COVID-19: Nigeria Can Now Access $3.4bn Contribution With IMF

• Nigeria Can Now Access $3.4bn Contribution With IMF

The International Monetary Fund has approved Nigeria’s request to access its entire $3.4 billion contribution with the Fund.

The Minister of Finance, Budget and Nation Planning, Mrs Zainab Ahmed, had said the nation approached the Fund for access to its $3.4 billion contribution to balance the deficit created by the COVID-19 pandemic.

The financial assistance was approved under the Rapid Financing Instrument‎ and will enable the nation to meet urgent balance of payment needs and cushion the impact of falling foreign reserves due to weak global oil prices.

Earlier this month, the Minister stated that without a well-structured stimulus package, the nation’s economy may contract as much as 3.4 percent this year alone given the decline in revenue generation and lack of fiscal space.

Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, IMF, said weak oil prices and drop in global demand for the commodity has impacted Nigeria’s revenue and exacerbated the need for external financing.

Furusawa said, “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.”

In response to the crisis, he said the Fund’s Executive Board approved Nigeria’s action in response to the negative impact of COVID-19 pandemic.

“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,” he added.

It should be recalled that the Senate approved another N850 billion loan request of President Muhammadu Buhari on Tuesday. The loan to be raised from the domestic capital market will also help finance some of the projects stimulated in the 2020 budget, according to the letter written to the Senate by the president.

The issue, however, remains the nation’s rising debt and its inability to lure buyers to its crude oil cargoes as the entire commodity market struggles with falling global demand.

“The Rapid Financing Instrument (RFI) provides rapid financial assistance to all member countries facing an urgent balance of payments need. The RFI was created as part of a broader reform to make the IMF’s financial support more flexible to address the diverse needs of member countries. The RFI has replaced the IMF’s emergency assistance policy and can be used in a wide range of circumstances. “