A reserve boost from the International Monetary Fund (IMF) will help Nigeria reduce next year’s spending shortfall, according to the country’s finance minister.
Nigeria received an IMF allocation of $3.35 billion in reserve assets – known as special drawing rights (SDR), and plans to use the funds to reduce a budget deficit that’s set to exceed a legal limit, Finance Minister Zainab Ahmed said weekend.
“We’re taking the IMF SDRs as part of the financing for the 2022 budget,” she said. “That may mean that we don’t have to borrow externally next year.”
The government still needs to negotiate the terms at which it plans to borrow the IMF funds from the central bank, said Ahmed, who didn’t specify how much of the reserves the government would use.
Nigeria, which tapped international markets last month for the first time since 2018, raising $4 billion, plans to spend N16.4 trillion ($39.7 billion) next year, or 18 per cent more than initially proposed. The spending increase is set to widen the budget deficit to N6.3 trillion, or 3.4 per cent of GDP, exceeding a legal threshold of three per cent stipulated in Nigeria’s fiscal responsibility law.
It’s still unclear if the IMF’s boost will help Nigeria avoid external borrowing altogether in 2022.
“That may be a possibility, but it’s too early to say,” Patience Oniha, the director-general of the Debt Management Office, said in a response to questions.