The International Monetary Fund (IMF) has asked the Central Bank of Nigeria (CBN) to allow commercial banks to determine the dollar buy-sale rates.
According to them, this will help boost foreign capital flows to the economy.
The Fund also said a unified and market-clearing exchange rate remains critical to enhancing the confidence of foreign investors in the economy.
The IMF, which disclosed its 2022 Article IV Consultation concluding statement following an official staff visit to Nigeria, insisted that continued forex shortages, a stabilized exchange rate regime, rising inflation, limited debt servicing capacity, and administrative restrictions on current transactions fuel devaluation speculations.
“These factors hinder much-needed capital inflows, encourage outflows, and constrain private sector investment. The mission reiterated its past recommendations to move towards a unified and market-clearing exchange rate by dismantling the various exchange rate windows at the CBN accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies.”
“In the medium term, the CBN should step back from its role as main forex intermediator, limiting interventions to smoothing market volatility and allowing banks to freely determine forex buy-sell rates,” it stated.
Furthermore, the Fund advised Nigeria to remove fuel subsidies and address oil theft as a major step to narrow the fiscal gap. The Fund advised that as a near-term priority, there is an urgent need to remove fuel subsidies fully and permanently, which disproportionately benefit the well-off, by mid-2023 as planned.
