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COVID-19: Nigeria to receive $3b from IMF

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… Secures over €22m debt relief from Germany

… Seeks N1.5t domestic loan

INTERNATIONAL Monetary Fund (IMF) has approved Nigeria’s request for $3.4 billion in emergency financial assistance.

  Deputy Managing Director of IMF, Mitsuhiro Furusawa, disclosed this in a statement today.

  According to Furusawa, 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.

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 more unified and flexible exchange rates are also important and unification of the exchange rate should be expedited.

The emergency financing under the RFI will provide much-needed liquidity support to respond to the urgent balance-of-payment 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,” he said.

  Federal government said it was seeking the fund to complement its efforts in mitigating economic impact of novel coronavirus (COVID-19) pandemic, which has resulted in a drastic fall in oil prices.

The loan falls under IMF’s Rapid Financing Instrument (RFI), which is extended to member countries without conditions attached to a formal IMF programme.

  The funds will disbursed immediately in a matter of days. But experts believe the loan will boost the foreign currency reserves of Central Bank of Nigeria (CBN) and give monetary authorities the required firepower as it moves towards convergence and stability of the exchange rate in a time of supply and demand shocks.

  IMF executive board approved Nigeria’s request for emergency financial assistance under a special drawing right (SDR) of 2,454.5 million ($3.4 billion, or 100% of the quota) under the RFI to meet the urgent balance-of-payment needs stemming from the outbreak of the coronavirus pandemic. The latest approval by the IMF is the largest allocation to member countries, to assist in the fight against the pandemic.

  Similarly, Germany has granted Nigeria a debt relief worth €22.4 million (about N8.9billion) due to the COVID-19 pandemic.

The grant is coming after Germany had pledged a total of €12 million (N4.8 biilion) in additional support to the West Africa Health Organisation, the regional health institution of the ECOWAS.

  According to German Foreign Minister, Heiko Maas,  the debt relief was in addition to its support of the pandemic response globally.

  “In 2020, the German treasury relieves Nigeria of debt repayments amounting to €22.4 million (N8.9 billion).  This comes in addition to Germany’s support to the COVID-19 response on a global level and the support provided by the European Union to partner countries in Africa worth €3.25 billion (N1.3 trillion). On April 27, Germany pledged €300 million (N120bn) to the global humanitarian response plan launched by the United Nations to fight COVID-19,” he said.

  Meanwhile, Nigeria is seeking to borrow about N1.594 trillion from domestic creditors.

  A release from Debt Management Office (DMO) dropped the hint yesterday.

  According to DMO, the decision was taken in view of effect of the COVID-19 pandemic on the international capital.

  “The 2020 Appropriation Act approves the as New Borrowing to finance the deficit in the budget. This was made up of N794.99 billion domestic borrowing and N850 billion external borrowing. With a COVID-19 pandemic and attendant effects on the world economy and the international capital market,

the Federal Government re-appraised its borrowing plan and decided it will be more expedient to raise the N850 billion earlier approved as external borrowing from domestic sources.

This conversion from external to domestic is to ensure that the implementation of the 2020 Appropriation Acton is not jeopardised by lack of funds,” it said.

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