The International Monetary Fund has called on Nigeria to be proactive on unifying the foreign exchange market, which will help to regain investors’ confidence.
The IMF, in its Article IV Consultation on Nigeria, said that a multiple exchange rate regime would create distortion in prices and hurt businesses, and that the Nigerian economy had been negatively impacted by low oil prices and production.
It commended the efforts already made by the authorities to reduce vulnerabilities and enhance resilience, including raising the monetary policy rate, and allowing the exchange rate to
depreciate.
IMF emphasised that these policies should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations and to limit the risk of exchange rate overshooting, as well as enhance structural reforms to improve competitiveness.
The IMF has continually insisted that to ensure further stability in the foreign exchange market, Nigeria needs to unify her exchange rates. Nigeria had battled a currency crisis brought about by low oil prices, which tipped her economy into recession and created chronic dollar
shortages.
Meanwhile, analysts at FBN Quest, the research arm of First Bank of Nigeria Holdings, have said that a single exchange rate for the naira is not likely to be achieved any time soon.
According to a report released ahead of the Monetary Policy Committee meeting for July, FBN Quest’s analysts said although one member of the committee called on the apex bank to pursue exchange rate convergence at different market segments, the possibility of realising the goal is
slim.
Nigeria has at least, four exchange rates, which include one for religious pilgrims to holy lands and the other for oil marketers. Others are rates for foreign travel and school fees, in addition to the official market rate.
The President, Association of Bureau de Change Operators of Nigeria, Alhaji Aminu Gwadabe, said the impact of the rate unification was massive, including raising foreign investors’ confidence in the domestic economy, boosting the foreign exchange reserves position and creating opportunity for a better foreign reserve management by the apex bank.
He, however, assured that the BDCs would continue to meet the critical forex needs of the retail end-users and stick to allowable transaction limits as approved by the
regulator.
Gwadabe described the development as a reflection of the apex bank’s commitment to achieving a single exchange rate regime, adding that his association had earlier expressed concerns about rate disparity and it was pleased with the review, which, according to him, will ensure transparency and stability in the forex
market.
