Weekly Economic and Financial Commentary – May 04, 2020

Last week, the Executive Board of the International Monetary Fund (IMF) approved Nigeria’s request for emergency financial assistance of $3.4 billion, (which is 100% of its SDR quota) under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of COVID-19. The RFI is a 5-year non-conditional loan, with a 3-year moratorium, interest charge estimated between 1.2% and 1.5%. In a separate report, the IMF estimated Nigeria’s BOP gap for 2020 at about $14 billion or 3.2% of GDP, with the RFI expected to cover about 24%. In addition, the planned borrowings from World Bank and the African Development Bank of about $3.6 billion, are expected to cover almost 26% of the BOP gap, with the rest of the financing gap expected to be met by further reserve drawdown and possible greater exchange rate flexibility. Elsewhere, the Senate last week approved the conversion of the hitherto planned N850 billion external borrowing to be financed from domestic sources.