The World Bank said on Thursday it had approved a total of $2.1 billion in concessionary loans to fund projects in Nigeria aimed at improving access to electricity, promoting governance and empowering women.

Most of the projects will be financed through the International Development Association, the concessionary-lending unit of the World Bank, the Washington, D.C.-based institution said Thursday in a statement.

“The approved projects support the implementation of the government’s growth plan,” World Bank Nigeria country director Rachid Benmessaoud said, according to the statement.

Nigeria’s 2017-2020 “Economic Recovery and Growth Plan”, released last year, seeks to revive the oil-reliant economy which contracted in 2016 due to a drop in crude revenues.

President Muhammadu Buhari, who signed a record-high 9.1 trillion-naira ($25 billion) budget last week, is pushing to increase investment in roads, power and ports in a bid to boost economic growth to 3.5 percent this year.

The largest of the seven projects, with $750 million of World Bank financing, seeks to help increase efficiency in government spending and improve accountability, according to the World Bank’s statement.

Another $400 million was earmarked to tackle land erosion and support Nigeria’s climate resilience, while $350 million was allocated to solar power projects and the supply of electricity to several universities and hospitals.

Nigeria’s energy output per capita is said to be one of the lowest in the world. It also approved a $7 million grant for nutrition.

“The FGN cannot cover the huge infrastructural deficit on its own, hence the agreements with multilateral and other agencies. The power sector is clearly a priority,” said Gregory Kronsten, head macroeconomic research, FBNQuest.

As for the borrowing costs, Kronsten said the loans will attract sub-market concessional rates which are cheaper than the Eurobonds and naira bonds.

After six success quarters of negative GDP growth, Nigeria turned the corner in second quarter of 2017.  GDP growth is projected at 2.0 percent in 2018 by Rand Merchant Bank Nigeria’s research.

However, growth slowed again in the first quarter of 2018, as the country’s non-oil sector struggled. The government expects growth to rise to a pre-recession level of 7 percent by 2020.

“Investment in power sector will be very beneficial to the country,” said Johnson Chukwu, managing director/CEO, Cowry Asset Management Limited.

Nigeria privatised most of its power sector in 2013 but retained control of its dilapidated monopoly transmissiongrid, often blamed for hobbling growth.

Africa’s largest oil producer plans to raise $2.8 billion Eurobond to help part-finance its 2018 budget and looks at exploring all options to lower costs.

Responding to the World Bank loans, Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited said “This is positive for the Nigerian economy and the electricity sector. World Bank, being a development institution, usually lends money to projects and countries at a rate that is lower than the market rate and the tenor is usually longer than what most countries can access from commercial banks”.

Meanwhile Finance Minister Kemi Adeosun said, contributions from the NNPC to the nation’s Federation Account were not in line with expectations and deemed “unacceptable.”
“Based on oil price, oil quantity you can pretty much calculate what you are expecting to see in the Federation Account and if the figure is less, then the right question that any stakeholder must ask is why?” the minister said.
Nigeria’s Excess Crude Account, which holds the country’s oil savings, has a balance of $1.9 billion dollars, she said.

The intervention according to the Minister is to ensure that salaries are not delayed “ Further negotiations and interactions is going on with NNPC as we speak. However, We did brief both the President and Vice President on the deadlock and asked for their support and their forbearance in this because the consequence of this is that, salaries might well be delayed in many states as a result of this.”

“For the purpose of this briefing, we operate NNPC as a business, we have invested public capital in that business and we have expectations of return and when that return fails lower than our expectations then the owners of this business which in this case in the federal government and states need to act”

The Minister appealed to the Governors adding that “we have asked for forbearance and the governors and the federal government are all in agreement that we need to get to the bottom of those figures.

“ In particular, now that the oil price is now $76 per barrel in the spot market which means that bonny light is about $78, we want to be aggressively putting money away into the excess crude account. “

“So we are very conscious that this period, this window of relatively high oil price might not last and we will like to be able to save. If we cannot get into the federation account the sort of revenues we are expecting then we will not be able to save. So it was a very important point really underscored by all the governors and they really want action taken and they are fully in support of the positions of the Federal Ministry of Finance and the commissioners of finance not to approve those accounts until we get further explanations on some of the cost being implemented.”