The International Monetary Fund (IMF) has released a report indicating that Nigeria’s currency, the naira, is beginning to show signs of stability.
This positive development comes after recent interest rate hikes and the clearing of foreign exchange (FX) backlogs by the Central Bank of Nigeria (CBN).
The IMF’s observations were shared during a press briefing in Washington, D.C., where the global financial stability report was unveiled.
The report emphasized that the CBN’s actions have played a significant role in stabilizing the naira.
The CBN successfully cleared all verified FX obligations on March 20, which has greatly helped the local currency.
However, an unverified amount of $2.4 billion remains under investigation.
The IMF praised the CBN, stating, “Rate hikes and the clearing of overdue domestic central bank foreign exchange obligations have helped the naira show more signs of stability.”
This statement highlights the importance of the CBN’s recent efforts in managing the currency.
The naira’s improved stability comes amid ongoing debates regarding the CBN’s monetary policies.
Since Olayemi Cardoso took office as governor, the CBN has raised interest rates several times to combat rising inflation.
Currently, inflation in Nigeria is hovering around 30 percent, which is a significant concern for the economy.
On September 24, the CBN’s Monetary Policy Committee decided to raise the interest rate by 50 basis points, pushing it to 27.25 percent.
This decision has drawn criticism from various stakeholders, including the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI).
Both groups expressed concerns about the potential negative impacts of high interest rates on business growth and the manufacturing sector.
“High interest rates can hinder investments and slow down economic growth,” said a spokesperson from the LCCI.
Despite the pushback from business leaders, the IMF’s financial counsellor, Tobias Adrian, praised the CBN’s approach.
He commended the transition to an inflation-targeting regime and the liberalization of the exchange rate.
“The rate hikes implemented so far have been appropriate, especially given the challenges posed by high inflation,” Adrian noted.
The IMF’s assessment comes at a critical time for the Nigerian economy.
The World Bank has recently described the naira as one of the worst-performing currencies in sub-Saharan Africa in 2024.
Despite this, the currency has begun to stabilize over the past month.
In the parallel market, the naira has been trading between N1,700 and N1,600 per dollar.
Meanwhile, the official exchange rate has ranged from N1,500 to N1,600.
These trading ranges indicate a narrowing of the gap between the official and parallel market rates.
Efforts to stabilize the naira are crucial, as it impacts everything from purchasing power to investments.
With the naira’s recent performance, some economists are hopeful that the currency will continue to recover.
“The IMF’s acknowledgment of the naira’s stability is encouraging for investors and businesses,” said Dr. Nwosu.
As the CBN continues to adjust its policies, stakeholders are closely watching for further developments.
