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IMF tells CBN how to boost value of naira against dollar

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 IMF tells CBN how to boost value of naira against dollar
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The International Monetary Fund (IMF) on Friday asked the Central Bank of Nigeria (CBN) to allow commercial banks to determine dollar buy-sale rates to boost foreign capital flows to the economy.

The Fund said a unified and market-clearing exchange rate remains critical to enhancing confidence of foreign investors in the economy.

The IMF, which made the disclosure in its 2022 Article IV Consultation concluding statement following an official staff visit to Nigeria, insisted that continued forex shortages, a stabilised exchange rate regime, rising inflation, limited debt servicing capacity, and administrative restrictions on current transactions fuel devaluation speculations.

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“These factors hinder much needed capital inflows, encourage outflows and constrain private sector investment. The mission reiterated its past recommendations to move towards a unified and market-clearing exchange rate by dismantling the various exchange rate windows at the CBN accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies.”

“In the medium term, the CBN should step back from its role as main forex intermediator, limiting interventions to smoothing market volatility and allowing banks to freely determine forex buy-sell rates,” it stated.

The Fund also advised Nigeria to remove fuel subsidies and address oil theft as a major step to narrow fiscal gap. The Fund advised that as a near-term priority, there is urgent need to remove fuel subsidies fully and permanently, which disproportionately benefit the well-off, by mid-2023 as planned.

“The government should also prioritize addressing oil thefts and governance issues in the oil sector to restore production to pre-pandemic levels. Step up implementation of tax administration reforms,” it said.

The Fund said fiscal transparency is critical for a sound fiscal policy. “Notwithstanding recent improvements, some gaps remain. While the authorities have published the annual financial reports of the Nigeria National Petroleum Corporation (NNPC) since 2019, uncertainties remain regarding the nature of tax write offs and fuel consumption volumes”.

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