The federal government has secured a $750 million loan from the World Bank to facilitate power projects across the nation.
The loan, with project ID P174622, was approved on June 9, making it the first World Bank loan approved under the administration of President Bola Tinubu.
The global lender stated that the fresh loan will serve as additional financing for the power sector recovery performance-based operation, which was first approved on June 23, 2020.
The World Bank, in a document, also disclosed that out of the $750 million initially approved in 2020, only 72 percent financing of $535.09 million was disbursed, with the balance expected by June 30, for the parent project.
For the newly approved additional financing, International Bank for Reconstruction and Development (IBRD) will provide $449 million, and International Development Association (IDA) will provide $301 million.
The IDA and the IBRD, which make up the World Bank, have, over the years, advanced loans to Nigeria.
The IBRD lends to governments of middle-income and creditworthy low-income countries, while the IDA provides concessionary loans, called credits, and grants to governments of the poorest countries.
The document partly reads, “This program paper seeks the approval of the Board of executive directors to provide additional financing to the Federal Republic of Nigeria, through an IDA credit in the amount of $301 million and an IBRD loan in the amount of $449 million to the power sector recovery performance-based operation (PSRO, P164001).
“The proposed AF will build on the tangible results achieved and lessons learned under the parent program.
“The proposed AF will continue supporting the implementation of the federal government’s power sector recovery plan’s critical actions to address the next set of power sector challenges and facilitate the achievement of the federal government’s ambitious access and energy transition targets.”
The document further disclosed that the new financing would run from 2023 to June 30, 2027.
The World Bank, while justifying the reason for the loan, noted that Nigeria has the largest electricity access deficit in the world.
The document added that, “Nigeria has the world’s largest absolute electricity access deficit.
“Lack of access to the electricity grid affects 45 percent of the population (90 million people), making Nigeria the country with the largest number of people not connected to electricity.
“As such, Nigeria accounts for 12 percent of the global access deficit.
“Large disparities exist in access to electricity between urban areas (84 percent) and rural ones (26 percent).
“The net access deficit has increased by over seven million citizens over the last decade, as the pace of population growth has overtaken the pace of electrification.
“Even those Nigerians who are connected to the grid face frequent outages and hence do not get reliable supply.”
The document also placed economic loss from poor electricity supply at $25 billion annually, with firms saying that it is a major business challenge.
The World Bank further noted that, “Economic losses from unreliable electricity supply are estimated to be around N7 trillion to N10 trillion (equivalent to $25 billion) annually, or 5-7 percent of GDP.
“Firms cite a lack of reliable electricity as the top constraint to their business.
“Faced with unreliable and insufficient supply, businesses and households fill the gap with expensive petrol and diesel-run generators.
“It is estimated that over 20 GW of gasoline generator capacity is employed by households and small businesses, nearly twice as much as the 12 GW capacity connected to the national grid.
“Over 22 million diesel/gasoline generators power about 26 percent of total households and 30 per cent of micro, small and medium-sized enterprises (MSMEs) in Nigeria.”
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