Nigeria rebuffs IMF, insists on multiple forex exchange rates
Nigeria’s current policy of multiple exchange rates for its currency, the naira, is working well, and the central bank is unlikely to change it anytime soon, the government’s information minister said. This is contrary to the recommendation of the IMF which has consistently frowned at Nigeria’s multiple forex exchange rates.
Nigeria has maintained multiple exchange rates since currency controls were introduced in 2015 to counter the impact of falling prices for crude oil, which provides 90 percent of the country’s foreign exchange earnings. The controls restricted access to U.S. dollars and choked off investment.
The International Monetary Fund has long called for Nigeria to scrap its multiple rates. The central bank is independent, though its governor backs President Muhammadu Buhari’s insistence that the naira’s value should remain pegged.
Information Minister Lai Mohammed said the current system, which involves multiple exchange rates while the official rate is held at 306 to the dollar, was working well.
“Right now, the currency is converging naturally at about 360 naira to the dollar. Three years ago, the same … was about 525. I don’t think the central bank is in a hurry” to change this, Mohammed said in an interview with Reuters.
“Inflation is down and the reserves are up. We are in a better position to defend the naira,” he said.
Buhari won a second term in office in a February election that was fought on the economy, which is recovering from a 2016 recession largely caused by low oil prices.
The tenure of Central Bank Governor Godwin Emefiele is due to end in June. A decision on his future is likely to be among the first major announcements in Buhari’s second term.
Mohammed said Emefiele had done a good job, particularly with loans to support sectors such as agriculture. He declined to comment when asked about the president’s intentions.
Nigeria’s central bank governors typically only serve one term, but they can be re-appointed. REUTERS