JOHANNESBURG - The board of the International Monetary Fund (IMF) has approved Nigeria's request for $3.4 billion (about R63bn) in emergency financial assistance to support the government's efforts in mitigating the severe economic impact of the coronavirus (Covid-19), which has resulted in a drastic fall in oil prices, This Day reported.
According to the publication, the loan falls under the 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. They will boost the foreign currency reserves of the 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, analysts said.
The Washington-based institution disclosed this in a statement by its deputy managing director and acting chairperson, Mitsuhiro Furusawa.
The 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, said This Day.
The latest approval by the IMF is the largest allocation to member countries, to assist in the fight against the pandemic.
Furusawa said: "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.
"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."
He advised the government that once the coronavirus crisis passes, the focus should remain on medium-term macroeconomic stability, with revenue-based fiscal consolidation essential to keep the country's debt sustainable and create fiscal space for priority spending.
He added that the government should focus on implementing the reform priorities under the economic recovery and growth plan, particularly on power and governance, which remained 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 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 added.