The International Monetary Fund ha approved Nigeria’s request for emergency financial assistance of $3.4 billion to address the economic impact of the COVID-19.
This was contained in a press statement by the IMF on Tuesday.
The statement read in part, “The Executive Board of the International Monetary Fund (IMF) approved Nigeria’s request for emergency financial assistance of SDR 2,454.5 million (US$ 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.
“The near-term economic impact of COVID-19 is expected to be severe, while already high downside risks have increased. Even before the COVID-19 outbreak, Nigeria’s economy was facing headwinds from rising external vulnerabilities and falling per capita GDP levels. The pandemic—along with the sharp fall in oil prices—has magnified the vulnerabilities, leading to a historic decline in growth and large financing needs.
The emergency financial assistance to Nigeria is the highest so far to any member country.
The IMF Executive Board today approved US$3.4 billion to help #Nigeria address the severe economic impact of the #COVID19 pandemic and the sharp fall of oil prices. #IMFAfrica
— IMF (@IMFNews) April 28, 2020
The assistance, facilitated via the Rapid Financing Instrument (RFI), will help limit the decline in Nigeria’s international reserves, the IMF said.
It will also help to provide financing for the country’s budget, which has been severely affected by falling oil prices triggered by the pandemic and price wars.
The IMF praised the Nigerian government’s “immediate” response to the crisis, describing it as “welcome.”
However, it noted that short-term focus should be on higher health spending and palliative for households and businesses.
The financial body also said Nigeria should take steps to unify its exchange rate as quickly as possible.
After the COVID-19 crisis passes, Nigeria’s “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,”, Deputy Managing Director and Acting Chair of the IMF, Mr Mitsuhiro Furusawa said.
No need for debt relief
On April 13, the IMF had announced immediate debt relief for 25 poor countries – most in Africa, but also in the Middle-East – to help them free up funds to fight the coronavirus pandemic.
The news was greeted with dismay by some Nigerians.
“We call for the inclusion of Nigeria in the beneficiary list for the COVID-19 related debt relief and debt moratorium based on very cogent reasons,” President of the Nigeria Labour Congress, Ayuba Wabba, said.
However, the Minister of Finance clarified that Nigeria couldn’t be granted debt relief since “it is not indebted to the IMF” and has “no outstanding debt obligation to be forgiven.”
She added that Nigeria had applied for new financing at the IMF and the country’s application “is under consideration and receiving attention.”
Now that the application has been granted, it will provide the country with more financing options to tackle the effects of the pandemic on the economy.
Earlier on Tuesday, the Senate had approved President Muhammadu Buhari’s request to secure a fresh loan of N850 billion to fund some projects in the 2020 budget.
The Buhari administration said it seeks to raise the loan from the domestic capital market to ensure adequate funds to finance projects in the budget.