The Executive Board of the International Monetary Fund on Tuesday approved $3.4bn in emergency financial assistance to the Federal Government in addressing the severe economic impact of the COVID-19 pandemic. The financial assistance, approved under the Rapid Financing Instrument, is also to enable Nigeria to address the sharp fall in oil prices. Federal Government had requested an emergency financial assistance of $3.4bn (100 per cent of quota) under the RFI to meet urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
The financial support is expected to limit the decline in international reserves and provide funds for targeted and temporary spending increases aimed at mitigating the impact of the pandemic. Following the Executive Board’s discussion on Nigeria, Mr Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, noted that the COVID-19 outbreak – magnified by the sharp fall in international oil prices and reduced global demand for oil products – had severely impacted economic activity in Nigeria.
According to Furusawa, “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.” He noted that the IMF Executive Board welcomed immediate actions taken by the Federal Government in response to the crisis. He added, “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.” Furusawa, in the same vein, advised that once the COVID-19 crisis passed, “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”.
He further called for implementation of reform priorities under the Economic Recovery and Growth Plan, particularly on power and governance. According to him, emergency financing under the RFI will provide much needed liquidity support to respond to the urgent BOP needs. The IMF Executive Board however noted that Nigeria would still contend with a ‘large financing gap’ and called for additional assistance to the Federal Government from development partners.