World Bank approves $750m loan for Nigeria

…as IMF cuts GDP forecast

The World Bank has approved a $750m International Development Association credit for Nigeria’s Power Sector Recovery Operation.

This was contained in a statement issued by the bank on Wednesday.

The statement quoted the bank’s Country Director for Nigeria, Shubham Chaudhuri, as saying the credit would help to improve the electricity supply in Nigeria.

The bank expressed worry that about 47 per cent of Nigerians had no access to grid electricity and those who had access faced regular power cuts.

It said the economic cost of power shortages in Nigeria was estimated at around $28bn, equivalent to two per cent of the country’s Gross Domestic Product.

The World Bank said, “Lack of reliable power has stifled economic activity and private investment and job creation. This is ultimately what is needed to lift 100 million Nigerians out of poverty.

“The objective of this operation is to help turn around the power sector and set it on a fiscally sustainable path. This is particularly urgent at a time when the government needs all the fiscal resources it can marshal to help protect lives and livelihoods amid the COVID-19 pandemic.”

According to the statement, the PSRO is expected to increase annual electricity supplied to the distribution grid, enhance power sector financial viability while reducing annual tariff shortfalls and protecting the poor from the impact of tariff adjustments.

It said, “This will enable the turnaround of power sector while helping the Federal Government to redirect large fiscal resources from highly regressive tariff shortfall financing towards critical crisis-responsive and pro-poor expenditures. It will also increase public awareness about ongoing power sector reforms and performance.

“Specifically, the PSRO will ensure that 4,500MWh/hour of electricity is supplied to the distribution grid by 2022 by strengthening the regulatory, policy and financing framework.”

Meanwhile, the International Monetary Fund (IMF) has downgraded Nigeria’s 2020 growth projection, saying the economy will shrink by 5.4 per cent.

The IMF had in April 2020 projected that the country’s economy would contract by 3.4 per cent this year.

The IMF disclosed this in its overview of the World Economic Outlook for June, titled, ‘A crisis like no other, an uncertain recovery’, which was released on Wednesday.

It stated that, ‘Global growth is projected at –4.9 per cent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook forecast.

“The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.”

The report said for the first time, all regions were projected to experience negative growth in 2020.

It said there were, however, substantial differences across individual economies, reflecting the evolution of the pandemic and the effectiveness of containment strategies; variation in economic structure; reliance on external financial flows, including remittances; and pre-crisis growth trends.

Part of the report read, “In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1.0 per cent in 2020, supported in part by policy stimulus.

“India’s economy is projected to contract by 4.5 per cent following a longer period of lockdown and slower recovery than anticipated in April.”

According to the report, in Latin America, where most countries are still struggling to contain infections, the two largest economies, Brazil and Mexico, are projected to contract by 9.1 and 10.5 per cent, respectively, in 2020.

“The disruptions due to the pandemic, as well as significantly lower disposable income for oil exporters after the dramatic fuel price decline, imply sharp recessions in Russia (–6.6 per cent), Saudi Arabia (–6.8 per cent), and Nigeria (–5.4 per cent), while South Africa’s performance (–8.0 per cent) will be severely affected by the health crisis,” it said.

The IMF, however, increased its projection for 2021 to 2.6 per cent from the initial projection of 0.2 per cent.

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