Nigeria applies for IMF's rapid credit facility

Nigeria's Finance Minister of Finance and National Planning, Zainab Ahmed, recently announced that Nigeria has applied for the International Monetary Fund's Rapid Credit Facility in response to the economic challenges posed by the COVID-19 pandemic. While emphasizing that Nigeria is not looking to negotiate or enter into any IMF program at this time, the country is seeking financial support to navigate through the crisis. To assess Nigeria's response, Tilewa Adibajo, CEO of CFG Advisory, spoke on CNBC Africa about the country's economic outlook. Adibajo highlighted the significant impact of the global pandemic on Nigeria, which has a population of over 118 million people. With the collapse of oil prices from the budgeted $57 per barrel to below $20, Nigeria faces challenges in funding its budget and managing its deficit. The looming devaluation of the naira and declining reserves further add to the economic strain, requiring a coordinated response from both monetary and fiscal policies. Amidst the economic uncertainties, Adibajo noted that Nigeria's response to COVID-19 has been positive, with the government introducing fiscal stimulus measures to support the economy. The Speaker of the House of Assembly is also considering legislation to provide tax breaks for companies to prevent layoffs, showing efforts to safeguard jobs and liquidity. However, Nigeria's financing options are limited due to the global financial market conditions. The country may struggle to access international markets for funding, especially with credit rating agencies giving a negative outlook. Adibajo suggested that Nigeria might need to rely on domestic sources for funding, including the central bank as the lender of last resort. The government's high debt profile of $85 billion, coupled with challenges in borrowing additional funds, raises concerns about debt sustainability and potential recession risks. As Nigeria grapples with the economic fallout of COVID-19, securing financial stability and maintaining fiscal discipline will be paramount. The central bank's role in providing funding for stimulus programs will be crucial in supporting the economy during these challenging times. However, executing prudent financial management practices and tightening expenditure will be essential to prevent a deeper economic downturn.