• Friday, March 01, 2024
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Nigeria can repay its COVID-19 fund, says IMF

Social protection needed to soften impact of FX reforms – IMF

The International Monetary Fund (IMF) has said that Nigeria’s capacity to repay its debt is adequate in a recent Post Financing Assessment Report.

The Executive Board of the IMF concluded the Post Financing Assessment to ascertain Nigeria’s capacity to repay its Rapid Financing Instrument fund allocated during the COVID-19 pandemic.

Christian Ebeke, Nigeria’s country representative for IMF said that the IMF had granted Nigeria emergency financing to fight the pandemic in 2020.

“We increased, the amount of Special Drawing Rights that countries had at the IMF. It was the second time in the history of the IMF that we did it, and all countries benefitted. Then at the request of the Nigerian authorities, with what we call the Rapid Financing Instrument, we helped Nigeria with emergency financing during the COVID period in 2020.

“And Nigeria got about $3 billion, in emergency financing to protect the balance of payments at the time, and by the fiscal authorities to fight the pandemic,” he said.

“Nigeria’s capacity to repay the Fund is adequate under the baseline. The authorities’ policy intentions are well placed to address risks of a downside scenario where difficult trade-offs may arise between urgent humanitarian needs and debt service, including to the Fund,” the report stated.

IMF also commended the administration for “adopting two policy reforms that its predecessors had shied away from; fuel subsidy removal and the unification of the official exchange rates”.

However, it acknowledged Nigeria’s difficult external environment as well as domestic challenges, stating that further inflation-depreciation will affect Nigeria’s ability to repay the fund.

“An adverse scenario of an inflation-depreciation spiral combined with a climate shock would increase risks to Nigeria’s capacity to repay the Fund,” the report stated.

It further said that Nigeria’s ability to repay the fund presents a downside scenario as “debt service would compete with urgent humanitarian needs to tackle rising poverty and food insecurity that would need to be prioritized.”

The IMF also expressed concern over the projected increase to 46 percent debt to GDP ratio in 2023, on account of the naira depreciation.

Significantly increasing domestic revenue will be key to safeguarding fiscal sustainability over the medium term, the report stated.