Nigeria Seeks $7bn From IMF, Others to Reflate Economy

Savings, money.
7 April 2020

Abuja — Nigeria is seeking about $7.050 billion, an equivalent of N2.679 trillion, from multilateral financial institutions and the Nigeria Sovereign Investment Authority (NSIA) to mitigate the impact of COVID-19 on the economy.

A breakdown indicates that $3.4 billion is being sourced from the International Monetary Fund (IMF), $2.5 billion from the World Bank and $1 billion from the African Development Bank (AfDB) as well as $150 million to be drawn from NSIA, bringing the total to $7.050 billion or N2.679 trillion at an exchange rate of N380/$.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, who briefed journalists in Abuja yesterday on measures being taken in response to the COVID-19 pandemic, noted that the federal government had already applied for the release of its contributions to IMF totalling $3.4 billion under the Fund's Rapid Credit Facility.

The country, she added, is also seeking a $2.5 billion loan from the World Bank, $1 billion from the AfDB as well as an undisclosed amount from the Islamic Development Bank.

The minister explained that $150 million would be drawn from the Stabilisation Fund of NSIA to augment the June allocation to be shared by the Federation Account Allocation Committee (FAAC) due to dwindling accruals into the Federation Account.

Explaining the moves towards seeking external interventions from multilateral institutions, the minister said: "Nigeria has a contribution of $3.4 billion with IMF and we are entitled to draw up to the whole of that $3.4 billion or less. We have in the first instance applied for that maximum amount; then in the process when we negotiate, we might get the maximum amount or less but that is the amount of our contribution with IMF and this is the provision that IMF has made for every member-country that you can apply for between 50 to 100 per cent of your contribution to IMF.

"Again, this is a programme that has no conditions attached to IMF programmes and this is not an IMF programme."

She stated that up to about 80 countries had applied to draw from their contributions to IMF, in a bid to assuage the impact of COVID-19.

Ahmed said Nigeria has also requested from the World Bank $2.5 billion and another $1 billion from the AfDB.

The minister added that when secured, $1.5 billion of the $2.5 billion World Bank facility would go to the federal government, while the states get $1 billion.

"During the process of reviews and negotiations, the proportion could change but the request we are making is on behalf of the federation, in all of these multilateral institutions," she added.

Ahmed, who chairs the fiscal stimulus committee set up by President Muhammadu Buhari, noted that Nigeria is exposed to the risks of both a pronounced decline in oil prices and spikes in risk aversion in the global capital markets.

According to her, although similar challenges were experienced in 2008/2009 as well as in 2015/2016, Nigeria has considerably lower fiscal buffers now than in previous economic downturns.

"The decline in international oil prices and domestic production may be magnified if a severe outbreak of COVID-19 occurs, despite ongoing efforts to curtail the spread of the pandemic through compulsory lockdown of Lagos and Ogun states as well as the Federal Capital Territory (FCT)," she said.

To directly address these health and economic challenges, she stated that the president has approved the establishment of a fiscal stimulus package, as part of an integrated policy framework to provide support for Nigeria's healthcare system, fiscal position and economy to weather the shocks.

She explained that the stimulus package comprised various measures, including the N500 billion COVID-19 Crisis Intervention Fund.

The fund, she stated, would involve drawing cash resources from various Special Funds and Accounts in consultation with and with the approval of the National Assembly.

The N500 billion is proposed to be utilised to upgrade healthcare facilities as earlier identified by the Presidential Task Force on COVID-19 and approved by the president as well as finance the federal government's interventions to support states in improving healthcare facilities.

Others are to finance the creation of a Special Public Works Programme; and fund any additional interventions that might be approved by the president.

She said: "With regards to the Special Public Works Programme, Mr. President had previously approved a Pilot Special Public Works Programme in eight states to be implemented by the National Directorate of Employment (NDE) from February 2020 to April 2020. Mr. President has now approved that this programme be extended to all 36 states and the FCT from October 2020 to December 2020.

