For the Tenth Year in A Row, the IMF Wants CBN to Devalue the Naira, Raise Interest Rates on Loans

For the Tenth Year in A Row, the IMF Wants CBN to Devalue the Naira, Raise Interest Rates on Loans

  • The International Monetary Fund (IMF) has sent a crucial message to the Nigerian government on the value of Naira
  • The IMF said that it is advisable for the Central Bank of Nigeria to devalue Nigerian currency further and also increase the interest rate for loan
  • Nigerian currency in the last nine years has been devalued with the most recent in December 2021 which saw Naira close 2021 at N435/$1

The International Monetary Fund (IMF) has asked Nigeria's Central Bank (CBN) to allow the Naira to decline further.

Despite the fact that the CBN depreciated the Naira for the ninth time in a row in December 2021, the IMF wants it to be the tenth time in 2022.

The IMF issued the recommendation to Nigeria and other developing economies in response to tighter financial conditions and the Federal Reserve Bank of the United States' impending policy tightening.

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For ten straight year, IMF is calling on Central Bank of Nigeria to devalue Naira
The seal for the International Monetary Fund is seen near the World Bank headquarters (R) in Washington, DC Credit: Photo By Stefani Reynolds

In a recent blog post titled, ‘Emerging Economies Must Prepare for Fed Policy Tightening’ and published on Monday, the Washington-based lender also counselled CBN and others to raise their benchmark interest rate.

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Reuters reports that the IMF said, while changes in the global economic outlook appear positive, especially in the United States, these changes are uncertain for emerging markets.

It was noted that emerging economies with large public and private debt, foreign exchange exposure, and lower current-account balances had experienced greater currency fluctuations relative to the US dollar in recent months.

To manage the tradeoffs, emerging economies, according to the IMF, must take early steps to strengthen policy frameworks and reduce vulnerabilities.

It said:

"In order to improve the public's awareness of the need to achieve price stability, central banks needed to be explicit and consistent in expressing their tightening efforts to manage inflation pressures."

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Advice to reduce debt

According to the global lender, countries with significant levels of debt denominated in foreign currencies should endeavour to minimize it and hedge its exposures where possible, and the duration of obligations should be prolonged even if it raises expenses.

The IMF also stated that deeply indebted nations may need to begin fiscal adjustment sooner and more aggressively.

It went on to argue that emerging economies were now grappling with high inflation rates and significant amounts of public debt.

CBN urges Nigerians to trust eNaira

In a related story, the Central Bank of Nigeria (CBN) has urged all Nigerians to use the eNaria, claiming it is more secure than cryptocurrencies.

This was disclosed by CBN spokesman, Nnamdi Okwuosa at the CBN Fair, with the theme, ‘Promoting financial stability and economic development.’

He stressed that despite several hitches and complaints, he promised Nigerians that eNaira is more reliable than any cryptocurrency.

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