The Federal Government and International Monetary Fund (IMF) have confirmed Nigeria’s full principal repayment of the $3.4 billion IMF loan advanced in April 2020 to fix Nigeria’s Balance of Payment hitches.
The loan came under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
The IMF financial support was to 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 fund provided much needed liquidity support to respond to the urgent balance of payment needs.
Analysts at Afrinvest West Africa Limited, explained that keeping with the credit terms, Nigeria commenced repayment of principal in 2023, with repurchases of 613 million Special Drawing Rights (SDR), followed by 1.2 billion and 1.8 billion in 2024 and 2025 respectively.
Providing context, the facility although not solely contributed positively to improvement in domestic external position. Data on current account (CU) points to a surplus of $17.2 billion in 2024, marking a sharp contrast to the $16.0 billion deficit recorded in 2020.
Furthermore, the timely repayment is a positive and affirms credit worthiness of Nigeria in keeping to loan terms and proves healthy FX reserves buffer, in addition, the completion of debt principal repayment will reduce the FX-lied loan servicing burden and free up resources for budget.
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Following the Executive Board’s discussion of Nigeria, Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, said: “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”.
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