IMF analysis reveals why the naira is bouncing back, highlighting reforms and global market conditions aiding its recovery.
The International Monetary Fund (IMF) has suggested that Nigeria’s currency, the naira, is starting to stabilize due to recent economic interventions.
The IMF credited this development to the Central Bank of Nigeria’s (CBN) efforts in addressing outstanding foreign exchange backlogs and increasing interest rates, actions intended to stabilize the economy.
At a press briefing held in Washington DC on Tuesday, the IMF recognized the effects of these policies.
The IMF reported that in Nigeria, increasing rates and settling overdue domestic central bank foreign exchange obligations have contributed to the naira demonstrating greater stability.
During the same conference, Tobias Adrian, who serves as the IMF’s financial counsellor and director of monetary and capital markets, emphasized the CBN’s advancements in controlling inflation and stabilizing the foreign exchange market.
Adrian stated, “We welcome the central bank’s shift to an inflation-targeting regime and its liberalization of the exchange rate.”
He reaffirmed the suitability of the CBN’s rate hikes due to ongoing inflation issues. “The implemented rate increases have been fitting, particularly considering the challenges brought on by high inflation, which remains around 30 percent.”
In 2024, the naira has encountered significant challenges despite recent advancements. According to a report by the World Bank on October 16, it continues to be one of the weakest-performing currencies in sub-Saharan Africa.
The report connected the currency’s decline in value to a rise in demand for dollars and inadequate foreign currency inflows.
The IMF observed indications of recovery in recent months, with the naira oscillating between N1,700 and N1,600 per dollar in the parallel market and stabilizing within a range of N1,500 to N1,600 in official exchange markets.
