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IMF Loan to Nigeria Explained

Based on the terms of the Rapid Financing Instrument, Nigeria is expected to pay back the loan between within 3¼ to 5 years.



Kristalina Georgieva, IMF boss hints at 'synchronized slowdown' in global growth , IMF: 40% of African countries can't pay back their debts , Nigeria worse off, posts grows lower than LIDC benchmark - IMF, Measures introduced by Nigeria to ensure transparent use of the $3.4b IMF loan

The International Monetary Fund “IMF” on Tuesday, April 28th approved the sum of $3.4 billion as financial assistance to Nigeria. This is the first time in recent history that Nigeria is obtaining funding support from the IMF.

Is this a loan or a grant?

The Financial Support of $3.4 billion obtained by Nigeria from the IMF is a loan. The IMF has various loan types for member countries depending on the reason for needing finance. In this case, the loan was issued as an “Emergency Support” under its Rapid Financing Instrument facility.

Nigeria being a member country has what they call Special Drawing Rights, which allows us to draw money in times of need to the maximum of our contribution to the fund. Think of it like a cooperative where you contribute money and can draw from it. In this case, the loans are provided via the Rapid Financing Instrument.

The Rapid Financing Instrument is an IMF facility that is usually tied to funding arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility. As such, it is rapidly approved. It is also available to member countries who have a major balance of payment problems.

Balance of payment refers to a situation where a country’s dollar inflow (supply)can no longer pay for its dollar outflows (demand). Nigeria’s balance of payment is estimated at $17 billion.

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READ ALSO: Nigeria is in a weak financial position to absorb recession shocks —Bismark Rewane

Does the loan come with an interest rate and are we meant to payback?

The IMF loan comes with a concessionary interest rate and is expected to be paid back by Nigeria. According to data from the website of the IMF, the interest charged is not flat and applies to several factors. The IMF charges a lending rate, annual commitment fees, and service charge.

The commitment fee can be as low as 0.15% and as high as 0.6%. The service charge is about 0.5% for each amount that is withdrawn. The lending rate is 0.05% (also called the Special Drawing Rights) plus a margin of 1% totaling about 1.05%.

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The higher a country draws on the loan beyond its quote the higher the margin it pays. Margins can go as high as 3%. Nigeria is taking 100% of its quota so we expect the interest rate to be about 1.05%.

Based on the terms of the Rapid Financing Instrument, Nigeria is expected to pay back the loan between within 3¼ to 5 years.

READ MORE: OFFICIAL: Nigeria’s oil sector accounts for 93.8% of export revenue

Why is Nigeria Seeking an IMF Loan?

The Nigerian government faces a major revenue crisis due to the impact of the fall in oil prices and the lock-down of the Nigerian economy due to the Covid-19 situation.

The government relies heavily on oil for about 85% of its revenue and because of the crash of the price of oil from its target $57 to under $20 it no longer has money to fund its budget. This means the government will struggle to pay for salaries of civil servants, take on capital projects and even more importantly, combat the effect Covid-19 pandemic which is ravaging the economy bit by bit.

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The government needs money to pay for testing equipment, treat victims of the virus, and provide palliatives for millions of Nigerians who may have lost their jobs or face business losses due to the pandemic. It is based on the above that the government had no choice but to approach the IMF for funding support.

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Why is the IMF giving Nigeria the loan?

According to the IMF, it has also looked at issues we highlighted above as well as other reasons in deciding whether to give Nigeria a loan. The IMF explains that the immediate economic impact of COVID-19 is expected to be severe in Nigeria especially as things have been bad even before the twin calamity of the COVID-19 and the fall in oil prices.

It also remarked that the pandemic—along with the sharp fall in oil prices has made Nigeria even more vulnerable and this could lead to a recession and a huge funding gap. The IMF also explains that the current situation could make the average Nigerian even poorer and so the need to extend the financial assistance.

One other major reason for this loan, which we had mentioned above was to help the government meet its balance of payment obligations.

Are there strings attached?

Due to the type of loan accessed by Nigeria, there are no strings attached to this loan. According to the IMF’s definition, Rapid Financial Support “provides rapid and low-access financial assistance to member countries facing an urgent balance of payments need, without the need to have a full-fledged program in place.”

This suggests there are no strings as loans requiring a “full-fledged program” are typically tied to major reforms. Should Nigeria in the nearest future go for a different loan from IMF it may have to meet the IMF’s reform requirements.

READ ALSO: FG to go ahead with Eurobond payment, seeks debt relief from china, multilateral agencies

Does this loan solve all Nigeria’s economic issues?

This loan does not solve all of Nigeria’s economic challenges. In Naira terms, assuming an exchange rate of N360/$1 the loan is about N1.2 trillion. Nigeria’s initial 2020 budget was N10 trillion and included revenue targets of about N8 trillion.

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This is the first of many steps that the government needs to take to plug the revenue hole that the crash in oil prices and the COVID-19 pandemic has caused.

The IMF explained it as follows; “The emergency financing under the RFI will provide much-needed liquidity support to respond to the urgent BOP needs. Additional assistance from development partners will be required to support the government’s efforts and close the large financing gap.”


