Nigeria is set to receive about $3.35billion as its share of the International Monetary Fund (IMF) $650billion Special Drawing Rights (SDRs) to help boost the liquidity of its member countries buffeted by the Coronavirus pandemic.
Managing Director of the IMF, Kristalina Georgieva, who announced the distribution in a statement on Monday, said the SDRs will be distributed to countries in proportion to their quota shares in the IMF.
She said $275 billion will go to emerging and developing countries, of which low-income countries will receive about $21 billion.
“The largest allocation of Special Drawing Rights (SDRs) in history—about US$650 billion—comes into effect today. The allocation is a significant shot in the arm for the world and if used wisely, a unique opportunity to combat this unprecedented crisis,” the statement reads.
“The SDR allocation will provide additional liquidity to the global economic system–supplementing countries’ foreign exchange reserves and 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. This means that about $275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion – equivalent to as much as 6 percent of GDP in some cases.”
The IMF boss said countries should ensure that decisions on the use of SDRs “should be prudent and well-informed”. She further stated that IMF would provide a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability.
The bank would also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years’ time. “To magnify the benefits of this allocation, the IMF is encouraging voluntary channeling of some SDRs from countries with strong external positions to countries.
SDR is an international reserve asset created by the United Nations specialised agency to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies – the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. They are units of account for the IMF, not physical currency.