The International Monetary Fund yesterday said it had disbursed to the Central Bank of Nigeria (CBN) the $3.4 billion assistance it recently approved to help Nigeria address its current economic crisis.
IMF Managing Director, Kristalina Georgieva, in an interview on CNBC Africa yesterday, noted that a few days after it approved the financing, it transferred the amount to the country’s apex bank.
“We have already disbursed emergency assistance. The board approved and within days, we disbursed the fund to the country. It goes into the central bank in dollars and gets transferred into naira in the case of Nigeria,” Georgieva stated.
IMF Board last week approved Nigeria’s request for $3.4 billion in emergency financial assistance under the fund’s Rapid Financing Instrument (RFI) to support the federal government’s efforts in addressing the severe economic impact of the COVID-19 economic shock and the drastic fall in oil price.
Georgieva restated that the financial support did not come with the usual IMF conditionalities.
“The conditions are quite favourable, the repayment period is five years. Up to three-and-a-half years is grace period. And the interest on the loan is one per cent. So in that sense, our members can benefit more directly through the fund, from very low interest rates globally. We also have a number of safeguards when we provide financial support to countries that have been approved, met and exceed the safeguards,” she added.
IMF chief executive stated that the COVID-19 crisis had presented Nigeria and other African countries another chance to build fiscal buffers and strong healthcare systems.
“Across Africa, as it is the case across the whole world, this crisis puts pressure on moving fast in digitalisation and transforming how societies and economies work. And I very much hope that Africa that has been geared towards that kind of transformation comes out of this crisis with a stronger capacity to be part of the new knowledge economy. That means, however, that countries need to sustain after COVID -19 investment in health, education, human capital, which are critical for success and also prioritise their public investments in a way that support that kind of transformation.
“Across Africa, governments have started recognising how important it to build buffers so they can weather shocks. In the case of Nigeria, the finance minister is setting a target to increase the share of tax to GDP.
“Before the crisis, it was eight per cent, this year because of drop in revenue, it may even shrink to five per cent. But the objective of five years is to lift it up to 15 per cent,” she said.
Georgieva expressed sympathy to Africans mostly affected by the pandemic and the economic shock it has created, adding that “IMF responded very early with a commitment to rapidly increase emergency financing.”
She said: “With the support of our shareholders, we doubled what we can provide. From the African countries we have about 40 requests, and I’m very proud to say that 21 sub-Saharan African countries have received financial support from the IMF with Nigeria getting the largest share of $3.4 billion assistance.
“We are aiming to continue with rapid approvals because we recognise speed is of an essence to help health systems cope with the pandemic but also to help vulnerable people and vulnerable parts of the economy to cope.
“Our aim is to get some $18 billion into the hands of policy makers and rapidly flowing in support of their economies.
“We have done two important things for Sub-Saharan Africa. We’ve mobilised debt relief for the countries with low income to their debt service to the fund. Twenty-three countries are not able to pay us for the next six months and we would extend that to, most likely, two years.
“Secondly, together with the President of the World Bank, we led the effort to come with the debt standstill for official bilateral creditors. We call on the private sector to also join in. When the economies stand still, debt economies should also stand still.”
The IMF chief lamented that Nigeria has been seriously hit by the economic impact of the pandemic, saying “it is hit because of the measures it takes, because of restrictions in the world economy and by the collapse of oil prices.”
Echoing the fund’s prediction, she stated: “To put this in numbers, for Africa we project a contraction of one and a quarter percent. This is going to be a deeper contraction in our perception, in Nigeria. It would go from +2 per cent growth to -3.4 per cent. Whilst we are projecting recovery in 2021, it is going to be only a partial recovery.
“Therefore, difficult days are ahead and in that context, we very much welcome the decisive measures to protect the economy and to protect the most vulnerable people in Nigeria. What we project in a situation when the fiscal gap is going to be quite significant in the order of somewhere between $11 billion, that’s the injection from the fund and other financial institutions, is critical and timely.”
According to her, collectively with the World Bank, African Development Bank and other partners of Nigeria, the country would be helped to overcome the economic crisis unleashed by COVID-19.