he International Monetary Fund (IMF) recently announced the approval of $3.4 billion emergency support to Nigeria under its Rapid Financing Instrument (RFI) facility1. This support fund comes as part of efforts to assist the nation in mitigating potential balance of payment problems as a result of both the decline in oil revenue as well as the economic effects of the COVID-19 pandemic. The IMF has approved a total of $8.3 billion to countries in the sub-Saharan region under various financing schemes in order to mitigate the impact of the pandemic2. However, the fund to Nigeria is the single largest disbursement made to any nation within the region and it is expected to provide the country with the much-needed liquidity during this critical period. On the grounds that Nigeria is taking 100% of its quota under the RFI, the government is expected to pay a concession fee totaling about 1.05% with repayment period up to 5 years. Although, this loan is not expected to completely finance the government’s spending plans or avert the imminent recession, it will serve as a cushion for revenue shortage problems.
May 28, 2020
Nigeria Economic Update (Issue 18)
Related
Nigeria Economic Update (Issue 8)
Recent
data from the National Bureau of Statistics (NBS) show that total capital
importation in 2015 fell steeply by 53.5 per cent from $20,750.76 million in
2014 to $9,643.01 million in 20152. This decline was largely driven
by a substantial drop in portfolio investment (the largest component of Capital
Inflows), which fell by 59.74 percent. The exclusion of Nigeria from the JP Morgan
EM Bond index, the slump in crude oil prices, the decision of the US Federal
Reserve to raise interest rates and the capital control measures imposed by the
Central Bank of Nigeria (CBN) are the notable drivers of the reduced inflow of
capital. Going forward, improving the business environment, especially easing
foreign exchange controls, would determine the extent to which the economy can
attract increased capital inflows.