N1.224trn IMF loan: Many more Nigerians to lose jobs

•Further increase in VAT, excise rates looms •Tougher times ahead

WITH the Federal Government accessing $3.4 billion (N1.224 trillion) loan from the International Monetary Fund (IMF) at the weekend, there are signs that Nigerians may face tougher times in order for government to fully repay the money by the end of the 2025 stipulated time.

The Executive Board of the International Monetary Fund (IMF), on Tuesday approved Nigeria’s request for emergency financial assistance of US$ 3.4 billion under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

Although loans under RFI are not usually accompanied by normal IMF preconditions, government has committed to certain policy implementations in order to strengthen its ability to fully repay the loan within stipulated time.

Some of these conditions include complete removal of petroleum subsidies, which it said will never be rescinded; full removal of electricity subsidy by 2021; further increment of value added tax (VAT) rates among others.

In order to further shore up government revenue, President Muhammadu Buhari has ordered the immediate implementation of the Orosanye Report through which thousands of workers will be retrenched as their ministries, departments or agencies may be either scrapped or merged.

Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed that the  Federal Government had set up machinery to borrow at least $7 billion (N2.5 trillion) from the International Monetary Fund (IMF), World Bank, African Development Bank (AfDB) and others to fight the twin evil of the coronavirus pandemic and depressed crude oil price.

She said Nigeria applied for $3.4 billion loan from IMF, devoid of any normal conditions; $2.5 billion from World Bank and $1 billion from AfDB, but refused to disclose how much government applied for from Islamic Development Bank and other multilateral agencies.

Already, Debt Management Office (DMO) said as of December 2019, the Federal Government’s domestic debt stood at N14.2 trillion, while external debt was $27,676.14 (N10 trillion).

DMO said in addition that between January and December 2019, the Federal Government paid N480.4 billion on servicing external debts.

However, although the IMF loan expected to have been released through the Central Bank of Nigeria (CBN) on Friday was without the usual IMF preconditions, observers see it as nonetheless both expensive and choking.

Professor of Capital Market, Uche Uwaleke, described the loan as non-concessional with commercial terms being disbursed under the IMF’s Rapid Financing Instrument (RFI) which, in addition to a basic interest rate charge, attracts a commitment fee, service charge and a surcharge on outstanding credit.

“The facility is for a short period due within three and one quarter to five years which means repayment will be done in eight quarterly instalments starting in the third quarter of 2023, assuming disbursement is made before end of Q2 2020.

The IMF Country Office in Abuja told Sunday Tribune during the week that “outstanding fund drawings under the RFI are expected to be repaid in eight quarterly installments, starting three quarter years and ending five years from the original drawing date, while interest rate on outstanding Fund credit (including RFI credit) is comprised.

“A basic rate of charge that is based on a market-determined special drawing right (SDR) interest rate (0.05 percent for the week ending April 30, 2020), plus a margin set by the Executive Board every two years (currently at 100 bps).

“Charges are billed on a quarterly basis and are payable in SDRs. The IMF’s financial quarters end in July, October, January, and April,” she said.

In addition, a service to the above interest payments, a service charge of 50 basis points of the amount drawn at the time of each drawing will also apply.

In the application for the loan, the Federal Government promised to repay the loan by beefing up its revenue generation.

“First and foremost, we will revert to our government’s planned medium-term fiscal consolidation path—which includes increasing revenue to 15 per cent of GDP through further VAT reforms, rise in excises, and removal of tax exemptions— once the crisis passes.”

The recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not re-emerge.

The existing stock of overdrafts held at the CBN will also be securitised.

“We will move towards full exchange rate unification and greater exchange rate flexibility, which would help preserve foreign exchange reserves and avoid economic dislocation.”

In 2020, the Federal Government will reduce its electricity subsidy to a maximum of N380 billion and remove it completely in 2021.

Government has also committed to strengthening powers of Auditor General of the Federation to ensure public officers fully declare their assets.

