The West African country is Africa’s biggest oil exporter and relies on the sale of natural resources to fund large parts of its public sector – and the government recently called for $7bn from lending institutions to help it through the crisis.
“The Covid-19 outbreak, magnified by the sharp fall in international oil prices and reduced global demand for oil products, is severely impacting economic activity in Nigeria,” said Mitsuhiro Furusawa of the IMF.
“These shocks have created large external and financing needs for 2020. Additional declines in oil prices and more protracted containment measures would seriously affect the real and financial sectors and strain the country’s financing.”
President Muhammadu Buhari has announced the gradual easing of lockdown measures in the Lagos, Ogun and Abuja regions, four weeks after they were first enforced, following the “very heavy economic cost” of the restrictions.
At the beginning of the crisis, he swiftly released contingency funds to Nigeria’s Centre for Disease Control and also prepared $1.3bn of economic stimulus measures in an attempt to mitigate the impact.
Furusawa praised the government’s immediate response to the virus, and said its focus on fiscal accommodation in the short-term would allow for higher health spending, and should alleviate some of the impact on households and businesses.
The package is the largest single coronavirus-related disbursement the IMF has made so far, and fund managing director Kristalina Georgieva said she expects the money to be with Nigeria before the end of April.
It forms part of the IMF’s Rapid Financing Instrument, which was designed to get funds to countries quickly because the packages do not require commitments to economic reforms that its programmes do normally.
Furusawa said that in the longer term, Nigeria should consolidate its public finances by focusing on raising revenue in order to keep its debt sustainable and provide fiscal space for spending.