As the onset of the Coronavirus pandemic has sent Nigeria’s economy into dire straits, the government has once again found itself running to the International Monetary Fund (IMF) for loans tagged as Emergency Funds.
Details available as of press time reveals that the IMF loan is a $3.4 billion facility with a 5 year tenor and 3 year moratorium. Once payment begins in 2023, $737 million will be paid annually for its tenor and the interest plus other service charge all amount to $178 million.
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Knowing Nigeria and its history with loans which has had no direct impact on the economy or on the livelihood of the citizenry, one cannot avoid being skeptical about this new debt facility – especially at a time that Nigeria’s capacity to repay loans stands diminished with falling crude oil prices.
Similarly, on Tuesday, the Senate resumed plenary briefly to deliberate on another N850 billion domestic loan request by the Federal Government. The Senate gave approval to the N850 billion loan request without any hassle. For this N850 billion domestic loan, it carries an advantage of being without the attendant exchange rate risk which the IMF loan carries.
But more interesting, in fact, is the detail that this is the first time in about 30 years that the FG will be seeking loans from the IMF.
The IMF got a bad rap within elite circles in the late 80’s to the early 90’s, during the junta of General Ibrahim Badamosi Babangida, when most of the financial woes the country now faces originated with the Structural Adjustment Programme (SAP). The loan burden on the nation accumulated for years, in addition to that from the Paris Club of Creditors which the Olusegun Obasanjo era struggled to settle. Ever since the World Bank and the IMF had been largely ignored by the Nigerian government, China has since stepped into the World Bank and IMF shoes – providing loans which came with infrastructure development deals.
However, there is only so much the Chinese can do, especially as Nigeria may have started being careful of deals which only favoured China on the long run. The President of Tanzania recently called off a $10 billion loan deal in the last minute. It may now be time to seek much-needed dollars from the IMF.
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As the new IMF loan is now approved, it came with some underlying conditions which may force the Nigerian government to sit tight a little more this time around. One of the conditions in the loan deal is that Nigeria must adhere to some terms in fiscal discipline. It may be on the heels of this development that measures to cut the size of government Ministries, Departments and Parastatals (MDAs) has now been approved by the President Muhammadu Buhari 9 years after it was recommended in the Oronsanye report.
As of press time, other conditions attached to the IMF loan which may have unintended positive consequences on the long term are yet to be made public; nevertheless, it is all the same a relief that the government is still able to get a fix in a time made desperate by the ravaging COVID-19 pandemic.
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