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Tuesday, April 28, 2020 /09:08 PM / by IMF / Header Image Credit: IMF
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 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 IMF remains closely engaged with the Nigerian
authorities and stands ready to provide policy advice and further support, as
needed.
Following the Executive Board's discussion of Nigeria,
Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the
following statement:
"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 and 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 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."
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