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COVID-19: Nigeria expects $3.4 billion loan from IMF, largest allocation to an African nation

NIGERIA expects a $3.4 billion in emergency funding from the International Monetary Fund (IMF) to cushion the impact of COVID-19 on the nation’s economy.

The facility has been considered to be the largest loan allocation by the monetary fund to an African nation to fight the pandemic, and it is scheduled to be repaid in not more than five years.

It will be recalled that minister of finance, Zainab Ahmed, earlier this month referred to the loan as part of funds being expected from multilateral organisations to aid the country’s battle against the pandemic.

According to Worldometer, Nigeria as at today April 26, has recorded 1,182 cases, with 222 recovered cases of the COVID-19 pandemic.

IMF approved a disbursement of about $1 billion to Ghana earlier this month, as the outbreak is reducing demand for and prices of Africa’s commodities, while domestic lockdowns have shuttered industries and trade.

Seyi Kolawole a Financial Analyst at NASD Plc who spoke to The ICIR said; ”The IMF debt obviously inflates our ballooning debt profile which obviously makes us an even more risky country to creditors.”

“However, regarding the size of the loan, it is commensurate with our size as the largest country in Africa,” he added.

“On repayment, I believe if oil prices stabilize back to pre-oil crash figures (which is still a few months away) we shouldn’t have a problem repaying the debt in about five years in line with the requirements of the IMF’s rapid financing instrument scheme,” he said.

Kolawole went on to say that the challenge this debt portends (in addition to the existing debt) is that, Nigeria’s debt servicing allocation would undoubtedly increase and would negatively impact the ability to finance and undertake other vital projects in the economy.

“More important and most worrying, is that the IMF and the beneficiary countries of its facility must agree on a program of economic policies (which are usually very stringent) and must be implemented to the letter to ensure countries repay the loan,” he further explained.

Kolawole said, “It seems like a good idea to raise the funds because Nigeria needs it and have limited options, and perhaps we may be beneficiaries of the next IMF debt relief.”

“In the event that oil prices don’t recover quickly enough and we can’t repay the loan and it would tell on us as a nation,” he added.

“However, if the policy conditionality does exist, Nigerians should prepare to experience some very stringent policy measures imposed on us by the IMF to facilitate loan repayment,” Kolawole said.

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