So, to solve Nigeria’s revenue challenges, the government will still need to rely on a combination of more foreign currency loans, local bonds, increased revenue, and economic reforms.

Will the money be disbursed to state governments?

The money is not available to State governments. It is a loan to the Federal Government and will be used for Federal expenditures. States will probably seek funding support from the world bank and other multilateral institutions.

What will the money be used for?

The funds are expected to be used for meeting government expenditure related to the fight against Covid-19. It is also expected to aid Nigeria’s balance of payment needs, allowing the economy to pay for import for critical procurements required to get the businesses back to work.

In fact the IMF explains that it expects Nigeria to “implement proper governance arrangements—including through the publication and independent audit of crisis-mitigating spending and procurement processes—is crucial to ensure emergency funds are used for their intended purposes.”

Will this loan get Nigeria out of recession?

As mentioned above, the loan is not expected to solve all of Nigeria’s problems. It is therefore not expected to singularly avoid Nigeria from getting into recession or get Nigeria out of recession.

However, loans like these if applied appropriately can provide a major cushion for the country’s revenue shortages and be a major bridge until we secure more funding support and the economy bounces back.

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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Business News

Nigeria’s Manufacturing Sector contracts for 6th consecutive month

The manufacturing sector contracted for the sixth consecutive month as 8 subsectors contracted out of 14.



Manufacturing: Momentum in activities slows in January, CBN’s forex intervention has encouraged influx of raw materials - Manufacturers , Manufacturing: Activity level slumps on COVID-19

The Manufacturing Purchasing Managers’ Index (PMI), for the month of October, witnessed a contraction for the 6th consecutive month, as it stood at 49.4 index points.

This was disclosed by the Central Bank of Nigeria (CBN), in its October PMI report released today.

READ: Manufacturing PMI dips further as recession scare looms

READ: FG set to create at least 5 million jobs for youths in the power sector – Minister of Power 

According to the information contained in the report, despite the fact that the Manufacturing Purchasing Managers’ Index (PMI) for the month of October contracted, the Manufacturing PMI index recorded a month-on-month increase owing to improved New orders, faster manufacturing supplier delivery time, and slight changes in production and employment levels.

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READ: FG meets group to access AfCFTA’s $650 billion market

What you should know

The report stated that, out of the 14 subsectors surveyed, 6 subsectors reported expansion (above 50% threshold) in the review month in the following order:

  • Electrical equipment
  • Transportation equipment
  • Printing & related support activities
  • Chemical & pharmaceutical products
  • Textile, apparel, leather & footwear
  • Cement

READ: Global Stocks rise higher, on positive Chinese manufacturing report

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READ: Nigeria’s inflation rate hits 13.71% as food prices soar

While the remaining 8 subsectors reported contraction (below 50% threshold) in the review month in the following order:

  • Primary metal
  • Petroleum & coal products,
  • Paper products
  • Fabricated metal products
  • Furniture & related products
  • Nonmetallic mineral products
  • Plastics & rubber products
  • Food, beverage & tobacco products

READ: The CBN data that can reveal whether we are already in a recession

PMI for the non-manufacturing sector stood at 46.8 points in October 2020, indicating contraction in Nonmanufacturing PMI for the seventh consecutive month. Of the 17 sub-sectors surveyed, 3 subsectors reported growth, while 11 subsectors declined.

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CAP Plc set to merge with Portland Paints and Products Plc.

CAP Plc and Portland Paints have taken a decision to merge their respective businesses in accordance with applicable laws.




The Board of Directors of Chemical and Allied Products Plc (CAP Plc), and Portland Paints and Products Plc (Portland Paints), have decided to merge their respective businesses in accordance with applicable laws to drive growth and expansion within the Nigerian and African markets.

This is according to a press release signed by Bolarin Okunowo, the Managing Director of Portland Paints, made available on NSE, Monday, 26th October 2020.

READ: Big players in Paints and Coatings industry suffer 52% profit loss in the first 6 months of 2020

The completion of the proposed merger is subject to approvals being obtained from the Federal Competition and Consumer Protection Commission, the Securities and Exchange Commission (SEC), The Nigerian Stock Exchange (NSE), the Federal High Court, as well as shareholders of CAP and Portland Paints.

READ: Meet the woman winning in a male-dominated paint market 

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What you should know

  • Should the proposed merger go ahead, CAP Plc will emerge as the resultant entity.
  • The proposed merger will be executed by way of a Scheme of Merger (the “Scheme”) in accordance with Section 711 of the Companies and Allied Matters Act, 2020, and other applicable laws, rules, and regulations.
  • The Scheme will involve the transfer of all Portland Paints Plc’s assets, liabilities and business undertakings including real property and intellectual property rights to CAP Plc.
  • In consideration for the transfer, CAP Plc is offering shareholders of Portland Paints a choice to receive N2.90 cash for every Portland Paints share held OR 1 new ordinary share of CAP Plc, credited as fully paid up for every 8 Portland Paints shares held.
  • The proposed consideration represents a 45% premium to the last traded share price of Portland Paints Plc on October 16, 2020, being the last business day prior to the date on which CAP Plc sent its merger proposal to the Board of Portland Paints and a 41% premium on the trading price as at close of trading on October 23, 2020.

