IMF Applauds CBN’s New Forex Policy

The International Monetary Fund (IMF) has commended the Central Bank of Nigeria (CBN), for the new foreign exchange policy actions which has helped in stabilizing the Naira.

The IMF’s executive board stated this in their 2017 Article IV Consultation with Nigeria, which was released on Thursday.

The Article IV Consultation came on the heels of the CBN’s decision to increase the amount of dollars to be sold to Bureau de Change (BDC) operators to $10,000 a week, up from $8,000, in its determination to sustain liquidity in the FX market.

The IMF said: “Directors 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 structural reforms to improve competitiveness.”

“Directors underscored that external adjustment is necessary to protect foreign currency buffers and reduce vulnerabilities.

“They commended the recent easing of some exchange restrictions and urged the authorities to remove the remaining restrictions and multiple currency practices, thus unifying the foreign exchange market and helping regain investor confidence.

“Directors emphasized 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 structural reforms to improve competitiveness.

“Directors welcomed the steps to strengthen banking sector resilience through stronger prudential requirements. With asset quality declining, they recommended further intensifying bank monitoring, enhancing contingency planning, and strengthening resolution frameworks. Directors encouraged quickly increasing the capital of undercapitalized banks and putting a time limit on regulatory forbearance.

“Directors emphasized that ambitious structural reforms are key to achieving a competitive, investment-driven economy that is less dependent on oil. Priority should be given to improving infrastructure, enhancing the business environment, improving access to financing for small enterprises, and strengthening governance and anti-corruption efforts.

“Timely and effective implementation of these measures would promote sustainable and inclusive growth. Directors welcomed progress in improving the quality and availability of economic statistics and encouraged further efforts to compile subnational fiscal accounts,” IMF said in a statement.