The International Monetary Fund, IMF, has welcomed the decision by the Central Bank of Nigeria to abandon its currency peg and adopt a flexible exchange rate policy.
According to IMF spokesman Gerry Rice, the move was important to reduce fiscal and external imbalances in Nigeria’s economy.
“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 said. “It will provide greater flexibility in that market, the foreign exchange market.”
Senior IMF officials, including Managing Director Christine Lagarde, have urged Nigerian officials to allow the naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues. IMF officials also said 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.”