The International Monetary Fund (IMF) called on Wednesday for Nigeria to lift foreign exchange curbs and let the naira reflect “market forces” more closely, also urging more fiscal discipline and structural reform to bolster growth.
President Muhammadu Buhari has rejected a naira devaluation and backed hefty restrictions imposed by the central bank to prevent a collapse of the naira as Africa’s biggest economy is whacked by a slump in oil revenues, its lifeblood.
Companies have laid off thousands, cut production and even closed operations as they struggle to get enough dollars to pay for imported spare parts and raw materials.
The naira is trading as much as 40 percent below the official rate on the black market. Devaluation would encourage investment and make domestically produced goods more affordable.
“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,” the Washington-based fund said in a statement, after consultations with top officials in Nigeria.
Currency curbs had “significantly” affected parts of the private sector and the economic outlook for Africa’s top oil producer was “challenging”, it said.
Nigeria needs to import anything from milk to machines as authorities have failed to end its dependency on oil, a fact Buhari wants to change but which business leaders say will be impossible to achieve if plants cannot import raw materials.
The IMF also said it expected the West African nation to grow by 3.2 percent this year, below the official forecast of 3.78 percent. It urged boosting non-oil revenues, raising infrastructure spending and collecting more taxes.
“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,” it said.
The views of the IMF are relevant as Nigeria wants to borrow from the World Bank to help fund a budget deficit of 3 trillion naira. Sometimes the IMF gets involved in such programmes asking for policy changes.
The government wants to borrow up to $5 billion abroad for the budget and has also held talks with China and the African Development Bank. It has also considered issuing Eurobonds although nothing concrete has emerged publicly on that.
Buhari was elected last year on an anti-corruption ticket, promising to create jobs in the nation of 170 million, where only a super-rich elite has benefited from its energy wealth.
He unveiled a record budget in December to improve power supply, build roads and invest in telecommunications but had to withdraw it due to flaws and optimistic oil price calculations.
On Wednesday, the former military ruler vowed to punish those he blamed for adding “unauthorised alterations” to the draft. “The culprits will not go unpunished,” he said, according to a statement of his office.
The IMF has welcomed his plans to lift capital expenditure. Click to signup for FREE news updates, latest information and hottest gists everyday
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17 Reasons Why Buhari is not the Killer of the Naira (Must Read)
ReplyDeleteA lot has been said about the falling of the country’s currency, the blames were all toward to President Muhammadu Buhari.
I investigated on the bedeviling issue and I discovered the problem is never to be linked with the present administration as the initiator or the genesis of crippling the national economy.
Please let me help our minds with this simple Economic terms that Dollar has not increased since Buhari became president but only an effort by the present government to improve the economy is making others evil agencies to cajole the Naira value in favor of the Dollars.
Understand that the Dollars has :
1. Dollar is not our currency so dollar should not be our business
2. Our problem is not the government but our problem is our importers and consumers
3. Naira has remained at 197 naira to 1 dollar since Buhari became president
4. Buhari has promised not to devalue the Naira and he has maintained that promise 5. Both at CBN and at interbank rates, dollar has remained 197
6. However because we are too lazy to produce what we use in Nigeria we import even toothpicks and matches
7. Buhari does not like d importation of luxury goods because luxury goods is d reason for most corruption, that is why he banned 41 products from having access to forex
8. However when Nigerian importers insisted on importing those 41 products, FG asked them to find their dollar at d BDCs parallel market also known as black market
9. And to discourage the pressure Nigerians are mounting on the Naira just to get dollars for importation, CBN banned DMBs from selling dollars to BDCs
10. To survive the pressure of excess dollar demands, BDCs resorted to sourcing for dollars from neighbouring countries through illicit money laundering routes
11. Because of the risks faced by BDCs to source for dollars, and because of the increase in demand for dollars by importers because China just resumed from their business holidays, BDCs keep increasing the price at which they exchange dollars to naira and now it is 400 naira to 1 dollars
12. However that does not mean that govt has changed the exchange rate because if our genuine importers go to CBN and fill Form M to import raw materials for local production, they will get dollars at 197 naira each
13. So the problem is that we love to consume luxury foreign products yet we are too lazy to manufacture them here.
14. For example u will see a dull girl using iPhone 5 without even knowing simple physics and computer engineering part of how that phone was produced
15. I want Buhari to ban every foreign product from Nigeria until Nigerians learn to produce and use Made in Nigeria products
16. Let us stop complaining about dollar as if dollar has become Nigeria’s currency
17. It is even bad enough that most of those complaining about the high exchange rate of dollar do not have 1 single dollar in their purse.
God bless you. I love number 17
DeleteTrue talk, well writing, knuckle for u
ReplyDeleteAnonymous 17 has done a comprehensive research and I personally commend his research work! He has said it all, let the Federal Government ban imported goods that are considered luxuries in the country. As a matter of fact, the roles of the BDC should be analyzed, examined and quantified as soon as possible for the sake of the economy. To me, the BDC has consistently manipulate the currency in favour of their clients. The BDC encourages money laundering as a result of encouraging their customers to buy the naira at an inflated price! The Central Bank should wade into the activities of BDC and if care is not taken, the unwilling ones among them should be denied their operating licenses. After all, the Commercial Banks follow and respect instructions from the CBN. It is my opinion that the BDC's activities should be properly monitored and any unwilling management within the BDC group, should be punished appropriately. Enough of the devaluation of the naira and IMF should bring about a more laudable and realistic economic advice to the country, not devaluation of the naira!
ReplyDelete