"The selected timeframe is to ensure that the programme is implemented after the planting season and it will result in the employment of about 774,000 Nigerians (that is, 1,000 people per each local government).

"Also, N60 billion in allowance and operational costs has been earmarked from the COVID-19 Crisis Intervention Fund for this initiative."

The Nigeria Centre for Disease Control (NCDC), the minister added, has access to a Regional Disease Surveillance Systems (REDISSE) facility from the World Bank in the sum of $90 million, out of which $8 million has been drawn.

Nigeria, she noted, had requested to fully draw down on the outstanding balance of $82 million, adding that the federal government has also requested for additional financing of $100 million from the REDISSE project to meet COVID-19 emergency needs in all the 36 states and the FCT, through the NCDC and Federal Ministry of Health.

"This will enable us to expand the capacity of intensive Care Units (ICUs), enhance laboratory capacity, accelerate the procurement of test kits, strengthen surveillance mechanisms as well as improve information management," the minister explained.

According to her, the federal government has provided N102.5 billion as direct intervention in the healthcare sector, from which N6.5 billion has already been made available to NCDC for critical expenditure.

She also expressed the federal government's commitment to supporting the states in these difficult times, particularly those that are currently battling with the COVID-19 pandemic, adding that Lagos State has already been provided N10 billion in emergency funding.

Ahmed said: "As the situation in the FCT and other states at the forefront of our efforts unfolds, explicit criteria are to be agreed with the Federal Ministry of Health and NCDC to determine when funds would be released to the affected states and the FCT. More funds are to be provided from the proposed COVID-19 Crisis Intervention Fund to address emerging and priority funding needs as these arise."

She thanked public-spirited individuals and corporate bodies for their donations to the government towards combating the COVID-19 pandemic and assured them that the federal government would set up a framework for the collection, management and reporting of these donations.

She explained that the Federal Ministry of Finance, Budget and National Planning was developing a comprehensive framework for the transparent management of the contributions.

In the interim, the minister said Buhari has approved the restructuring of the Treasury Single Account (TSA) in order to better mobilise cash donations from the people and corporate bodies, create flexibility and build a coalition with financial institutions while maintaining the sanctity of the account.

Ahmed said going forward, the COVID-19 Donor Accounts, which would form part of the TSA arrangement, shall be opened with five banks, comprising Zenith Bank, Access Bank, Guaranty Trust Bank, UBA and First Bank.

The accounts would be linked to the main TSA for ease of monitoring and reporting, the minister added.

"I will be issuing circulars and ministerial orders to ensure that charitable donations by benevolent companies to support our COVID-19 pandemic efforts are tax-deductible, pursuant to Section 25 of the Companies Income Tax Act," she stated.

She added that based on the fiscal assumptions underpinning the 2020 Appropriation Act, monthly Federation Account Allocation Committee (FAAC) disbursements to the federal and state governments were projected at N888.5 billion, noting, however, that due to the significant drop in international oil prices, FAAC monthly disbursements have declined in recent months to N716.3 billion in January and N647.4 billion in February 2020.

"Our experience shows that monthly average FAAC receipts must average at least N650 billion for the federal and state governments to meet their current obligations.

"Unfortunately, we project that monthly receipts may decline to below N400 billion, over the next three to six months," the minister said.

To address the emerging fiscal risks, she said the president has approved the withdrawal of $150 million from NSIA Stabilisation Fund to support the June 2020 FAAC disbursement.

She said the Stabilisation Fund was created for such emergencies and would be utilised for the purpose.

According to her, other options are being explored to augment FAAC disbursements over the course of the 2020 fiscal year.

The president, she added, has also approved that the Ministry of Finance, Budget and National Planning should engage with CBN to agree on a debt and interest moratorium for states on federal government and CBN-funded loans in order to create fiscal space for the states, given the projected shortfalls in FAAC allocations.

The minister noted that once-monthly average FAAC receipts fall below a specific threshold, interest and capital payments by states shall be suspended till monthly average FAAC receipts exceed the threshold.

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