• Disbursement under the RFI could amount to up to US$3.3bn
  • But this is not an IMF program, and the Nigeria authorities have ruled out requesting one
  • According to media reports, Nigeria is also seeking US$2.5bn from the World Bank and US$1bn from the AFDB

The IMF stated last night that Nigeria has made a formal request for support under one of the Fund’s emergency financing facilities. Nigeria has sought support under the Fund’s Rapid Financing Instrument (RFI), one of the two enhanced emergency financing facilities (RFI/RCF) that the Fund has made available to help countries at this time. The IMF statement confirmed media reports earlier this week that Nigeria would make such a request. The IMF Board is expected to consider Nigeria’s request as soon as possible.
We think this is a sensible move. Nigeria follows a host of other countries that have made similar requests, including Rwanda (already approved), Senegal (approval pending), and Ghana (approval pending). Hence it is in good company and there should be no stigma attached to it. These emergency facilities have no conditionality (unlike a proper program), are quickly disbursing and are offered on highly concessional terms, although access is relatively low (100% of quota). Hence, we reckon Nigeria might be able to get up to US$3.3bn under the RFI. According to media reports, Nigeria is also seeking US$2.5bn from the World Bank and US$1bn from the AFDB. So that’s nearly US$7bn altogether.
Equity strategy: Nigeria equities are very cheap but, for foreign investors, the risk of capital controls outweighs this. The admission that the fiscal budget needs to be reviewed, devaluation of the Naira (albeit relatively small), narrowing of the gap between the official rate and the Investor and Exporter window, approach to bilateral creditors for payment relief, and the request for IMF assistance all suggest that the authorities are recognizing the scale of the economic shock presented by the oil price collapse and COVID-19, and attempting to deal with it. Foreign equity investors are comfortable pricing in the risk of further FX rate devaluation. But they cannot tolerate de facto capital controls which lock up a part of their portfolio (which inhibits accurate valuation of the portfolio and forces a disproportionate sale of positions in markets where repatriation is not constrained).