The board of the International Monetary Fund (IMF) has approved the sum of $3.4 billion as emergency assistance to Nigeria’s fight against coronavirus. The development was confirmed in a tweet sent by the IMF on Tuesday.
The fund was facilitated through the Rapid Financing Instrument (RFI) to help curtail Nigeria’s dwindling international reserve according to a statement by IMF.
“The IMF financial support will help limit the decline in international reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing and mitigating the economic impact of the pandemic and of the sharp fall in international oil prices,” the statement said.
The International Monetary body had earlier granted debt relief to 25 countries which Nigeria wasn’t part of, while the African giant has been desperately looking for funds to cushion the economic effects of coronavirus.
As part of its support, the IMF promised to be on standby and provide policy support to Nigeria when needed.
Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the Executive Board said the shocks from plunging oil price have created a large vacuum for the country’s 2020 external financing, making the need for financial assistance inevitable.
“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 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 Growth Plan, particularly on power and governance, remains 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 BOP needs. Additional assistance from development partners will be required to support the government’s efforts and close 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 intended purposes,” he said.
While it is obvious that Nigeria, like other countries affected by the coronavirus crisis, needs as much money as it can get, the concern of Nigerians has been how the governments are going to use the fund. Governments’ lack of accountability in handling finances has created doubt that the assistance fund will be judiciously used.
Moreover, the cost of governance is believed to be so high that it will end up taking the largest part of the fund if it is not minimized. Nigerian lawmakers had reconvened on Monday to approve the loan request; a rapid response many believe should be applauded, if not that it is believed to be more of protecting their own interest than that of the people.
The government has been adamant to the calls to cut salaries of the lawmakers which takes a huge sum of the national budget. With the oil market in crisis, recurrent expenditure will be funded by loans as other means of revenue generation fall woefully short.
Meanwhile, the German Government has approved a 22.4 million euros (N8.9 billion) debt relief for Nigeria.
In a statement issued on Tuesday, the European economic powerhouse said the decision has been made in support of the fight against coronavirus.
“In 2020, the German treasury relieves Nigeria of debt repayments amounting to 22.4 million euros. This comes in addition to Germany’s to the COVID-19 response on a global level and the support provided by the European Union to partner countries in Africa worth 3.25 billion euros.
“Clearly, the current crisis goes beyond national and even continental borders and can only be fought effectively in a cooperative way. We need more international cooperation, not less,” German Foreign Minister, Heiko Maas said.
It could be recalled that earlier in April, former Nigerian president Olusegun Obasanjo, and the former Minister of Finance, Ngozi Okonjo-Iweala were making a case for debt relief for African countries, to help the continent survive the brute spikes of the global health crisis.
The German government said it is pushing the G20 members and the Paris Club to grant African countries debt relief as part of a global effort to contain the plague.