As International Monetary Fund (IMF) is pressing Nigeria to further devalue its naira currency amid uncertainty over the political and economic outlook for Africa’s biggest oil producer and economy.
IMF has also called on President Buhari to continue the economic policies of his predecessor, this is despite the fact that such policies have criminalized the Nigerian economy and pauperized the overwhelming majority of Nigerians.
Speaking on the sidelines of the recent World Bank-IMF Spring Meetings in Washington DC, IMF Managing Director, Christine Lagarde, cautioned against policy somersault from regime change, charging the new regime to continue reducing public spending and end the fuel subsidy regime, arguing that Nigerians must endure the unavoidable hardships.
According to her, “What we have observed, the last one year in particular, is that a good fiscal policy, with some tightening no doubt, a good exchange rate in order to adapt to the external shocks and some use of reserves buffer, has been fairly exceptional. In a nutshell, policies that have been adopted by the Nigerian authority have been positive.
Our sense is that some of these policies need to be continued …We will still recommend that any subsidy that is being paid out on physical resources be phased out to the possible maximum extent.”
The IMF boss argued that the Nigerian economy has actually benefitted from falling oil prices as a result of dollar appreciation in value, because dollar pricing for oil exports cushion the fall in prices.
IMF Analysts said there’s disappointment that President Muhammadu Buhari’s long-awaited Cabinet list — five months in the making and still not finalized — includes no economic stars to guide much-needed reform.
“There’s no economist on the (Cabinet) list that can suggest to the government ways to improve revenue generation and how to run the economy,” said Garba Kurfi, managing director of APT Securities and Funds.
The naira has lost 25 percent of its value in the past year and the stock market plummeted by 20 percent last year and 14 percent this year because of political uncertainty and halved prices for oil that provides most government revenue.
Nigeria’s Central Bank devalued the naira by 8 percent in November and then fixed the official exchange rate at an even lower 198 to the dollar, though it sells at 222 at exchange bureaus.
Unable to stem the slide, the Central Bank has defended the naira by restricting access to foreign currency and banning a long list of imports.
“It’s like digging a hole to fill up another hole,” said an editorial in Nigeria’s huhuonline news website.
The restrictions are “quite detrimental,” said the International Monetary Fund’s Africa director, Antoinette Sayeh.
They “are already making it harder for the average person to buy milk,” she said at the IMF annual meeting that ended in Peru this week, according to the organization’s website.
She called for a review of the restrictions and for officials to “permit the exchange rate to continue to adjust.”
Additional reporting by Press Association
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