In 1976, the Federal Republic of Nigeria under the leadership of the then Head of State, General Olusegun Obasanjo created the Nigerian Trust Fund (NTF) at the African Development Bank (AfDB), pursuant to Article 8 of the Agreement establishing the Bank. The purpose of the Fund is to assist the development efforts of low income Regional Member Countries (RMCs) whose economies, social conditions and prospects require concessional financing, and also to actualize Nigeria’s desire to effectively contribute to the socio-economic development and regional integration of the continent. Specifically, the NTF has two basic Sobjectives:
(a) To contribute to the Heavily Indebted Poor Countries (HIPC) Trust Fund,thereby enabling it to participate in HIPC debt relief for eligible Regional Member Countries (RMCs);
(b)To provide greater flexibility and adjustment in the interest rates (2 – 4 %) that will be charged for NTF loans to low income countries.
The Nigerian Trust Fund initial capital of US$80 million was replenished in 1981 with US$71 million. In 2008, the Federal Republic of Nigeria and the AfDB agreed to a ten year extension of the NTF. The Capital at the end of 2010 was US$200 million (approximately UA128.5 million). This initiative provided for the granting of developmental loans to eligible regional member countries at concessionary interest rates of between 2 – 4% per annum with a repayment period of 25 years and 5years grace period.
The NTF also provides for a commitment fee of 0.75% per annum on undisbursed balance of loans. In other words, the goal is to provide eligible regional member countries with funds to directly finance viable projects of national and/or regional importance and relevance in promoting economic and social development, as well as projects with regional integration potentials.
The political and economic gains of this approach however, fell short of meeting the aspirations of the Federal Government. This was so because Nigeria’s strategic national interests often-times were not tied to such assistance. In some cases, the concepts of capacity building, collaboration, and training, were not taken into cognizance at the planning stage, to ensure sustainability of projects. There was therefore the need for a pragmatic approach in tackling assistance to Regional Member Countries.