The International Monetary Fund (IMF) is set to boost Nigeria’s foreign exchange reserves with $3.35bn following the rollout of its special drawing right (SDR).
Under the special drawing right, the IMF is setting aside $650 billion to provide liquidity to countries to help plug external reserves holes and curtail reliance on domestic and external facilities.
Nigeria is expected to secure $3.35 billion liquidity support from SDR to boost unstable external reserves.
Managing Director of IMF, Kristalina Georgieva, described it as the largest SDR in the history of the scheme and is a shot in the arm of the world.
The newly approved allocation will in part help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies – dollar, euro, renminbi, yen, and pound sterling.
She said the SDR allocation will help reduce reliance on domestic and foreign debt, and provide additional liquidity to the global economic system.
“Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis. SDRs are being distributed to countries in proportion to their quota shares in the IMF,” she said.
According to the IMF boss, about $275 billion of the funds would go to emerging and developing countries, with low-income countries receiving about $21 billion.
“SDRs are a precious resource and the decision on how best to use them rests with our member countries. For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well informed.
“To support countries, and help ensure transparency and accountability, the IMF is providing a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability.
“The IMF will also provide regular updates on all SDR holdings, transactions and trading – including a follow-up report on the use of SDRs in two years’ time. To magnify the benefits of this allocation, the IMF is encouraging voluntary channeling of some SDRs from countries with strong external positions to countries most in need,” Georgieva said.
The SDR was created in 1969 by the IMF as an international reserve asset to supplement its member countries’ official reserves. About $943 billion has been allocated since it started.
