On IMF’s $3.3bn COVID-19 support for Nigeria

The International Monetary Fund (IMF)’s $3.3bn coronavirus emergency facility for Nigeria could provide relief, but it is a reflection of the country’s poor economic status and the gloom on the horizon. The paperwork for the facility began in 2020, during the first wave of the pandemic, as the fall in oil export froze 90 per cent of Nigeria’s revenue, and left local industries shivering due to economic uncertainty. This Bretton Woods institution facility to Nigeria is the highest of the $18bn loan earmarked for 40 low-income African countries, weather-beaten by the pandemic. Ghana, for instance, is to get $1bn.

The IMF says the Rapid Credit Facility, “provides lowaccess, rapid, and concessional financial assistance to Low-Income Countries (LICs) facing an urgent balance of payments need, without ex-post conditionality. It can provide support in a wide variety of circumstances, including shocks, natural disasters and emergencies resulting from fragility. The RCF also provides policy support and may help catalyse foreign aid.”

Though there are no strings attached to this loan, it is expected that Nigeria would adopt some policy initiatives recommended for the economy to recover. The initiatives being pushed by the IMF include a unified foreign exchange regime to arrest the devaluation of the Naira and for the currency to settle at a more realistic value against foreign currencies. Until the Central Bank of Nigeria (CBN) halted the handout of the dollar to Bureaux de Change (BDCs), a fortnight ago, the exchange rate regime provided an avenue for round-tripping and the laundering of illicit funds.

Also, the IMF is pushing for Nigeria to revisit its tax regime, recommending 10 per cent Value Added Tax (TAX) when the economy improves, and an aggressive tax collection that would cut tax exemptions, customs duty waivers and broaden the country’s tax base.

We, as a newspaper, have raised the alarm over the debt trap for Nigeria. Though the IMF facility attracts zero interest, Nigeria is expected to concede to some of the monetary body’s policy recommendations, especially the tax drive which could worsen our tax fatigue, as the economy continues to shrink instead of surging. The IMF data raises concern that Nigeria’s tax revenues lag behind those of other oil-producing countries, an argument that could incite government into imposing further tax on hapless Nigerians. However, over 90 per cent of the country’s revenue from oil goes into public debt servicing, with little or nothing left for financing critical social infrastructure, not to talk of cushioning the effects of the COVID-19 pandemic. The situation is compounded by this administration’s penchant for deficit budget used in financing white elephant projects.

Without mincing words, it is clear that Nigeria has been cast into a quagmire. Loans, either from the World Bank, IMF, China or whatever country, cannot redeem Nigeria from its current logjam. The time to walk the talk of exportoriented diversification of the economy is now. The fact that 90 per cent of Nigeria’s export is hydro-carbon product, just as it was in 1970s, is not complimentary about a country tagged as the giant and hope of Africa. Government must provide support for non-oil industries that are export-oriented, as it is clear that only industries have the capacity of mopping up thousands of youths from unemployment. No matter how much handout, in the name of social intervention, government gives to the poor and vulnerable, it will not approximate the industrial boom in several major Nigerian cities four decades ago.

The COVID-19 pandemic has provided a valid excuse for taking this $3.3bn IMF facility, but Nigeria must rise from the ranks of countries that go cap-in-hand to the Bretton Woods institutions and, now, China, pleading for more debts. The IMF has forecast that for Nigeria to come out of the woods, it must generate, at least, five million jobs annually in the next 10 years. This target cannot be achieved through begging. We must work towards achieving that and more. Nigeria must work hard to become financially independent.