Minister of Finance, Budget and National Planning, Zainab Ahmed, has explained why Nigeria is borrowing $3.4bn from the International Monetary Fund.
In an interview on Channels Television’s Politics Today Programme, the minister said the loan will help in curbing the spread of the COVID-19 pandemic and regulating the crash in crude oil prices.
The minister also said that the money will support the budget and stabilize the country’s economy especially the revenue from oil and gas.
“The financial package is for assistance to curb this COVID-19 pandemic and the shock that we have had in terms of the crash in the crude oil prices.
“It’s broad, it will support the budget, stabilize the economy from the significant decline in the revenues from oil and gas as well as large expenditure to manage the health crisis”.
Ahmed said that the loan is to be paid within five years with an interest cost of one percent.
“This $3.4bn loan is to be paid over a period of five years but before the payment starts, we have a moratorium of three and a quarter year which makes it about eight and quarter years.
“It is a facility with an interest cost of one percent”.
On the structure of the loan whether the Federal Government will be getting the naira equivalent while the Central Bank of Nigeria will be getting the dollar equivalent, the minister explained that the loan is a dollar currency loan which will come into a special account that will be opened in the CBN and be accessed and converted into Naira.
“It is a dollar currency loan so it will come into a special account that we will be opened in the CBN.
“The loan will be accessed and converted into naira.
“Yes, it is coming into the CBN as dollars but the amount we are using will be in naira”.
The minister assured Nigerians that the funds will be used judiciously for the purpose of health, social development, and breaching the revenue gap that has affected the economy.
She added that the National Assembly will be exact in the use of these funds.
The board of the IMF had on Tuesday approved the sum of $3.4 billion to support Nigeria’s COVID-19 fight.
The assistance, facilitated via the Rapid Financing Instrument (RFI), will help limit the decline in Nigeria’s international reserves, the IMF said.
The money will help to provide financing for the country’s budget, which has been severely affected by falling oil prices triggered by the pandemic and price wars.
The IMF praised the Nigerian government’s “immediate” response to the crisis, describing it as “welcome.”
However, it noted that short-term focus should be on higher health spending and palliative for households and businesses.
The financial body also said Nigeria should take steps to unify its exchange rate as quickly as possible.
After the COVID-19 crisis passes, Nigeria’s “focus should remain on medium-term macroeconomic stability, with revenue-based fiscal consolidation essential to keep Nigeria’s debt sustainable and create fiscal space for priority spending,”, Deputy Managing Director and Acting Chair of the IMF, Mr. Mitsuhiro Furusawa said.
The emergency financial assistance to Nigeria is the highest so far in any member country.
