The International Monetary Fund (IMF) has advised the Buhari administration to create fiscal space for priority spending on infrastructures to strengthen the economy now and in the post- COVID-19 period .
The advice came on the heels of the approval of a $3.4 billion emergency funding to help Nigeria cushion the impact of the coronavirus pandemic on its economy.
The COVID-19 outbreak and the sharp fall in international oil prices as well as the reduced global demand for oil products had impacted negatively on Nigeria’s economy.
“These shocks have created large external and financing needs for 2020. Additional declines in crude oil prices and more protracted containment measures would seriously affect the real and financial sectors and strain the country’s financing,” IMF noted.
“The implementation of proper governance arrangements—including through the publication and independent audit of crisis-mitigating spending and procurement processes—is crucial to ensure emergency funds are used for their intended purposes,” it added.
Deputy Managing Director and Acting Chair of the Executive Board, Mitsuhiro Furusawa urged the Nigerian government to ensure that once the COVID-19 crisis was over, its focus should remain on medium-term macroeconomic stability, with revenue-based fiscal consolidation essential to keep Nigeria’s debt sustainable.
“The IMF remains closely engaged with the Nigerian authorities and stands ready to provide policy advice and further support, as needed,”Furusawa added.
The money which is the single largest aid for any African country tackling the Coronavirus pandemic was given under the Rapid Financing Instrument to support the Nigeria’s efforts to address the devastating impact of COVID-19 and ensure financial stability after the pandemic
IMF had earlier approved $1 billion for Ghana for the same purpose.
The emergency financing under the RFI is geared towards providing the life-giving liquidity support to respond to the urgent balance of payment needs, while additional assistance from development partners would be required to support the Nigeria’s efforts and close the large financing gap.
“Once the impact of the COVID-19 shock passes, the authorities’ commitment to medium-term macroeconomic stability remains crucial to support the recovery and ensure debt remains sustainable,” the board said.
IMF also recommended the implementation of the reform priorities under the Economic Recovery and Growth Plan, particularly on power supply and good governance, saying these remain crucial to boost growth over the medium term.
The IMF said its financial support would help Nigeria 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.
On April 6, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said at the launching of the N500 billion fiscal stimulus measures in response to the COVID-19 pandemic that the IMF request was part of a number options the country was exploring raise funds to salvage its economy.
The minister said the other options to mobilise financial support to the country’s economic stimulus fund included a $2.5 billion credit facility from the World Bank, and another $1 billion from the African Development Bank.
Segun Fatuase
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(with additional reports)