Akinwumi Adesina, president of the African Development Bank (AfDB), says the International Monetary Fund (IMF) $650 billion special drawing rights (SDRs) will boost the reserves of developing countries.
Adesina said this on Thursday during a closed-door session between Angela Merkel, German chancellor, and heads of international development institutions to discuss the uneven global economic recovery, access to vaccines, and strategies to drive recovery from the COVID-19 crisis.
He said the SDRs, including $27 billion for African countries, were invaluable in facing down economic headwinds.
Nigeria will receive about $3.4 billion as its share, according to the IMF quota.
SDR is an international reserve asset created by the United Nations specialized agency to supplement its member countries’ official reserves.
The AfDB, in a statement, quoted Adesina as saying, “The recent IMF release of $650 billion in SDRs, with $27 billion to Africa, will go a long way in helping to boost reserves for developing countries.
“If the developed countries reallocate $100 billion of SDRs to Africa, as agreed at the Paris leaders meeting and by the G7, that will further support faster economic recovery in Africa.”
The statement said that heads of international development institutions present at the closed-door session included the heads of AfDB, IMF, the World Trade Organization, the World Bank, the International Labour Organization, among others.
Speaking at the session, David Malpass, World Bank’s president, said progress had been made under the African Vaccine Acquisition Trust (AVAT) initiative of the Africa Centres for Disease Control and Prevention, but that advanced economies still need to make doses available to the rest of the world.
Highlighting the IMF’s projection of 6 percent global growth in 2021, Kristalina Georgieva, IMF’s managing director said: “The composition of the 6 percent is changing, with advanced economies broadly accelerating growth, whereas most emerging markets and developing economies are falling further behind. This is a dangerous divergence.”
According to her, vaccines remain the number one priority.
According to the statement, German Chancellor, Angela Merkel, called on the IMF, G7 and World Bank to continue to take measures to support the COVID-19 recovery of lower and middle-income countries.
She also urged them to create strategies to drive economic recovery from the Covid-19 crisis.
“We have noted that the recovery after the pandemic is a two-speed recovery, which is cause for concern,” she said.
NNPC Demands Additional N2.5 Trillion For Fuel Subsidy in 2022
The Nigerian National Petroleum Company (NNPC) has stated that due to the increase in the price of crude oil in the global market, an additional N2.5 trillion is needed to cater for fuel subsidy.
This is as it demanded a total of N3 trillion from the federal government to fund fuel subsidy this year.
Investors King recalls that the federal government, on Monday cleared the air on the petrol subsidy removal, declaring its suspension after unions’ strike threat.
The Minister of Finance and National Planning, Zainab Ahmed, disclosed that only N443 billion was marked out for fuel subsidy in the 2022 budget to cover January to June, pointing that a total of N3 trillion would now be needed to continue the subsidy payment.
Ahmed made this known on Wednesday, while briefing newsmen after the weekly Federal Executive Council (FEC) meeting in Abuja.
She said, “We presented to the Council today a request for Council’s consideration to make additional funding provisions to enable us to meet incremental fuel subsidy request in the 2022 budget.
“Having taken into account the current realities, increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from the fuel subsidy are not yet in place, it was agreed by Council that it is desirable to exit fuel subsidy.”
The minister explained that the additional money became necessary due to the increase in crude oil price at the global market adding that the country consumes 65.7 million litres a day.
“We have to make an incremental provision of N2.557 trillion to be able to meet the subsidy requirement, which is averaging about N270 billion per month.
“In 2021, the actual under-recovery that has been charged to the federation was N1.2 trillion, but in 2022, because of increased crude oil price per barrel in the global market, now at $80 per barrel and also because an NNPC’s assessment is that the country is consuming 65.7 million litres per day, now we’ll end up with the incremental cost of N3 trillion in 2022,” she said.
Ahmed hinted that the council agreed with the stance of the state governors, that there was a need to bring down the amount– N3 trillion.
