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  • Business - Economy
  • Updated: May 01, 2020

IMF To Investigate CBN Over $3.4 billion Loan To FG

IMF To Investigate CBN Over $3.4 billion Loan To FG

 

The International Monetary Fund is set to investigate the Central Bank of Nigeria (CBN) following President Muhammadu Buhari-led administration's request to obtain $3.4 billion.

Allnews discovered that the investigation will give IMF access to CBN's external audit reports.

Why IMF is conducting an investigation on CBN

It is part of IMF's assessment procedure to ensure the country obtaining a loan from the international financial institution doesn't default on the debt payment. The investigation is a fact-checking process to ensure the receiver doesn't misuse the funds, “When the IMF provides a loan to a country, a due diligence exercise is carried out to obtain assurance that the country’s central bank receiving IMF resources is able to manage the funds and provide reliable information,” IMF explained in a FACTSHEET.

Nigeria had promised that, “They (Nigerian authorities) will provide fund (IMF) staff with the necessary central bank audit reports and have authorised the external auditors of the Central Bank of Nigeria to hold discussions with staff,” The due diligence focuses on five key areas; external and internal audit mechanisms, legal structure and autonomy, financial reporting and system of internal controls.

Nigeria open to investigation

The Federal Government had revealed its willingness to submit itself for due diligence in order to obtain the emergency financial assistance from the IMF. In a Letter of Intent the IMF received from Nigeria during the application for the loan on April 21, 2020, it was stated that, “In line with IMF safeguards policy, we commit to undergoing a new safeguards assessment conducted by the fund.

"To this end, we have authorised IMF staff to hold discussions with external auditors and provide IMF staff access to the CBN’s most recently completed external audit reports. We do not intend to introduce measures or policies that would exacerbate the current balance-of-payments difficulties.

"We do not intend to impose new or intensify existing restrictions on the making of payments and transfers for current international transactions, trade restrictions for balance-of payments purposes, or multiple currency practices, or to enter into bilateral payments agreements which are inconsistent with Article VIII of the IMF’s Articles of Agreement.”

Why Nigeria needs the loan

The $3.4 billion is expected to be disbursed by the Nigerian government to cushion the impact of coronavirus on the country's economy. In the letter seen by Allnews, Nigeria had stated that, "Nigeria faces an immediate balance of payments need given the sharp contraction in oil prices and the COVID-19 pandemic, which, if not addressed, would result in immediate and severe economic disruption. There is also a high degree of uncertainty on the duration and scale of the COVID-19 impact."

Nigeria further stated that, "To address the immediate external financing needs, the Government of Nigeria requests the maximum amount of IMF emergency financing available to Nigeria under the Rapid Financing Instrument (RFI), or SDR 2,454.5 million (about US$3,398 million), corresponding to 100 per cent of our quota."

The letter also disclosed that Nigeria will ensure transparency in the disbursement and usage of the financial assistance provided by IMF, "We fully recognize the importance of ensuring that financial assistance received is used for intended purposes. To that end, we will (i) create specific budget lines to facilitate the tracking and reporting of emergency response expenditures and report funds released and expenditures incurred monthly on the transparency portal (http://opentreasury.gov.ng/).

Adding that the government will "publish procurement plans, procurement notices for all the emergency response activities—including the name of awarded companies and of beneficial owners—on the Bureau of Public procurement website"

To read further the correspondence between Nigeria and IMF regarding the loan, click the link.

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