The Federal Executive Council (FEC) of Nigeria, presided over by President Umaru Musa Yar’Adua, approved a USD 27.2 million loan from the International Fund for Agricultural Development (IFAD), as reported by AllAfrica.com. The loan, along with a USD 400,000 grant from IFAD, will constitute the core financing of IFAD’s Rural Finance Institution-Building Programme (RFIBP), a seven-year plan to strengthen rural microfinance institutions (MFIs) in Nigeria as well as establish increased linkages between MFIs and mainstream financial institutions. As stated in the September 2006 submission from the Executive Board of IFAD to the government of Nigeria, the official recipient of the loan is the Federal Republic of Nigeria and the loan terms are for 40 years, including a grace period of ten years, and a service charge of 0.75 percent per year (page vi). The Federal Ministry for Agriculture and Rural Development will implement the RFIBP (page 10).

The stated goal of the programme is to reach 345,000 households, specifically targeting woman-headed households, “families that are food insecure and living below the poverty line,” and “families that are food secure in good rainfall years but have a low income” (page vii). The RFIBP will take place in the following 12 Nigerian states: Adamawa, Akwa Ibom, Anambra, Bauchi, Benue, Edo, Imo, Katsina, Lagos, Nassarawa, Oyo, and Zamfara.

The FEC consists of the Nigerian president’s cabinet and oversees many major financial transactions within the country.

The loan approval comes shortly after the creation in February of an NGN 50 billion (USD 426 million) fund for existing microfinance institutions (MFIs)—reporting by MicroCapital—and the Central Bank of Nigeria’s (CBN) licensing of 107 new MFIs in January as reported by THISDAY, a Nigeria-based newspaper and online service covering Africa since 1997. Established in 1958, the CBN is responsible for the administration and control of the Nigerian financial sector and monetary policies. The CBN reported total assets in November 2007 of NGN 7.18 trillion, or USD 62 billion.

According to an IFAD press release covering the September 2006 Executive Board meeting in Rome, the total for the RFIBP is to be USD 40 million including a Nigerian government contribution of USD 6.2 million, USD 4.8 million from various participating organizations, USD 985,100 from beneficiaries, and a USD 500,000 grant from the co-financier Ford Foundation. The AllAfrica.com article does not clarify whether all of these components were approved as well. With 2007 total assets of USD 13.7 billion, the Ford Foundation is a global organization, based in New York and chartered in 1936, providing grants and loans to individuals and institutions working to solve regional and global problems.

Notably, the original submission to the Government of Nigeria lists the IFAD loan and grant in special drawing rights (SDR), an international reserve asset whose value is based on a collection of currencies and is allocated to member countries of the International Monetary Fund (IMF) in proportion to their quotas—a country’s maximum financial commitment and thus its voting power in the IMF. At the time of submission, the loan amount was SDR 18.5 million (USD 27.2 million) and the grant amount was SDR 270,000, or USD 400,000.  However, using current SDR conversion rates, the loan equals USD 30.4 million and the grant is USD 444,000. It was unclear at the time of writing which rates would be used.

The Washington, DC-based IMF is an international organization overseeing the global financial system and working to promote economic growth and stability as well as reduce poverty. Technical assistance, consultations, and financial support are given to member countries, of which there are 185. As of September 2007, the IMF reported total quotas of USD 338 billion and loans outstanding to 68 countries totaling USD 17 billion.

The IFAD is a United Nations (UN) agency working since 1977 to eradicate rural poverty in developing countries and has contributed over USD 10 billion to nearly 800 projects since its inception. As listed by IFAD’s Nigeria page, the organization is conducting or planning five large-scale projects in the country, of which RFIBP is one. Although yet to be signed, the Rural Microenterprise Development Programme (RUMEDP) will also aim to strengthen rural MFIs in 8 Nigerian states over a period of 8 years. The total cost of RUMEDP will be USD 57.9 million and IFAD will contribute a loan of USD 42.7 million and a grant of USD 400,000. Since 1985, IFAD has committed USD 187.4 million in loans to nine different projects in Nigeria. The IFAD Country Programme Manager, Mr. Hamed Haidara, can be contacted by e-mail at h.haidara@ifad.org, or by phone at +39 0654592604.

By Anthony Busch, Research Assistant

Additional Resources:

AllAfrica.com: Home, “Nigeria: FEC Approves $27.17m IFAD Loan”, by Juliana Taiwo, March 6, 2008

Central Bank of Nigeria: Home, Data & Statistics, History

Ford Foundation: Home, About

International Fund for Agricultural Development: Home, IFAD in Nigeria, RFIBP, Loan Submission, Executive Board Press Release, RUMEDP

International Monetary Fund: Home, Special Drawing Rights, Quotas, At a Glance

MicroCapital article, February 22, 2008: “Nigerian Government Creates $426m Microcredit Development Fund”

OANDA: FXConverter

THISDAY: Home, Who We Are, “CBN 107 New Micro Finance Banks”, by Chinwe Ochu, January 18, 2008

XE: Currency Converter