The International Monetary Fund (IMF) has stated that the Nigerian naira is currently under pressure, giving Nigeria the option to seek a loan from the Fund if it deems it necessary for stabilizing the currency. The IMF acknowledged recent exchange reforms and other measures taken by Nigerian authorities, expressing support for the Central Bank of Nigeria’s decision to lift the eight-year foreign exchange ban on certain items.
In a response to questions at the World Bank Group/IMF Meeting in Marrakech, Morocco, the IMF highlighted Nigeria’s high inflation of 26% in August and the continued pressure on the naira. The recent unification of official exchange rate windows was commended, along with the lifting of the ban on 43 items from accessing foreign exchange from the official window.
The IMF suggested the need for tightening monetary policy by raising the Monetary Policy Rate and mopping up excess naira liquidity. It emphasized that foreign exchange market confidence could benefit from more clarity on the Central Bank of Nigeria’s dollar obligations.
Regarding the possibility of Nigeria seeking a loan for currency support, the IMF mentioned that Nigeria, like any IMF member country, could approach the organization for financing if it considers it helpful for addressing external imbalances. However, it clarified that the Nigerian authorities had not approached the IMF with a request for financing.
The IMF expressed confidence in the new leadership of the Central Bank of Nigeria, led by Olayemi Cardoso, and the new Minister of Finance, Wale Edun, believing they have the capacity to make the right decisions to boost the economy. Cardoso outlined a preliminary assessment of challenges facing the Central Bank of Nigeria, proposing reforms and measures to achieve economic growth and development.
The assessment includes a review of foreign exchange market policies, corporate governance practices, and monetary policies. Cardoso emphasized the need for evidence-based monetary policies, addressing inflation and price stability, and creative financing options for clearing the backlog of foreign exchange demand.
The IMF’s stance opens the door for Nigeria to consider seeking a loan to stabilize the naira, acknowledging the economic challenges and providing recommendations for a comprehensive assessment and reforms.