READ: GNI lists shares on NASD after delisting voluntarily from NSE 

What they are saying

Commenting on the proposed merger, David Wright, Managing Director of CAP, said, “The decision to pursue the proposed merger, is driven by the Board’s strategic plan to aggressively grow within the Nigerian and African markets.

“We believe that the Proposed Merger presents a unique opportunity that will benefit all stakeholders, from shareholders to customers, as well as the broader economy. I am excited by the prospect of an enlarged company with a broader decorative paint portfolio covering the premium, mid-market and affordable segments and the inclusion of marine and protective coatings, all of which will benefit our customers and shareholders.”

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READ: Africa Prudential tops losers list following mark down

The Managing Director of Portland Paints, Bolarin Okunowo, submitted that “In recent months, the Board and Management of Portland Paints have evaluated various strategic options with a view to positioning our company to capture emerging growth opportunities.

“CAP Plc’s business is complementary to ours, and both companies will be better able to serve our respective customers by coming together. I believe the combination of Portland Paints and CAP will yield significant benefits for all of our stakeholders.”

Mutual shareholder

Portland Paints and Products Nigeria Plc – with 85.98% of the company’s issued share capital owned by UAC Nigeria Plc, manufactures and sells decorative, industrial, and marine/protective coatings for the construction of oil & gas industries in Nigeria. Portland Paints is the Nigerian representative of Hempel. It is listed on the NSE.

Chemical and Allied Products Plc (CAP) – a subsidiary of UAC Nigeria Plc – which holds 51.49% of the company’s shares, manufactures and sells premium and standard paints and coatings, and is the sole technological licensee of Akzo Nobel Coatings International B.V. in Nigeria. It is listed on the NSE.

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#EndSARS: Anyone found culpable in Lekki Toll Plaza shooting would be held accountable – Sanwo-Olu

Sanwo-Olu has continued to ensure Nigerians that those found culpable in the unfortunate Lekki shootings will not escape the law.



#EndSARS: Anyone found culpable in Lekki Toll Plaza shooting would be held accountable - Sanwo-Olu

Lagos State Governor, Babajide Sanwo-Olu, has said that the Lagos State Government would ensure that anyone found culpable in last Tuesday’s shooting at the Lekki Toll Plaza would be held accountable for their actions.

This was disclosed in a statement by the Lagos State Government, after the Governor’s interview with CNN’s Becky Anderson.

In the interview with CNN, the Governor said, “We will be committed to a full investigation of what happened and people would be held accountable. They certainly would be held accountable. We would do everything possible to ensure that they are held accountable.

READ: CBN rolls out plans to stop smuggling, vows to block several bank accounts

“People have claimed that their friends and family members have been killed. So, this Judicial Panel of Enquiry is meant to bring all of these stories to accountability; where we can make restitution, where families can prove and identify officers that were responsible for this.

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“I am not the Commander-in-Chief of the Armed Forces, I am Governor of a State. The report would be out and we would channel the report to all the relevant authorities in the state to ensure that every one that is found culpable is accountable for the act.”

READ: EFCC files suit against ex Skye Bank Chairman Tunde Ayeni

He added that there was no international pressure on Nigerian leaders to investigate the Lekki incident, and he had met the #EndSARS protesters. He also acknowledged that the protests were legitimate.

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“There are no international pressures whatsoever. These are genuine protesters that we all believe and we all have knowledge about. I was the first governor among governors, with due respect to all my other colleagues, who came out to meet with them, who started from the front. I carried the EndSARS flags with them. I met with them twice and we all had the rally together and worked together,” he said.

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Sanwo-Olu also said that the investigations would be a catalyst for positive change of Governance, and he saw it as a wake-up call for those in power.

“I genuinely believe there would be a change for two reasons. One, what has happened, especially in Lagos is extremely unimaginable. Number two is that it was a clarion call for all of us in government, especially understanding and realizing what the youths truly want us to be doing. So, it hit all of us like a thunderbolt and it was just a wake-up call,” he said.

READ: #EndSARS: Tinubu says he has no investment in LCC, collects no dime from Lekki Tollgate

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What you should know

Nairametrics reported last week that several social media accounts had revealed that peaceful protesters were allegedly being shot at by the military at the Lekki toll holdout. The Nigerian Army, however, denied deploying soldiers to attack #EndSARS protesters who assembled at the Lekki Toll Plaza.

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The Lagos State Government ordered an investigation into the Lekki Toll Plaza shooting that was allegedly done by some men of the Nigerian Army on Tuesday evening. Babajide Sanwo-Olu had also stated that Lagos State would not burn on his watch, as he tried to calm things down after hoodlums wreaked havoc post-Lekki shootings, and announced that the Judicial panel set up by the state would include the incident at Lekki toll gate.

READ: ASUU discloses why it is yet to call off nationwide strike


The Lekki incident has gotten the world’s attention, with the Governor and other members of government admitting that there were casualties as a result of the incident. The onus is on the Federal Government to ensure the recommendations of the state judicial panels are properly executed after they submit their reports.

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