The Former Deputy Governor of the Central Bank of Nigeria (CBN) Tunde Lemo has revealed that the $3.4bn loan from the International Monetary Fund will be used to support Nigeria’s balance of payment mode.
He stated this during Channels Television’s Business Morning Programme on Thursday.
Mr. Lemo welcomed the idea of borrowing the fund, describing it as a unique one that will help to avoid a currency crisis.
He said that the IMF is releasing about 100 percent of Nigeria’s quota, noting that the fund is different from other project facilities obtained from other sources.
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“This is different because it goes directly to support your balance of payment, like government revenue, the percent that comes from foreign exchange earnings.
“And Today because of the plunge in oil price, we also need to curtail the output from a little over $2m barrels per day to now $1.4m or $1.5m barrels per day.
“When your price has plunged to below cost, you start to run short of foreign exchange”.
He noted that COVID-19 is a global pandemic that has caused a major setback in the economy, especially the crash in oil prices.
According to him, the country needs to get financial help to cushion the effect of the virus.
“The nation should understand the fact that we need to get very rapid financial accommodation to cushion the effect, particularly our balance of payment support”.
He appealed to the Federal Government to revamp businesses in the country to avoid situations where countries will not be able to operate due to a lack of foreign exchange.
His statement comes less than 24 hours after the Minister of Finance, Zainab Ahmed said that the loan will help to provide financing for the country’s budget, which has been severely affected by falling oil prices triggered by the pandemic and price wars.
“The financial package is for assistance to curb this COVID-19 pandemic and the shock that we have had in terms of the crash in the crude oil prices.
“It’s broad, it will support the budget, stabilize the economy from the significant decline in the revenues from oil and gas as well as large expenditure to manage the health crisis”.
Ahmed said that the loan is to be paid within five years with an interest cost of one percent.
“This $3.4bn loan is to be paid over a period of five years but before the payment starts, we have a moratorium of three and a quarter year which makes it about eight and quarter years.
“It is a facility with an interest cost of one percent”.
