The Central Bank of Nigeria (CBN) has disagreed with the International Monetary Fund (IMF) on the latter’s advice that the Federal Government should devalue the naira and make it flexible. The IMF advised Nigeria to devalue its naira last week after concluding the 2010 Article IV Consultation with Nigeria.
But in a text message in response to our reporter’s question, CBN governor, Sanusi Lamido Sanusi, said though a formal statement on the bank’s position on the matter will be issued this week, he disagrees with the IMF position.
Asked if the central bank was thinking of devaluing the naira, Sanusi said, “No Idris and I have already said so on CNBC () and I told the IMF I didn’t agree with them. We will issue a formal statement next week (this week).”
This was not the first time the IMF was asking the country to devalue its currency. In 1986, the IMF/World Bank asked Nigeria to devalue the naira, open its market and liberalize its economy.
The result was the economy reform of the Structural Adjustment Program (SAP).
Analysts say effect of SAP has brought about the economic crisis which the country is yet to correct.
The Nigerian naira currently exchanges N150 to the US$ officially and about N157 to the US$ at the parallel market.
Last week, the IMF said: “Directors took note of the staff’s assessment of an overvaluation of the naira, and stressed that greater exchange rate flexibility would prevent one-way bets in the foreign exchange market and cushion external shocks.”
It said that the economic outlook of the country remains positive and risks are generally balanced.
It projected Nigeria’s economy to grow by 7 percent in 2011, and to moderating gradually in subsequent years. It also projected inflation to decline to 9 percent by the end of 2011. Inflation rate climbed from 11.8 percent in December 2010 to 12.1 percent as at January 2011.
IMF warned that if the National Assembly increased the N4.2 billion 2011 budget currently before it, inflation will worsen.
It said that inflation has been stuck in the low double digits for the past two years and foreign reserves have been falling because the CBN has focused on maintaining exchange rate stability and low interest rates.
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