Nigeria Writes IMF, Says IT Will Ensure Unified, Flexible Exchange Rate

The federal government has pledged to adopt a more flexible and unified naira exchange rate  to respond to the external shock brought by the coronavirus pandemic and will leave foreign-exchange interventions for only when there are large fluctuations.

The development was contained in  IMF’s staff appraisal of the $3.4 billion  financing request by the government.

The government had sent a letter to the institution dated April 21 and signed by Finance Minister Zainab Ahmed and central bank Governor Godwin Emefiele.
 
The letter of intent was sent to the  International Monetary Fund (IMF) prior to the approval of the $3.4 billion funding request.

The federal  government said more currency flexibility would  rescue the dwindling reserves currently at $3.3 billion and avert economic shocks.

“We are committed to maintaining this more unified and flexible exchange-rate regime, which will operate in a market-determined manner and be allowed to respond to shocks, with the Central Bank of Nigeria only intervening to smooth large FX fluctuations,” the letter said.

The IMF however on April 28 approved $3.4 billion of emergency funding for Nigeria, representing  the single biggest disbursement for any country during the coronavirus pandemic

The CBN on February 29 announced that it would soon begin its weekly sale of dollars to Bureaux  De Change operators, after the naira had crashed to a three -year low against the dollar at the parallel market.

The apex bank had similarly debited N1.47 trillion ($3.8 billion) from Deposit Money Banks as additional cash reserves for failing to meet regulatory targets of 27.5% Cash Reserve Ratio.

Experts say the move was a means to strengthen the local currency.