loan

by `
1 year ago
in Lead-In
Reading Time: 2 mins read
World Bank on glass building. Mirrored sky and city modern facade. Global capital, business, finance, economy, banking and money concept 3D rendering animation.

World Bank on glass building. Mirrored sky and city modern facade. Global capital, business, finance, economy, banking and money concept 3D rendering animation.

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Nigeria has requested an 18-month extension on the closing date of the World Bank’s $800 million palliative loan in a strategic move to bolster its social safety net programs amidst rising inflation and economic challenges.

According to 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. The extension seeks to realign project timelines and enhance the efficacy of the National Social Safety Net Program-Scale Up (NASSP-SU).

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.”

The extension request stems from Nigeria’s ongoing battle with high inflation, which peaked at 33.2 per cent in early 2024, exacerbated by the removal of fuel subsidies and exchange rate depreciation. These economic pressures have pushed millions into poverty, necessitating expanded and sustained support for the vulnerable populations. In a letter dated March 4, 2024, the Federal Ministry of Finance formally requested the extension to ensure comprehensive implementation of project activities. The government’s ambitious reforms, including the removal of gasoline subsidies and a unified foreign exchange policy, while beneficial in the long run, have heightened short-term economic hardships. The requested extension aims to provide additional time for rolling out and managing cash transfers, as well as strengthening the social safety net delivery systems.

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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 the delayed start due to legislative hurdles, the project has made significant strides. As of May 2024, the project has covered approximately 30 million beneficiaries, with around three million poor and vulnerable households receiving cash transfers.

The project’s implementation, however, 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 an emphasis on biometric verification of beneficiaries. The project is now poised to extend its reach, 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 per cent of the entire loan has been released to Nigeria, as there is a pending balance of about $485 million. 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 to strengthen the social registry.

The project restructuring will align with the government’s program, adjusting benefit sizes and durations of support, and enhancing collaboration between the Federal Ministry of Humanitarian Affairs and Poverty Alleviation (FMHAPA) and the National Identity Management Commission (NIMC) for beneficiary verification. The restructuring also includes changes in institutional oversight, with the National Steering Committee now chaired by the minister of finance.

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Lead-In

Providus Bank has acquired the 34% equity stake held by the Asset Management Corporation of Nigeria (AMCON) in Unity Bank Plc, marking a decisive step toward the long-anticipated merger between the two financial institutions. The deal, valued at about N6.5 billion, saw AMCON offload its decade-old holding in Unity Bank to Providus at a price of N3.18 per share, representing a 110per cent premium to the bank’s prevailing market value of N1.50 on the Nigerian Exchange. Industry analysts said the transaction signals a turning point for Unity Bank, which has faced prolonged struggles with weak capitalisation, rising non-performing loans, and declining market relevance. By transferring AMCON’s strategic stake, they noted, Providus has strengthened its hand as it pushes for regulatory approvals to consummate a full merger. AMCON acquired its Unity Bank stake during the 2011–2012 banking sector clean-up after the global financial crisis exposed balance sheet vulnerabilities across second-tier lenders. Its divestment, according to banking sources, underscores the corporation’s gradual exit from long-held equity positions as it focuses on recovering toxic assets and reducing its systemic footprint. “AMCON’s sale to Providus is significant not just for Unity Bank but for the entire financial system,” said a Lagos-based investment banker. “It shows the government is serious about cleaning up legacy interventions while paving the way for stronger private-sector-led banks.” Unity Bank shareholders are set to benefit from the deal’s pricing structure. At N3.18 per share, Providus’ offer more than doubles the bank’s trading value, giving investors a rare premium exit in a market where bank stocks often trade at steep discounts. For minority shareholders, the merger if approvedcould also unlock value by combining Providus’ niche strength in corporate banking and digital services with Unity Bank’s broader retail and SME base. Providus, one of Nigeria’s fastest-growing mid-tier lenders, is widely seen as using the Unity Bank deal to accelerate its ambition of achieving national bank status. By absorbing Unity’s branch network and customer base, the lender would scale its operations beyond its current limited licence, positioning itself to compete more aggressively with tier-one institutions. “The synergies are clear,” said a senior Unity Bank executive familiar with the talks. “Providus brings balance sheet strength and digital innovation, while Unity offers reach and brand equity, especially in northern Nigeria.” Following AMCON’s divestment, the proposed merger will be subject to approval from the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), and Unity Bank shareholders. Both banks are expected to present a detailed merger scheme in the coming months, outlining share swap ratios, post-merger governance, and capital plans. Market watchers say regulatory scrutiny will focus on whether the combined entity meets CBN’s revised recapitalisation thresholds, which mandate higher minimum capital bases for Nigerian banks. The Providus–Unity transaction comes amid a wave of consolidation moves triggered by the CBN’s ongoing recapitalisation drive. Several lenders are exploring mergers, acquisitions, or fresh capital injections to meet compliance deadlines ahead of 2026. “This is the first big-ticket transaction of the recapitalisation era,” said a financial markets analyst. “It won’t be the last.”

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