The International Monetary Fund (IMF) called on Wednesday for Nigeria to
lift foreign exchange curbs and let the naira reflect “market forces” more
closely, also urging more fiscal discipline and structural reform to
bolster growth.
President Muhammadu Buhari has rejected a naira devaluation and backed
hefty restrictions imposed by the central bank to prevent a collapse of
the naira as Africa’s biggest economy is whacked by a slump in oil
revenues, its lifeblood.
Companies have laid off thousands, cut production and even closed
operations as they struggle to get enough dollars to pay for imported
spare parts and raw materials.
The naira is trading as much as 40 percent below the official rate on the
black market. Devaluation would encourage investment and make domestically
produced goods more affordable.
“The exchange rate should be allowed to reflect market forces more and
restrictions on access to foreign exchange removed, while improving the
functioning of the interbank foreign exchange market,” the
Washington-based fund said in a statement, after consultations with top
officials in Nigeria.
Currency curbs had “significantly” affected parts of the private sector
and the economic outlook for Africa’s top oil producer was “challenging”,
it said.
Nigeria needs to import anything from milk to machines as authorities have
failed to end its dependency on oil, a fact Buhari wants to change but
which business leaders say will be impossible to achieve if plants cannot
import raw materials.
The IMF also said it expected the West African nation to grow by 3.2
percent this year, below the official forecast of 3.78 percent. It urged
boosting non-oil revenues, raising infrastructure spending and collecting
more taxes.
“With oil prices expected to remain low for a long time, continuing risk
aversion by international investors, and downside risks in the global
economy, the outlook remains challenging,” it said.
The views of the IMF are relevant as Nigeria wants to borrow from the
World Bank to help fund a budget deficit of 3 trillion naira. Sometimes
the IMF gets involved in such programmes asking for policy changes.
The government wants to borrow up to $5 billion abroad for the budget and
has also held talks with China and the African Development Bank. It has
also considered issuing Eurobonds although nothing concrete has emerged
publicly on that.
Buhari was elected last year on an anti-corruption ticket, promising to
create jobs in the nation of 170 million, where only a super-rich elite
has benefited from its energy wealth.
He unveiled a record budget in December to improve power supply, build
roads and invest in telecommunications but had to withdraw it due to flaws
and optimistic oil price calculations.
On Wednesday, the former military ruler vowed to punish those he blamed
for adding “unauthorised alterations” to the draft. “The culprits will not
go unpunished,” he said, according to a statement of his office.
The IMF has welcomed his plans to lift capital expenditure.