By Uche Mbah
The International Monetary Fund has approved $3.4 billion to Nigeria to cushion the effect of COVID 19 and dwindling oil fortune, the Presidency has said.
According to the Minister of Finance, Zainab Alkali, the Presidency is also seeking loans from Other sources. They have requested $2.5 billion from World Bank, $1 billion from afDB, as well as an undisclosed amount from the Islamic Development Bank.
The IMF itself confirmed on Tuesday that its Executive Board approved the Nigeria’s “request for emergency financial assistance of SDR 2,454.5 million (US$ 3.4 billion, 100 percent of quota) under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.”
With this, Nigeria’s debt profile has risen further. As of December last year, Nigeria spent $1.12 bn for debt servicing only. The figure has risen since then.
The money is meant to help shore up the Country’s foreign reserve and finance the budget, which benchmark has been reversed downwards from $57 per barrel to $30 per barrel.
IMF had earlier confirmed Nigeria’s descent into the worst recession in more than twenty years, with a projection of the economy contracting 3.4 percent in 2020.
According to Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the Fund, COVID 19 is impacting the Economic activity of Nigeria.
“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 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 BOP needs. Additional assistance from development partners will be required to support the government’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.”
$3.4 billion is the total holdings of Nigeria in the international fund vault under the rapid financing terms. The Minister of Finance Zeinab Ahmed said the loan will attract no conditionalities, ostensibly because it is Nigeria’s deposit within the bank.
