Following President Muhammadu Buhari’s refusal to devalue Naira, IMF (International Monetary Funds) has advised the Central Bank of Nigeria (CBN) to devalue Naira to exchange rate of N199/dollar.
IMF in the statement which was released after its 2016 Article IV Mission to Nigeria said that the recent economy downturn can be blamed to the sharp decline in oil prices.
“Nigeria is facing the impact of a sharp decline in oil prices. Eliminating existing macroeconomic imbalances and achieving sustained private sector-led growth requires a renewed focus on ensuring the competitiveness of the economy.
“As part of a credible package of policies, the exchange rate should be allowed to reflect market forces more and restrictions on access to foreign exchange removed, while improving the functioning of the interbank foreign exchange market.
“It will be important for the regulatory and supervisory frameworks to ensure a strong and resilient financial sector that can support private sector investment across production segments (including the SMEs) at reasonable financing costs.”
According to the fund, foreign exchange restrictions introduced by the CBN to protect reserves have impacted significantly on segments of the private sector that depend on adequate supply of foreign currencies.
“With oil prices expected to remain low for a long time, continuing risk aversion by international investors and downside risks in the global economy, the outlook remains challenging. The authorities’ policy response has focused on seeking to support growth, while preserving international reserves. The draft 2016 budget envisaged, appropriately, a significant shift in the composition of fiscal spending toward capital investment while increasing the allocation for a social safety net. At the same time, the CBN has eased monetary conditions.”
“In the light of the significant macroeconomic adjustment that is needed to address the permanent terms-of-trade shock, it will be important to put in place an integrated package of policies centered around: (i) fiscal discipline; (ii) reducing external imbalances; (iii) further improving efficiency of the banking sector; and (iv) fostering strong implementation of structural reforms that will enhance competitiveness and foster inclusive growth.”
Most recently, IMF (International Monetary Fund) elected its Chief, Christine Largarde, Managing Director of the International Monetary Fund tenure has been renewed till 2021.