AfDB Approves $500 Million Loan for Nigeria’s Economic Governance and Energy Transition
The African Development Bank Group (AfDB) has committed significant support to Nigeria’s reform agenda, approving a $500 million policy-based loan. This financing is designated for the second phase of the Economic Governance and Energy Transition Support Programme and will cover the 2024 and 2025 fiscal years.
The operation aims to stimulate inclusive growth by accelerating critical structural reforms, focusing heavily on improving fiscal policy and transforming the struggling energy sector.
Table of Contents
AfDB Approves $500 Million for Reform Support
Three Key Areas of Reform Focus
Deepening Fiscal Policy and Non-Oil Revenue
Accelerating Power Sector Transformation
Supporting Nigeria’s Energy Transition Plan
Key Beneficiaries and Expected Impact
1. AfDB Approves $500 Million for Reform Support
The $500 million loan, approved by the AfDB Board of Directors in Abidjan, Côte d’Ivoire, is a policy-based operation intended to provide direct budget support to the Federal Government. This facility is crucial for helping the administration carry out ambitious structural reforms while managing the associated fiscal impact.
The program is designed to build upon the gains from the first phase, which focused on stabilizing fiscal operations and initiating earlier energy sector reforms.
“The second phase of the programme aims to stimulate inclusive growth by accelerating structural reforms in the energy sector, while supporting progressive reforms of fiscal policy to boost non-oil revenues and expand fiscal space,” said Abdul Kamara, Director General of the AfDB Group’s Nigeria office.
2. Three Key Areas of Reform Focus
The AfDB intervention is strategically structured around three interconnected pillars to address Nigeria’s most pressing economic challenges:
Fiscal Policy Reforms: Strengthening public financial management and boosting non-oil revenue generation.
Accelerating Power Sector Reforms: Expanding access to reliable electricity and attracting private sector investment.Supporting Energy Transition: Promoting climate change mitigation strategies and energy efficiency.
3. Deepening Fiscal Policy and Non-Oil Revenue
The first pillar is dedicated to enhancing transparency and efficiency in government spending. By strengthening public financial management, the program aims to reduce fiscal risks and substantially increase the country’s non-oil revenues.
This focus is essential for fiscal consolidation and is intended to expand the fiscal space available to the government, reducing reliance on volatile oil revenues and debt.
4. Accelerating Power Sector Transformation
Nigeria’s power sector is plagued by low generation capacity, inefficient transmission, and weak market structures, resulting in pervasive energy poverty. The AfDB’s support will directly target these issues:
Expand Access: Improve governance structures and increase access to reliable electricity for citizens.
Attract Investment: Create a more favorable investment climate to draw private sector capital into the energy value chain.
5. Supporting Nigeria’s Energy Transition Plan
The third key area aligns with global climate commitments and Nigeria’s own National Energy Transition Plan (NETP).
Climate Strategy: The facility will back the implementation of climate change adaptation and mitigation strategies.
Efficiency Standards: This includes introducing new energy-efficiency standards for electrical appliances.
International Targets: The program also supports updating Nigeria’s Nationally Determined Contribution (NDC) targets for the 2026–2030 period, ensuring alignment with international climate action efforts.
6. Key Beneficiaries and Expected Impact
The program’s direct beneficiaries are critical government institutions responsible for driving economic and energy policy:
Federal Ministry of Finance
Federal Inland Revenue Service (FIRS)
Office of the Auditor General
Debt Management Office (DMO)
Federal Ministry of Power and Environment
Nigerian Electricity Regulatory Commission (NERC)
National Climate Change Council (NCCC)
Beyond these institutions, the support is expected to significantly benefit private businesses by improving the overall investment climate, especially in the energy sector, and facilitating public-private partnerships at the subnational level.
The successful implementation of these reforms is expected to contribute significantly to macroeconomic stability, fiscal consolidation, and long-term energy security, which are all vital for restoring investor confidence and attracting long-term financing for infrastructure and green energy projects. As of October 31, 2025, AfDB’s active portfolio in Nigeria comprised 52 projects valued at $5.1 billion.
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