The executive board of the International Monetary Fund (IMF), on Tuesday, approved $3.4 billion in emergency financial assistance for Nigeria under the Rapid Financing Instrument (RFI) to enable the country meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
The Bretton Woods institution said in a statement signed by Mr Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, after the board meeting that the financial support would help limit the decline in Nigeria’s foreign 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 statement added, “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 have 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.”
While counselling the country on the need to ensure the sustainability of its debt profile, IMF said, “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.”
In her words, “We have applied for funding from the International Monetary Fund’s COVID-19 Rapid Credit Facility to draw from our existing holdings with the World Bank Group / International Monetary Fund.
“This loan will not be tied to any conditionalities. Let me just state here and clarify that Nigeria does not intend to negotiate or enter into a formal programme with IMF at this time or in the foreseeable future.
“The COVID-19 Rapid Credit Facility is a right for every member country to draw up to limit of the amount that it has contributed and Nigeria has expressed its interest in that regard.
“We have about $3.4 billion with the IMF and we intend to withdraw the entire amount. The IMF has a provision that we can withdraw between 50 100 per cent. We are aware that 80 other countries have asked for similar facilities.”