IMF sends chilling message to CBN regarding Nigeria's currency | READ DETAILS
chuks oti
Feb 09, 2021
The International Monetary Fund (IMF) has said the naira was overvalued by 18.5 per cent at the official market.
READ ALSO: Ofuji Ndị Igbo Sets 2026 Agenda, Promises Greater Community Engagement
The Fund called on the Central Bank of Nigeria (CBN) to establish a more transparent and market-based exchange rate policy to instil confidence in the market.
READ ALSO: BRUTALITY: APUMA OFFICIALS ACCUSED OF INFLICTING INJURY ON ABIAN IN ABA
The advice was contained on IMF Article IV Consultation with Nigeria, released yesterday.
READ ALSO: Mother's Day: Abia Government Liaison Officer Honours Women, Says Mothers Shape Future Leaders
The naira exchanges at N379 to a dollar at the official market, data from the CBN website showed.
READ ALSO: Nigeria Overtakes Congo, Worst In Global Electricity Access
The IMF Executive Board, which visited Nigeria, released its findings on Nigeria's economy to the Federal Government.
READ ALSO: Dwindling Oil Revenue: Gombe Govt. Takes Remedial Steps | DETAILS
It recommended establishing a market-clearing unified exchange rate with the near-term focus on allowing greater flexibility and removing the backlog of requests for foreign exchange
READ ALSO: Muslim-Muslim Ticket Wahala: North Central APC Forum Mandates Lalong To Reject Appointment |READ WHY
The Fund said Nigeria's long-running policy of a stable exchange rate has produced limited benefits.
READ ALSO: "Ikwuano Locked Down For Alex OttiÔÇØ - Monday Ubani SAN Sends Strong Message To Opposition
The stabilised exchange rate policy, combined with administrative control of imports, has led to periods of real effective exchange rate appreciation interrupted by episodes of forced large adjustments.
READ ALSO: Biafra: Nigerian forces arrest ex-soldier for training 2,000 IPOB ESN fighters
"Staff's latest estimates suggest an overvaluation of the real effective exchange rate (applied on the current level of the official exchange rate) of 18.5 per cent, with the external position assessed as substantially weaker than what is consistent with fundamentals and desirable policy settings,ÔÇØ it said.
READ ALSO: Breaking: IPOB leader, Nnamdi Kanu, arrested - Malami Gives Detail
It said gross reserves levels are significantly below the IMF's Assessing Reserve Adequacy metric and projected to remain so in the medium term.
External financing is projected to rely on Foreign Direct Investment, issuance of Eurobonds and some drawdown of reserves as portfolio flows are expected to only gradually recover over the medium-term.
READ ALSO: How a Catholic Priest Slumped and Died While Delivering Homily in Delta Church
The Fund said clear exchange rate policy is needed to instil near-term confidence and bring long- term gains.
READ ALSO: Bloodbath At Wedding: Bandits Kill 13, Abduct Many In Midnight Attack In Kaduna Community
"The current system, with its multiple windows and un-transparent rules of Forex allocation, creates uncertainties for the private sector.
READ ALSO: Ofuji Ndị Igbo Sets 2026 Agenda, Promises Greater Community Engagement
"The unification of various rates into one market-clearing rate,ÔÇØ IMF said.
READ ALSO: BRUTALITY: APUMA OFFICIALS ACCUSED OF INFLICTING INJURY ON ABIAN IN ABA
The Fund also advised the Federal Government to increase its value-added tax (VAT) rate to at least 10 per cent by 2022 and 15 per cent by 2025 from 7.5 per cent now to boost revenues after it recovers from a recession.
READ ALSO: Mother's Day: Abia Government Liaison Officer Honours Women, Says Mothers Shape Future Leaders
In the report, the Fund said the government must continue to pursue reforms to help overcome the twin shocks of the oil price crash and the COVID-19 pandemic.
READ ALSO: Nigeria Overtakes Congo, Worst In Global Electricity Access
The Fund said Nigeria's economy has been hit hard by the COVID-19 pandemic.
READ ALSO: Dwindling Oil Revenue: Gombe Govt. Takes Remedial Steps | DETAILS
Following a sharp drop in oil prices and capital outflows, real GDP is estimated to have contracted by 3.2 per cent in 2020 amidst the pandemic-related lockdown.
READ ALSO: Muslim-Muslim Ticket Wahala: North Central APC Forum Mandates Lalong To Reject Appointment |READ WHY
The IMF asked the CBN to stop financing the budget deficit.
READ ALSO: "Ikwuano Locked Down For Alex OttiÔÇØ - Monday Ubani SAN Sends Strong Message To Opposition
It said: "In the medium term, the monetary policy operational framework should be reformed and Central Bank financing of budget deficit phased out to reduce inflation.ÔÇØ
READ ALSO: Biafra: Nigerian forces arrest ex-soldier for training 2,000 IPOB ESN fighters
The IMF Executive Board also wants Nigerian banks to tighten the conditions for facilities given to Nigerians as COVID-19 debt relief.
READ ALSO: Breaking: IPOB leader, Nnamdi Kanu, arrested - Malami Gives Detail
The IMF wants "COVID-19 debt relief measures for bank clients should remain time-bound and limited to those with good pre-crisis fundamentalsÔÇØ.
To the CBN, they "recommended a gradual and multi-step approach to establishing a unified and clear exchange rate regime with the near-term focus on allowing for greater flexibility and removing the payments backlogÔÇØ.
READ ALSO: How a Catholic Priest Slumped and Died While Delivering Homily in Delta Church
The IMF Board observed that "the accommodative monetary stance remains appropriate in the near term, although tightening may be warranted if the balance of payments or inflationary pressures were to increaseÔÇØ.
Related Stories
Bloodbath At Wedding: Bandits Kill 13, Abduct Many In Midnight Attack In Kaduna Community
"Ikwuano Locked Down For Alex OttiÔÇØ - Monday Ubani SAN Sends Strong Message To Opposition
Mother's Day: Abia Government Liaison Officer Honours Women, Says Mothers Shape Future Leaders
Why ICPC Is Prosecuting Mike Ozekhome Over a London Property Deal That Has Shaken Nigeria's Legal Circle | READ DETAILS
Ofuji Ndị Igbo Sets 2026 Agenda, Promises Greater Community Engagement
How a Catholic Priest Slumped and Died While Delivering Homily in Delta Church
""
— chuks oti