Despite having received financial support from the International Monetary Fund (IMF) earlier this year to tackle the impact of the coronavirus (Covid-19) pandemic on their economies, Nigeria and other countries in sub-Saharan Africa may need more assistance from the fund and the World Bank to “supplement foreign exchange reserves, better manage FX liquidity and restore output growth,” analysts at United Capital have said.
The analysts, who stated this in a report obtained by New Telegraph at the weekend, said their view was based on the threat that protests and other forms of social unrest pose to the economy of the region, which is still grappling with the effects of the pandemic.
The analysts said: “Earlier in the year, the world experienced an unprecedented event of COVID-19 outbreak with Africa not being an exception. The incidence of COVID-19 in Africa was followed by stringent measures across the region. Notably, all countries imposed some form of restrictions on the movements of people and economic activities. These restrictions and lockdowns worsened the already fragile social and economic conditions of most countries within the region.
“As the continent continues to fight its way out of the damage caused by the pandemic, it must be noted that this has been followed by protests and one form of social unrest or other in various part the continent.
Certainly, this poses another threat to the economy of the region. “Specifically, Nigeria, the largest economy on the continent, is currently battling a protest against police brutality (#EndSARS). South Africa, the second largest economy is also dealing with Gender-Based Violence (#StopGBV) across the countries.
“Similar to the event in Nigeria, Zimbabwea (#ZimbabweanLivesMatter) has been protesting about the human right violation by the current government which has affected their freedom of speech.
In Congo, #CongoIsBleeding has been trending on social media for days. Also, Cameroon’s #AnglophoneCrisis which has been on for a while, resurfaced and have now escalated into a crisis over the economic and political marginalisation of Cameroon’s.” According to analysts, “with the devastating impact of COVID-19 on the region, now amplified by social unrest, economic outcomes in the region may actually weaken beyond initial projections. Going forward, Africa may need additional Special Drawing Rights (SDR) from the IMF and the World Bank to supplement foreign exchange reserves, better manage FX liquidity and restore output growth.
“SDRs are supplementary foreign exchange reserve assets defined and maintained by the IMF. They are units of account for the fund, and not a currency per se. However, they represent a claim to currency held by IMF member countries for which they may be exchanged.” It will be recalled that Nigeria received a $3.4billion emergency support loan from the IMF at an interest rate of one per cent in early May to help mitigate the devastating impact of the coronavirus pandemic and sort out balance of payment issues.
Commenting on the loan at the time, the Managing Director of IMF, Kristalina Georgieva, said: “The conditions are quite favourable. The repayment period is five years, up to two and half years is a grace period and the interest on the loan is one per cent.