Review foreign exchange policy — IMF urges Nigeria

As the falling export incomes and sharp fiscal adjustment continue to take toll on the economies of oil producing countries in Africa, especially Nigeria and Angola, the International Monetary Fund (IMF) at the weekend joined the call for the review of Nigeria’s foreign exchange policy.

The call was made by the Director of African Department of IMF, Antoinette Sayeh on the sidelines of the on-going 2015 IMF/World Bank meeting in Lima, Peru.

Responding to a question on a cocktail of administrative policies put in place to contain the demand for foreign exchange in the face of the sharp decline from oil revenue, the IMF director said the persistent complaints of private sector operators over the restrictions in foreign exchange market has shown that the policy may not last for a longer period.

Sayeh said, “The Central Bank has introduced administrative measures that limit access to foreign exchange and that as a way of restricting the demand for the foreign exchange; those measures are detrimental we think.

“It has certainly led to a lot of unhappiness in the private sector, as far as we are aware and understand that private sector investors see this as very detrimental to their economic activities. So it’s not something we think is sustainable or advisable,” she said, adding that the Fund hopes there will be an opportunity to review those restrictions and permit the exchange rate to adjust.

However, some analysts at the global event argued that the current regime of restrictions in the foreign exchange market is good for the Nigerian economy as it has been able to discourage Nigerians from wasting the scarce foreign exchange on frivolous items including those which can be locally produced.

The IMF chief noted that the exchange rate pressures in Nigeria and other oil producers has been considerable in the course of this past year because of what has happened in terms of for exchange earnings as oil prices have reduced those considerably, and the demand for foreign exchange in a number of conditions continues to exert considerable pressure on their exchange rates.

Saying exchange rate pressure is already taking its toll on the naira, she argued that Nigeria’s case was compounded by a number of factors which included the uncertainty preceding the April elections, a continued uncertainty about the policy direction that the current administration is going to take, the wait for a cabinet, and what can be expected from that.