Here’s what you need to know about the approved $200 million loan for Lagos state Nigeria
Yesterday, the Federal Executive Council (FEC) approved a long awaited $200 million International Development Association (IDA) loan for the Lagos state government. The loan was approved to enhance Lagos state; Nigeria’s economic nerve centre to meet its infrastructural and developmental needs.
Here are five things you need to know about the approved loan:
This is not a new loan
The World Bank approved a total amount of $600 million in 2010 to be disbursed in tranches of $200 million from 2011 to 2013. However, due to partisan in political differences, there was a freeze after the disbursement of first loan under the previous administration.
The loan will be used to finance infrastructure
The Lagos state Governor, Akinwunmi Ambode intends to complete developmental programmes and rehabilitation projects the state has embarked on since 2010 with this loan. He has outlined plans to embark on massive road construction in the state this year. Specifically, the 61-kilometre 10-lane Lagos-Badagry Expressway, some seven-kilometre light roads alongside the rehabilitation of inner roads in 20 local governments and 37 Local Council Development Areas (LCDAs) in the state.
It is a 25 year loan with 2.5 interest rate
As a result of delay in approval, the $200 million loan will be dispersed over a span of five years with a 2.5 percent interest rate. The initial agreement Nigeria had with the World Bank was a 40-year loan, on a 10 year moratorium and 0.5% interest. “Because of the delay, by the time this one is approved now, we had lost the opportunity of 40 years” said, the Minister of Works, Power and Housing, Mr. Babatunde Fashola.
Other Nigerian states have benefitted from these developmental loans
The newly approved loan is not the first by World Bank to sub-national government under the auspices of the federal government of Nigeria. Rivers and Edo state government were beneficiaries of $280 million (2014), $75million (2015) respectively while the World Bank spent $50 million (2015) on water projects in Ekiti to enhance development.
The risk of default is minimal
In order to reduce risk of default in loan repayment, the federal government being the recipient of the loan from the World Bank will deduct from Lagos state’s allocation during the monthly Federation Accounts Allocation Committee (FAAC) meeting.
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