“In line with IMF safeguards policy, we commit to undergoing a new safeguards assessment conducted by the Fund.

“To this end, we have authorised IMF staff to hold discussions with external auditors and provide IMF staff access to the CBN’s most recently completed external audit reports.

“We do not intend to introduce measures or policies that would exacerbate the current balance of payments difficulties.

“We do not intend to impose new or intensify existing restrictions on the making of payments and transfers for current international transactions, trade restrictions for balance of payments purposes, or multiple currency practices or to enter into bilateral payments agreements which are inconsistent with Article VIII of the IMF’s Articles of Agreement,” she said.



Buy and read digital replicas of your TRIBUNE titles by subscribing through E-VENDING

COVID-19: Dokpesi, Daughter-In-Law, Six Other Family Members Test Positive
The founder of DAAR Communications Plc, High Chief Raymond Dokpesi and his daughter-in-law along with six members of his family have tested positive for coronavirus. This is coming three days after his son and Chairman of the board of the company, Raymond Dokpesi Jnr, also tested positive for the virus… Read full story

Kano And The Mad Woman Of Omu-Ijelu
Not long ago, the funny character, who presides over the affairs of Kano State as the governor, Umar Ganduje, raised the alarm that the Federal Government had literarily abandoned the state in its quest to combat the rampaging Coronavirus epidemic… Read full story

Lagos Discharges Polish, Filipino, 24 Nigerians After Testing Negative For Coronavirus
Lagos State governor, Babajide Sanwo-Olu, on Friday announced that 26 more patients have been discharged from isolation centres in the state having tested negative twice consecutively to coronavirus. He said those discharged included 14 males and 12 females, including two foreign nationals – a Polish and a Filipino… Read full story

WHO To Identify Animal Source Of COVID-19 ― Director-General
Dr Tedros Ghebreyesus, the Director-General, World Health Organisation (WHO), said the agency will work with relevant organisations to identify the animal source of novel Coronavirus (COVID-19) based on Emergency Committee recommendations… Read full story

COVID-19: Workers Won’t Be Retrenched Without Following Due Process, Says Buhari
President Muhammadu Buhari has told workers that despite the expected downturn in the nation’s economy owing to the coronavirus pandemic, the Federal Government will ensure that workers won’t be retrenched without due process. Seeking to allay the fears of workers for their jobs, which has heightened recently… Read full story

COVID-19: Osun Monarchs Want Govt To Explore Herbal Medicine
SOME traditional rulers in Osun State have charged their subjects to abide by all the precautionary measures announced by the World Health Organization (WHO), Federal Government and health experts in the state so as to stay safe against the ravaging COVID-19 pandemic in the country… Read full story

Nigeria COVID-19 Survivor: ‘An Experience I Don’t Wish On Anyone’
It feels great to have survived COVID-19. If you see the data of people who have passed away due to the virus, they are alarming. I’m really grateful to be alive but also grateful for the experience as I am able to share with people that COVID-19 is not a hoax like many people may believe in Nigeria… Read full story

Our Fears Living Close To Isolation Centres —Residents •Why we can’t relocate you —Govt
Lagos, which has the highest number of patients with COVID-19 infection, understandably has the highest number of isolation centres, topping four as of the last count. While two have been in use and frequently in news, two new ones located at Landmark Exhibition Centre in Victoria Island and Gbagada Hospital are… Read full story

Loss Of Smell May Suggest Milder COVID-19, Study Finds
New research suggests that loss of smell as a symptom of COVID-19 may indicate a mild case of the disease. A new study has found that loss of smell, which is a reported symptom of COVID-19, may indicate that a person will experience a milder case of the disease… Read full story

Covid19- And The Rising Global Challenge
It would not be an exaggeration to aver that Covid 19 has endangered human race globally in such a manner that is novel. Death tolls in countries like China, Italy, Spain, United Kingdom, USA, Germany, Iran and others are rattling and quaking the whole world and make many to be having the fear that the globe is on the… Read full story

You might also like

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More