Nigeria is one of the countries to benefit from the $650 billion creative funding set aside by the International Monetary Fund (IMF) under its Special Drawing Rights (SDR) support base. The SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. To date, about $943 billion has been allocated.
The SDR, which the IMF accompanies with governance framework support, is expected to help countries to plug external reserves holes and reduce reliance on both domestic and external facilities, according to a report by the Guardian newspaper.
Nigeria is expected to secure $3.35 billion liquidity support from the Fund. The Guardian reported this week, that Nigeria’s foreign reserves have been on a downtrend since August 11 after what appeared like a rally in the second half of July turned out to be a breather.
Last week, the gross reserves closed at $33.52 billion while the liquid (or available) form was $33.24 billion, bringing the average figure to $33.38 billion.
Managing Director of IMF, Kristalina Georgieva, noted yesterday, that the largest SDR in the history of the scheme “is a significant shot in the arm of the world and, if used wisely, a unique opportunity to combat this unprecedented crisis.”
She said the SDR allocation would provide additional liquidity to the global economic system, helping to supplement countries’ foreign exchange reserves while “reducing their reliance on more expensive domestic or external debt.”
“Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis. SDRs are being distributed to countries in proportion to their quota shares in the IMF,” he said.
According to the IMF boss, about $275 billion would go to emerging and developing countries out of which low-income countries will receive about $21 billion, which is as much as six percent of GDP of the befitting countries in some cases.
The newly approved SDR allocation is to address the long-term global need for reserves and help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies – dollar, euro, renminbi, yen, and pound sterling.