The International Monetary Fund (IMF) has approved US$3.4 billion which Nigeria requested to address the severe economic impact of the COVID-19 and sharp fall in oil prices.
The money will be coming in through the “emergency financial assistance under the Rapid Financing Instrument to support the authorities’ efforts.”
According to a statement by the IMF, “the COVID-19 outbreak has magnified existing vulnerabilities, leading to a historic contraction in real GDP growth and to large external and fiscal financing needs.”
It added: The Executive Board of the International Monetary Fund (IMF) approved Nigeria’s request for emergency financial assistance of US$ 3.4 billion, (100 percent of quota).=
That is Nigeria’s entire savings with the IMF, “under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.”
Finance minister, Zainab Ahmed, had earlier revealed that “Nigeria has a contribution of $3.4 billion with the IMF and we are entitled to draw up to the whole of that $3.4 billion no less.
“We have in the first instance applied for that maximum amount, then in the process when we negotiate we might get the maximum amount or less.”
Ahmed had noted: “That is the amount of our contribution with the IMF and this is the provision that IMF has made for every member country that you can apply for between 50 to 100 per cent of your contribution to the IMF.”
This money from the IMF, she explained “is a programme that has no conditions attached to IMF programmes and this is not an IMF programme.
“Up to date we were told that up to about 80 countries have applied to draw from their contributions to the IMF.
The IMF statement also said “once the impact of the COVID-19 shock passes, the authorities’(Nigeria) commitment to medium-term macroeconomic stability remains crucial to support the recovery and ensure debt remains sustainable.”
The near-term economic impact of COVID-19 the IMF said, “is expected to be severe, while already high downside risks have increased.”
It noted that “even before the COVID-19 outbreak, Nigeria’s economy was facing headwinds from rising external vulnerabilities and falling per capital GDP levels.”
The pandemic, along with the sharp fall in oil prices, the IMF lamented “has magnified the vulnerabilities, leading to a historic decline in growth and large financing needs.”
The IMF said the approved fund “will help limit the decline in international reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing and mitigating the economic impact of the pandemic and of the sharp fall in international oil prices.”
The IMF said it is ready to provide policy advice and further support to Nigerian authorities and “as needed.”
Following the Executive Board’s discussion of Nigeria, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said, the authorities’ immediate actions to respond to the crisis are welcome.
He noted that “the short-term focus on fiscal accommodation would allow for higher health spending and help alleviate the impact of the crisis on households and businesses.”
He added that “steps taken toward a more unified and flexible exchange rate are also important and unification of the exchange rate should be expedited.”
“Once the COVID-19 crisis passes, the focus should remain on medium-term macroeconomic stability, with revenue-based fiscal consolidation essential to keep Nigeria’s debt sustainable and create fiscal space for priority spending.”
“Implementation of the reform priorities under the Economic Recovery and Growth Plan, particularly on power and governance, remains crucial to boost growth over the medium term” the IMF told Nigeria.
It added that “the COVID-19 outbreak—magnified by the sharp fall in international oil prices and reduced global demand for oil products—is severely impacting economic activity in Nigeria.”
These shocks The IMF said has “created large external and financing needs for 2020. Additional declines in oil prices and more protracted containment measures would seriously affect the real and financial sectors and strain the country’s financing.”
According to the IMF, “the authorities’ immediate actions to respond to the crisis are welcome. The short-term focus on fiscal accommodation would allow for higher health spending and help alleviate the impact of the crisis on households and businesses.
“Steps taken toward a more unified and flexible exchange rate” the IMF said “are also important and unification of the exchange rate should be expedited.”
“Once the COVID-19 crisis passes, the focus should remain on medium-term macroeconomic stability, with revenue-based fiscal consolidation essential to keep Nigeria’s debt sustainable and create fiscal space for priority spending.”
“Implementation of the reform priorities under the Economic Recovery and Growth Plan, particularly on power and governance, remains crucial to boost growth over the medium term.
“The emergency financing under the RFI will provide much needed liquidity support to respond to the urgent Balance of Payment (BOP) needs.
However, additional assistance from development partners will be required to support Nigeria’s efforts and close the large financing gap.
“The implementation of proper governance arrangements—including through the publication and independent audit of crisis-mitigating spending and procurement processes—is crucial to ensure emergency funds are used for their intended purposes.”
