The International Monetary Fund said on Thursday that it welcomed the
decision by Nigeria's central bank to abandon its currency peg and adopt
a flexible exchange rate policy, saying this was important to reduce
fiscal and external imbalances.
IMF spokesman Gerry Rice told a weekly news briefing that the fund
wanted to see how effectively the naira exchange market functions once
the new float system is put into effect on Monday.
The governor of Nigeria's Central bank said in a letter to President
Muhammadu Buhari that the bank expects the naira to settle at around 250
to the dollar after it abandons the peg of 197 to the dollar it has
supported for 16 months.
"I think the announcement yesterday to revise the guidelines for the
operation of the Nigerian interbank foreign exchange market is
an
important and welcome step," Rice told reporters. "It will provide
greater flexibility in that market, the foreign exchange market."
Senior IMF officials, including Managing Director Christine Lagarde,
have urged Nigerian officials to allow the naira to fall to absorb some
of the shock to the economy from a plunge in oil prices and revenues.
OPEC member Nigeria is a major oil producer.
IMF officials have said that Nigeria has not requested IMF financial
assistance, but has been in consultation with the fund on dealing with
budget shortfalls.
"As we have said before, a significant macroeconomic adjustment that
Nigeria urgently needs to eliminate existing imbalances and support the
competitiveness of the economy is best achieved through a credible
package of policies involving fiscal discipline, monetary tightening, a
flexible exchange rate regime and structural reform," Rice said.
"Allowing the exchange rate to better reflect market forces is an
integral part of that.
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