The IMF has agreed $3.4 billion in emergency financing assistance to help the authorities address the severe economic consequences of the COVID 19 shock and dramatic fall in oil prices under its rapid financing instrument. The outbreak of COVID-19 has increased the existing faults, which leads to a historic contraction of actual GDP growth and significant external and tax financing needs. On the after-evolution impacts of the COVID-19 shock, government support for the recovery and sustainability of debt remains critical to the medium-term macro-economic stability.
In order to meet the emergency balances of payments needed as a consequence of the outbreak of the COVID-19 pandemic, the IMF Executive Board approved an urgent financial aid application from Nigeria of SDR 2,45,5 million (USD 3,4 billion,100% quota) under the Rapid Funding Instrument(RFI).
The short-term economic effect of COVID-19 should be serious, though risks already high. Even before the outbreak of COVID-19, the economy in Nigeria was faced with winds as the per-capita GDP levels grew and rose. With the steep drop in petroleum prices, the pandemic has exacerbated vulnerabilities, contributing to a significant growth decrease and high financing needs.
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Financial support from the IMF will contribute to limiting the decrease of international reserves and providing budget funding for the targeted and temporary increases to contain and mitigate the economic consequences of the pandemic and the sharp fall in global oil prices. The IMF remains closely involved and willing to provide policy advice and further support if needed.
| Major Three Output |
| The IMF approved US$3.4 billion in emergency financial assistance under the Rapid Financing Instrument to support the authorities’ efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices. |
| The COVID-19 outbreak has magnified existing vulnerabilities, leading to a historic contraction in real GDP growth and to large external and fiscal financing needs. |
| Once the impact of the COVID-19 shock passes, the authorities’ commitment to medium-term macroeconomic stability remains crucial to support the recovery and ensure debt remains sustainable. |
Mr Mitsuhiro Furusawa, deputy manager and acting Chair, released the following statement after Nigeria’s discussion in the Executive Board:
The outbreak of COVID-19 – aggravated by a sharp decline in global petroleum and rising global demand for petroleum products – is seriously impacting Nigeria’s economic activities. Such shocks provided major external and financing requirements for 2020. Further declines in petroleum prices and longer containment measures will affect seriously the real and financial sector and bring pressure on the financing of the country.
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The authorities are welcome to take urgent measures in response to the crisis. In the short term, fiscal accommodation will have increased health spending and reduce the impact of the crisis on households and businesses. Equally significant are steps to achieve a more consistent and efficient exchange rate and uniform exchange rates.
As the COVID-19 crisis passes, the emphasis will continue to be on mid-term macroeconomic stability, with revenue-based fiscal consolidation necessary for maintaining Nigeria’s debt and establishing a prioritization fiscal space. In order to foster growth over the medium term, the implementation of reform priorities within the ERP, especially on power and governance, remains important.
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The RFI will provide much-needed cash support to respond to the urgent requirements of BOP in emergencies. To order to support the efforts of the government and close the broad financing gap, more assistance from the development partners would be needed. The introduction of effective governance arrangements, which include the release of crisis alleviation expenditure and procurement independent audits, is essential for the introduction of emergency funds.
Data Source: International Monetary Fund (IMF)