“We want to be able to settle some of the subsidy costs through this reconciliation process. So, when we’re done with that, whatever is left that we’re not able to apply to what an NNPC is owing the Federation will not be increasing the deficit. And that means increased domestic borrowing.”
CBN Holds Monetary Policy Rate At 11.5%, Leaves Other Parameters Constant
In its continuous efforts to boost the country’s economy and as well, reduce inflation, the Central Bank of Nigeria (CBN) led Monetary Policy Committee (MPC) has retained the Monetary Policy Rate (MPR) at 11.5% with all other parameters unchanged.
Governor of the CBN, Godwin Emefiele, disclosed this while reading the communique of the first monetary policy committee meeting of the year on Tuesday.
The committee unanimously voted to retain the Cash Reserve Ratio at 27.5% and the liquidity ratio at 30 percent.
According to the MPC, the Nigerian economy is expected to continue its positive trajectory following the impressive growth recorded in the third quarter of 2021.
Monetary policy refers to any policy measure devised by the Central Bank to control the cost, availability and supply of credit.
According to the apex bank, the ultimate goals of monetary policy are basically to control inflation, maintain a healthy balance of payment position in order to safeguard the external value of national currency and promote adequate and sustainable level of economic growth and development. These goals are achieved by controlling money supply in order to enhance price stability (low and stable inflation) and economic growth.
Investors King reports that CBN undertakes monetary policy in order to maintain Nigeria’s external reserves to safeguard the international value of the legal currency, promote and maintain monetary stability and a sound and efficient financial system in Nigeria, act as banker and financial adviser to the Federal Government and act as lender of last resort to banks.
The legal backing for monetary policy by the Bank derives from the various statutes of the bank such as the Central Bank of Nigeria Act of 1958 as amended in CBN Decree No. 24 of 1991, CBN Decree 1993 (Amendment), CBN Decree No. 3 of 1997 (Amendment), CBN Decree No. 4 of 1997 (Amendment), CBN Decree No. 37 of 1998 (Amendment), CBN Decree No. 38 of 1998 (Amendment), CBN Decree 1999 (Amendment) and CBN Act of 2007 (Ammended).
COVID-19: IMF Rolls Out $50 Billion Trust Fund, Targets Low-income, Vulnerable Countries
The COVID-19 pandemic, no doubt, has had significant economic consequences, especially on low-income and less developed countries.
It is in view of this that the International Monetary Fund (IMF) proposed a $50 billion trust fund to help these low-income and vulnerable middle-income countries build resilience and ensure a sustainable recovery through a Resilience and Sustainability Trust (RST), Investors King has learnt.
The RST’s central objective is to provide affordable long-term financing to support countries as they tackle structural challenges.
According to the IMF, broad support from the membership and international partners will further aid in the approval of the RST by the IMF Executive Board before the upcoming Spring Meetings and for it to become fully operational before the end of the year.
Apart from the pandemic, climate change is another long-term challenge that threatens macroeconomic stability and growth in many countries through natural disasters and disruptions to industries, job markets, and trade flows, among others.
Hence, the RST support aims to address macro-critical longer-term structural challenges that entail significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalization.
The IMF and World Bank staff have worked closely to develop a coordination framework on RST operations on climate risks, building on earlier experience in supporting countries with structural reforms. Similar frameworks with relevant institutions are expected to be developed in the coming months in this and other reform areas.
Meanwhile, to qualify for the RST support, an eligible member would need a package of high-quality policy measures consistent with the RST’s purpose; a concurrent financing or non-financing IMF-supported program with appropriate macroeconomic policies to mitigate risks for borrowers and creditors; and sustainable debt and adequate capacity to repay the Fund.
The RST would be established under the IMF’s power to administer contributor resources, which allows for more flexible terms, notably on maturities, than the terms that apply to the IMF’s general resources.
Consistent with the longer-term nature of balance of payments risks the RST seeks to address, its loans would have much longer maturities than traditional IMF financing.
Specifically, 20-year maturity and a 10-year grace period has been proposed.
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