Nigeria Rejects IMF Advice to Devalue Naira

By Bashir Olanrewaju

Nigeria rejected advice from the International Monetary Fund to devalue its currency and merge its multiple-exchange rate system into a unified rate.

The exchange rate and other key issues affecting Nigeria’s economy were the subjects of Article IV Consultations between Nigeria and IMF personnel that took place in December. Under the relevant provisions, the Bretton Woods body is required to hold periodic discussions with members on their economic performance.

“Multiple rates, limited flexibility, and foreign exchange shortages are
posing challenges,” the IMF said in the report, calling for “a gradual and multi-step approach to establishing a unified and clear exchange rate regime.”

Steps were also required to clear a backlog of outstanding foreign-exchange payments, the fund said.

Nigerian authorities disagreed with the fund’s exchange-rate stance, according to the report.

“The authorities did not agree with the need for additional exchange rate adjustment,” the IMF said in the report. “They explained that the major burden of macroeconomic adjustment does not need to be borne by the exchange rate,”

Nigeria further argued that relative exchange rate predictably has helped to stabilize prices, which would be undermined by inflation should there be additional devaluation.