Nigeria seeks $3.4 billion IMF facility to tackle coronavirus pandemic

Faced with a weak fiscal position, the Federal government has approached the International Monetary Fund (IMF) for a $3. 4 billion facility, in order to effectively tackle the COVID-19 pandemic.

The Minister of Finance Budget and National Planning, Mrs Zainab Ahmed, disclosed this at a press conference in Abuja, this afternoon (Monday), also announced a N500 billion COVID-19 stimulus package.

$3. 4 b IMF facility

She explained that the facility being sought was from the Drawing Right, meaning, it would come from Nigeria’s contribution to the IMF. Mrs Ahmed added that it would, therefore, come without IMF conditionalities and that the country was not entering into any formal programme with the Fund.

Her words, “We have also applied for funding from the International Monetary Fund’s COVID-19 Rapid Credit Facility to draw from our existing holdings with the World Bank Group / International Monetary Fund. “This loan will not be tied to any conditionalities.

Let me just state here and clarify explain that Nigeria does not intend to negotiate or enter into a formal programme with IMF at this time or in the foreseeable future.

“The COVID-19 Rapid Credit Facility is a right for every member country to draw up to limit of the amount that it has contributed and Nigeria has expressed its interest in that regard."

“We have about $3.4 billion with the IMF and we intend to withdraw the entire amount. The IMF has a provision that we can withdraw between 50 – 100 per cent. We are aware that 80 other countries have asked for similar facilities.”

In addition, Mrs Ahmed said that the federal government was in talks with other multilateral organizations such as the World Bank, the Islamic Development Bank and the African Development Bank, for concessionary loans to effectively fight the pandemic. On the N500 billion, Mrs Ahmed said, “Mr President has approved the establishment of a N500 billion COVID-19 Crisis Intervention Fund.

“The establishment of this COVID-19 Crisis Intervention Fund will involve drawing much-needed 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 utilized to Upgrade healthcare facilities as earlier identified by the Presidential Task Force on COVID-19 and approved by Mr President; finance the Federal Government’s Interventions to support States in improving healthcare facilities; finance the creation of a Special Public Works Programme, and fund any additional interventions that may be approved by Mr President.”

She disclosed that the Federal Government had provided N102.5 billion to be available for direct interventions in the healthcare sector. According to her, “Of this sum, N6.5 billion has already been made available to the NCDC for critical expenditure. The Federal Government remains committed to supporting the States in these difficult times, particularly those States that are currently battling with the COVID-19 Pandemic.

“Lagos State has already been provided N10 billion in emergency funding. 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 the 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.”

Moratorium for states

The minister also announced fiscal relief for state governments including a moratorium on the loans they received from the Central Bank of Nigeria, which repayment could be suspended when the distribution from the Federation Account falls beyond certain thresholds, to be determined.

She said, “Based on the financial 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.

“However, 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 3 to 6 months.”

Withdraws $150 m from NSIA Stabilisation Fund

Mrs Ahmed said, “To address these emerging fiscal risks, Mr President has approved that the sum of US$150 million be withdrawn from the Nigeria Sovereign Investment Authority (NSIA) Stabilization Fund to support the June 2020 FAAC disbursement."

“The Stabilization Fund was created for such emergencies and is to be utilized for this purpose. We are also exploring other options to augment FAAC disbursements over the course of the 2020 fiscal year.”

$30 pbl benchmark

The minister also announced a downward review of the Budget 2020 crude oil benchmark from the original $57 pbl to $30 pbl.

She said, “The 2020 Appropriation Act was based on certain fiscal assumptions, which we have been compelled to revisit given the emerging economic realities. Specifically, projected Oil Revenues have been significantly affected in that: Dated Brent Oil Prices fell to as low as US$19.125/barrel (as at Friday 3rd April 2020) as compared with the 2020 Budget Benchmark of US$57/barrel; and Oil production in 2020 year-to-date is 2.0mbpd as compared with the 2020 Budget’s projection of 2.18mbpd.

“We are therefore revising the benchmark oil price for 2020 to US$30/barrel and oil production to 1.7mbpd. We have similarly had to adjust downwards our Non-Oil Revenue projections including various tax and customs receipts, as well as proceeds of privatisation exercises.

In this regard, the Budget Office is currently working on a revised 2020 – 2022 Medium-Term Expenditure Framework / Fiscal Strategy Paper (MTEF/FSP) as well as an Amendment to the 2020 Appropriation Act.

“The proposed Amended Budget will provide for the COVID-19 Crisis Intervention Fund and other adjustments required due to the decline in international oil prices.”

Restructured TSA

The Minister disclosed that the President Muhammadu Buhari has approved the restructuring of the Treasury Single Account (TSA) in order to better mobilize cash donations from the generality of our people and corporate bodies across the nation, create flexibility and build a coalition with financial institutions while maintaining the sanctity of the TSA.

She said that going forward, the COVID-19 Donor Accounts, which would form part of the existing TSA arrangement, would be opened with four banks: Zenith, First Bank, UBA and Access.

Fund Monitoring Committee

Mrs Ahmed assured Nigerians that all private donations and public funds set aside for the fight against the COVID-19 would be transparently utilized. She said that an independent committee would be set up to monitor the disbursements and appropriately inform the public on how the funds were spent.

She said that the Federal Government was committed to working closely with the National Assembly, the State Governments, Multilateral Organisations, the Donor Community, and the International Community at large, to alleviate the suffering of Nigerians due to the on-going economic and healthcare challenges.