Nigeria and IMF COVID-19 relief

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, last week announced a list of 25 countries that are scheduled to benefit from its $500 million COVID-19 debt relief package. The debt relief package is coming under what the Bretton-Woods multilateral financial institution described as the revamped Catastrophe Containment Relief Trust (CCRT), and […]

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, last week announced a list of 25 countries that are scheduled to benefit from its $500 million COVID-19 debt relief package.

The debt relief package is coming under what the Bretton-Woods multilateral financial institution described as the revamped Catastrophe Containment Relief Trust (CCRT), and is for countries described as the poorest, as well as most vulnerable members. Specifically, it is intended to help such countries overcome the impact of the COVID-19 pandemic by providing them exemption for six months during which they will not service their debts to IMF, but are allowed to divert any debt servicing funds into combating the impact of COVID -19.

The window is to enable them concentrate on providing urgent medical and related emergency relief efforts. Incidentally, the omission of Nigeria from the list of would be beneficiaries of the CCRT had drawn queries from not a few observers, on at least two grounds.

Firstly, is that Nigeria is a bona fide member of the Fund, is in good standing and is entitled to such a relief that will ease its burdens in the onslaught of the COVID-19 pandemic. Secondly is that the country also faces similar challenges as the listed beneficiary countries. Hence in a sense it sounded unfair to exclude Nigeria from benefitting from the IMF’s seeming goodwill gesture. 

However, on the flip side of the argument is that Nigeria does not technically qualify for the CCRT package, also on the basis of equally cogent reasons. Firstly, the country is not owing the IMF, and is presently not a debtor which is saddled with debt servicing obligations. Secondly, the country even has a reserve holding of $3.4 billion with the IMF from which it can, and even intends to, draw down funds to service its fiscal obligations, which for now are pressing given the dip in its revenue profile jointly caused by the COVID-19 pandemic in one vein and its repercussions which spawned a price war between Russia and Saudi Arabia.

In the light of its diminished revenue from oil which provides it with over 95% of export earnings and 40% of government revenue, Nigeria is adjusting to the COVID-19 pandemic by recalibrating its N10.594 trillion 2020 budget, by reviewing some of its critical fundamentals. In a new budget proposal, which the executive presented to the National Assembly, the government is cutting off N318 billion to bring the budget to N10.276 trillion. This is in tandem with the 2020 budget oil price benchmark which drops from the December 2019 value of $57 per barrel to a current, notional value of $30 per barrel, and a reduced daily production from 2.17 million to 1.17 million barrels a day. The country has also adjusted tacitly, the exchange rate of the Naira from N305 per dollar to N360 per dollar. In the face of this situation, the federal government is contemplating acquiring more loans. This time from multilateral agencies such as the IMF, the World Bank, and the African Development Bank (AfDB).

The immediate and unsettling implication of the foregoing is that the country is still dependent on and hence highly vulnerable to the wild swings of the global oil market. Hence the government is groping for any relief to latch onto even if such were to be the IMF. On a more profound note, it actually indicts the government’s agenda for diversification of the economy, as a failure.

In the circumstances, even dividends of the Economic Recovery and Growth Plan (ERGP) which was launched in the wake of the 2016 economic recession may have yielded suspect dividends, hence the desperation in government circles to raise money from any source. Meanwhile the government agents are parading data and sundry evidence to shore up its claims of making meaningful progress in turning the economy around. Just as well, market realities tell a different story.

The situation therefore calls for the government to think out of the box in order to move the country to the proverbial next level, which it flaunts to the citizenry. The time has come for the government to consider moving from rhetoric of growing the economy to actually practicalising the growth agenda.