The International Monetary Fund (IMF) has agreed to extend Nigeria’s deadline for repaying a $3.4 billion loan to 2027. The loan was originally due to be repaid between 2022 to 2026.
The executive board of IMF had in 2020 approved the historic disbursement of $3.4 billion to Nigeria as an assistant for the coronavirus pandemic and failing oil price.
The fund Nigeria received from IMF is the second-highest of the countries that have benefitted from RFI during the Covid-19 pandemic. South Africa got $4.3billion, Côte d’ivoire – $ 886.2 million, Egypt – $2.77 Billion, Tunisia – $745 million, amongst others.
Is it a loan
It is not a loan in the typical sense but Nigeria still has to pay back with interest. Countries hold reserves with the IMF. These reserves are held in what we can technically call a currency called Special Drawing Rights (SDR).
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
The value of an SDR is based on the value of certain international currencies including the dollar, euro, pound, Japanese yen and the Chinese renminbi.
The $3.4 billion Nigeria got represents SDR 2,454.5 million (100% of the quota Nigeria holds with the IMF).
New repayment plan
New data from IMF has given a breakdown of how much Nigeria is expected to pay spread the payment from 2023 to 2027.
The first installment, due in 2023, will be worth SDR373.81 million, or $497.17 million. This includes SDR306.81 million in principal and SDR67 million in interest.
The second installment, due in 2024, will be worth SDR1.32 billion, or $1.76 billion. This includes SDR1.23 billion in principal and SDR94.76 million in interest.
The third installment, due in 2025, will be worth SDR650.58 million, or $865.27 million. This includes SDR613.63 million in principal and SDR36.95 million in interest.
The final two installments, due in 2026 and 2027, will each be worth SDR25.56 million, or $33.99 million. These installments will only be interest payments.
In total, Nigeria is expected to repay the IMF loan with interest over a period of 5 years. The amount of each installment will decrease over time, as the principal amount of the loan is paid down.