By Dipo Olowookere
The request of Nigeria for an emergency financial assistance of $3.4 billion from the International Monetary Fund (IMF) has been granted.
Business Post reports that the fund was taken under the Rapid Financing Instrument to support the federal government’s efforts in addressing the severe economic impact of the coronavirus (COVID-19) shock and the sharp fall in oil prices.
Deputy Managing Director and Acting Chair of IMF, Mr Mitsuhiro Furusawa, stated that, “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.”
Speaking further, he said, “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 a more unified and flexible exchange rate are also important and unification of the exchange rate should be expedited.”
“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 (ERGP), particularly on power and governance, remains crucial to boost growth over the medium term,” he noted.
Mr Furusawa stated further that, “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.”
Recall that before the COVID-19 outbreak, Nigeria’s economy was facing headwinds from rising external vulnerabilities and falling per capita GDP levels.
But the pandemic, along with the sharp fall in oil prices, has magnified the vulnerabilities, leading to a historic decline in growth and large financing needs.
Adedapo Adesanya