The United States said on Monday it will press Nigeria in talks this week
to adopt a more flexible foreign exchange rate to boost growth and
investment in Africa’s largest economy.
US Assistant Secretary of State for Africa, Linda Thomas-Greenfield, told
an audience at the United States Institute of Peace that Nigeria should
ensure the value of the naira currency versus the US dollar was “more
realistic.”
“While most people complain about the possibility of there being a
devaluation, people are already operating on a devalued currency, and the
only people who are not, are people who are doing it officially,”
Thomas-Greenfield said.
“Our recommendation is, and we will have discussions about it … that they
should look at the exchange rate and try to make the exchange rate more
realistic to what the value of the naira is to the dollar,” she added.
She spoke ahead of talks in Washington on Thursday involving officials
from the State Department, Pentagon and Treasury and their counterparts in
the Nigerian government.
Nigeria faces its worst economic crisis in decades as the falling price of
oil has slashed revenues, prompting the central bank to peg the currency
and introduce curbs to protect foreign exchange reserves, which have
fallen to an 11-year low.
Some members of Nigeria’s central bank monetary policy committee have said
the naira should be devalued. However, President Muhammadu Buhari has said
devaluation will not bring any benefit whatsoever to the Nigerian economy.
Thomas-Greenfield said the parallel currency market in Nigeria was “alive
and well,” warning that a rigid exchange rate, capital controls and import
bans could undermine President Muhammadu Buhari’s efforts to expand
economic growth and fight corruption.
“Capital controls that limit access to foreign exchange rewards insiders
and undermines the stated goals of Nigeria to increase domestic production
because both Nigerian and expat investors alike tell us many businesses
are unable to obtain the capital to purchase badly needed intermediate
goods,” she said.
The naira trades some 40 per cent below the official rate on the black
market versus the dollar. The central bank last year pegged the exchange
rate to curb speculative demand for the dollar and conserve foreign
exchange reserves after it restricted access to hard currency for imports
of certain items, frustrating businesses.
The International Monetary Fund last month called on Nigeria to lift the
curbs and let the naira reflect market forces more closely, as the
restrictions have significantly affected the private sector.