By Dayo Omoogun
The International Monetary Fund has approved the request by Nigeria to draw down on its total contributions to the tune of US$3.4b. This announcement was made Tuesday 28 March,2020 by the Executive Board of the Fund after it sat to evaluate the merits of the request.
The IMF according to a statement on its website, approved US$3.4bn in emergency financial assistance under the Rapid Financing Instruments to support the authorities’ efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.
It acknowledged that “the COVID-19 outbreak has magnified existing vulnerabilities, leading to a historic contraction in real GDP growth and to large external and fiscal needs.”
Earlier this month, on the 6th of April precisely, Nigeria’s Minister of Finance Zainab Ahmed, had announced at a press conference that the Federal Government was engaging with the International Monetary Fund to explore the possibility of drawing down on its entire holdings with the Fund. This is aside from reaching out to the Islamic Bank and the African Development Bank also.
She said at that conference, “Nigeria has a contribution of $3.4bn with the IMF and so we are entitled to draw up to the whole of that $3.4bn. We have applied in the first instance for the maximum amount but in the process we will negotiate so we might get the maximum amount or less but that is our contribution with the IMF.
She explained further on that occasion that “this is a provision that the IMF has made for every member- country; that you can apply for between 50 to 100% of your contribution. Again, this is a programme that has no condition attached to normal IMF programmes. Up till today we are told about 80 member- countries have applied to draw from their contributions”.
The Fund gave an overview of the Nigerian economy in the statement where it stated that COVID -19 pandemic coupled with the fall in oil prices had magnified the nation’s vulnerabilities. It offered to provide further support and policy advise.
“The Executive Board of the International Monetary Fund (IMF) approved Nigeria’s request for emergency financial assistance of SDR 2,454.5 million (US$ 3.4 billion, 100 percent of quota) under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.”
“The near-term economic impact of COVID-19 is expected to be severe, while already high downside risks have increased. Even before the COVID-19 outbreak, Nigeria’s economy was facing headwinds from rising external vulnerabilities and falling per capita GDP levels. 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”.
“The IMF remains closely engaged with the Nigerian authorities and stands ready to provide policy advice and further support, as needed”