The International Monetary Fund (IMF) has hailed the decision by the Central Bank of Nigeria (CBN) to abandon its currency peg and adopt a flexible exchange rate policy, saying this was important to reduce fiscal and external imbalances.
Gerry Rice, IMF spokesman, who stated this in a weekly news briefing said that the Fund wanted to see how effectively the Naira exchange market functions once the new float system is put into effect next Monday.
Mr. Emefiele, the CBN governor had said in a letter to President Muhammadu Buhari that the apex bank expected the Naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.
“I think the announcement yesterday to revise the guidelines for the operation of the Nigerian interbank foreign exchange market is an important and welcome step,” Rice told reporters. “It will provide greater flexibility in that market, the foreign exchange market.”
Senior IMF officials, including Christine Lagarde ,Managing Director, have urged the Federal Government to allow the Naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues.
Nigeria , a major oil producer is a member of the Organisation of Petroleum Exporting Countries’ (OPEC).
IMF officials have said that Nigeria has not requested IMF financial assistance, but has been in consultation with the Fund on dealing with budget shortfalls.
“As we have said before, a significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime and structural reform,” Rice said. “Allowing the exchange rate to better reflect market forces is an integral part of that.”