It may be time for Nigeria to further devalue the Naira
The International Monetary Fund (IMF) has called for Nigeria to further devalue the Naira, as the already panicked economy is yet to record any improvements in it’s political and economic outlook. This comes amidst concerns about President Buhari’s delayed cabinet appointments.
The IMF has recently been mounting a lot of pressure on Nigeria’s currency. A situation which may have been triggered by the fact that, having pointed out the need for certain changes, recent appointments do not seem to include advocates who can lead the implementation of the much-needed reform.
“There’s no economist on the (Cabinet) list that can suggest to the government ways to improve revenue generation and how to run the economy,” Garba Kurfi, managing director of APT Securities and Funds, told reporters.
Nigeria’s central bank devalued the Naira by 8 per cent in November last year, and then fixed the official exchange rate at 198 to the US dollar.
In the heat of the declining oil price, and Naira devaluation early this year, the governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele mentioned that the CBN will put measures in place to protect the economy and the Naira. As such the CBN restricted access to foreign currency and put a ban on 41 items from the official forex market. Also the apex bank had spent an average of $200 million daily to cover surging dollar demand and on more than one occasion shut down electronic trading of the Naira.
However, the International Monetary Fund’s Africa director, Antoinette Sayeh has stated that the restrictions are instead, “quite detrimental”. “They are already making it harder for the average person to buy milk,” she said at the just concluded IMF annual meeting in Peru.
Saveh called for a review of the restrictions, asking that officials “permit the exchange rate to continue to adjust”.
The IMF is beginning to give up on a significant turn around in Nigeria’s political and economic situation and has urged the country to further devalue its currency.
Market analysts have long predicted that a further devaluation was inevitable. Segun Agbaje, Managing Director of GTB, a top tier Nigerian lender, said in August that the exchange rate is unsustainable, and will need to be devalued by 10 percent for the Naira to settle.
The Naira has lost more than 25 percent of its value over the last year. It is currently trading at N222 to a dollar at the parallel market.
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