Nigeria may lose billions of Naira due to EU’s cut in foreign aid

Nigeria may have to find other foreign aid partners as the European Union (EU) has decided to halt direct financial assistance to the country. Head of EU delegation to Nigeria and ECOWAS Michael Arrion disclosed this at an event in Abuja recently. He also advised the country to take steps to raise her tax revenue. Moving forward the EU will concentrate on capacity building programmes in the country. The EU may have taken this step after considering several factors.

Reasons for the cut in funding
The recent recoveries by the Federal Government from the Dasukigate scandal running into billions of Naira clearly show that Nigeria is a wealthy country, at least on paper. The EU may have thus decided to focus funding efforts on smaller African countries that earn far less than Nigeria.

The cut in funding may also be a reflection of a larger fall in money received by the commission itself. The EU’s budget is funded by member countries and largely by Germany, France, Italy and Britain. Data from the 2013 EU budget show the UK was third largest contributor on a net basis. Britain’s decision to pull out of the union, could lead to a major shortfall in funding. In addition to assistance of African countries, EU member countries also receive aids and grants from the budget.

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Fallout from the EU’s action

While EU funding makes up a small proportion of the total foreign aid received in the country, individual countries in the union who make up a large chunk of development assistance may decide to pull back on their own funding. Of the $21 billion in foreign aid Nigeria received between 1999 and 2007, the European Commission and member of the EU provided $16 billion. Projects funded between 1999-2008 include immunization, water sanitation, and election monitoring.

What next for Nigeria ?  

The cut in funding means Nigeria will have to find other sources of aid. Donald Trump’s policy of America first has signaled a cut in assistance to Africa. China is not a big fan of direct aid, preferring infrastructure projects where it can deploy its excess capacity. That leaves just the World Bank, which also prefers infrastructure projects. The country will thus have to step up its revenue drive.