The board of governors of the International Monetary Fund (IMF) has approved the allocation of $3.35 billion to Nigeria as part of a historic general allocation of Special Drawing Rights (SDRs) of the International Multilateral Institution.
This is a result of the approval of a general allocation of about SDR456 billion, an equivalent of $650 billion, by the IMF Board of Governors on Monday.
This was disclosed in a statement issued by the IMF on Tuesday, saying that Nigeria will be allocated $3.35 billion out of the funds.
The allocation which was approved on Monday aims to boost global liquidity at a time when the world is grappling with the coronavirus pandemic.
What the Managing Director of IMF is saying
The Managing Director of IMF, Kristalina Georgieva, in a statement, said, “This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.
“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis.”
Georgieva promised that IMF would continue to engage actively with its membership to identify viable options for voluntary channelling of SDRs from wealthier to poorer, and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth.
IMF said in its statement that the general allocation of SDRs will become effective on August 23 and the newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund.
It also stated that about $275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.
It noted that one key option that members that have strong external positions can adopt, is for them to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).
The IMF said the concessional support through the PRGT was currently interest-free, adding that it was exploring other options to help poorer and more vulnerable countries in their recovery efforts.
The statement pointed out that a new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term.
What you should know about SDRs
Special Drawing Rights (SDRs) are supplementary foreign exchange reserve assets defined and maintained by the IMF to supplement the official reserves of its member countries. SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged
The amount allocated to Nigeria is as a result of the exchange rate of reference which is 0.702283 SDR to a dollar as of July 1, 2021, and Nigeria has 2.4545 billion SDRs.
It can be recalled that in May 2020, the IMF disbursed the sum of $3.4 billion, one of the largest emergency support, as Rapid Financing Instrument (RFI) to Nigeria.
The fund which was requested by Nigeria was a fiscal support to the country during this period of coronavirus pandemic and is to be used to mitigate its impact on the country’s economy as it grappled with dwindling government revenue and an economic crisis following the crash of crude oil prices globally.