IMF Rejects Naira Exchange Rate Policy, Insists on Devaluation

IMF Rejects Naira Exchange Rate Policy, Insists on Devaluation

The International Monetary Fund (IMF) has given Nigeria a hard knock over its policy of guiding the naira to appreciate in value through weekly pumping of dollars to the inter-bank market. To the IMF, the local currency is being overvalued by 10 to 20 per cent, according to its mission chief for Nigeria, Gene Leon. He stated that “Naira overvaluation is somewhere to the tune of 10 to 20 per cent”, and that the country’s 2017 projections for non-oil revenues are more optimistic than the Fund’s. “We rather the authorities should increase tax levels to diversify income and allow the currency find its actual value”.

Leon who spoke on Wednesday in Abuja, was reacting to Nigerian authorities’ concern about the IMF’s Article IV Report in late March 2017, which listed a number of countries in the watch list of the Fund for assistance, with Nigeria being among the second batch. The IMF representative warned that the economy required urgent reforms and spoke of the dangers of a volatile foreign exchange market. He further stated that the Fund had earlier outlined a number of failings in the Federal Government’s handling of Africa’s largest economy, which could affect talks over its pending $1.4 billion loan before the international loan agency . The IMF quoted the Federal Government as saying that further measures were under way which included the implementation of a more flexible foreign exchange market and “maintaining tight monetary policy to underpin price stability.

But the President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the IMF should explain the yardstick for its advice. According to him, the IMF has technically said that the official rate of N306/$ should move to N360/$. Gwadabe said: “The IMF and others look at the bureau de change rate. That is why we are saying there should be a special window for both entry and exit to encourage more capital inflows to supplement the foreign reserves and diversify dollar sources.” The Naira closed yesterday at N390/$ due to the Central Bank of Nigeria’s (CBN) intervention. But an economist, Henry Moyo said the country can only do better by listening to the advice of the IMF, adding that every other palliative measure could amount to begging the issue.