The International Monetary Fund (IMF) says the naira, Nigeria’s local currency, is showing signs of stability due to interest rate hikes.
In its global financial stability report launched during a
press briefing in Washington DC on Tuesday, the IMF also linked the currency’s
stability to the clearing of the foreign exchange backlog by the Central Bank
of Nigeria (CBN).
On March 20, the CBN had announced the successful settlement
of all verified outstanding foreign exchange (FX) obligations, noting that an
unverified amount of $2.4 billion is under investigation.
“… in Nigeria, rate hikes and the clearing of overdue
domestic central bank foreign exchange obligations have helped the naira show
more signs of stability,” the IMF said.
The multilateral’s position comes amid push backs from
stakeholders on certain monetary policy decisions of the central bank.
The CBN, since Olayemi Cardoso took over as its governor,
has raised the interest rate multiple times to curb a raging inflation in the
country.
In the latest hike on September 24, the apex bank’s monetary
policy committee (MPC) increased the interest rate by 50 basis points to 27.25
percent.
The rate increase was immediately criticised by the
Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce
and Industry (LCCI).
While the MAN said the policy would negatively impact the
manufacturing sector, the LCCI argued that the expansion and sustainability of
businesses would be hampered.
Speaking at the news conference, Tobias Adrian, the IMF’s
financial counsellor and director of monetary and capital markets, acknowledged
the efforts of the CBN in controlling inflation and stabilising the foreign
exchange market.
“The central bank has been transitioning to an
inflation-targeting regime and has liberalised the exchange rate, which we
welcome,” he said.
“The rate hikes
implemented so far have been appropriate, especially given the challenges posed
by high inflation, which still stands around 30 percent.”
Meanwhile, the World Bank had, on October 16, said the naira
is among the worst-performing currencies in sub-Saharan Africa in 2024, but the
currency seems to have stabilised in the past month, oscillating between N1,700
and N1,600 per dollar in the parallel market and also between N1,500 and N1,600
in the trading official window.
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