The International Monetary Fund (IMF) has reported that Nigeria’s currency, the naira, is showing signs of stability due to recent interest rate hikes and the clearing of foreign exchange backlogs by the Central Bank of Nigeria (CBN).
The announcement was made during the launch of the IMF’s global financial stability report at a press briefing in Washington DC on Tuesday.
The IMF’s analysis comes after the CBN took measures earlier in the year to address Nigeria’s foreign exchange challenges.
On March 20, the CBN announced that it had settled all verified outstanding foreign exchange (FX) obligations, though an unverified amount of $2.4 billion remains under investigation.
“in Nigeria, rate hikes and the clearing of overdue domestic central bank foreign exchange obligations have helped the naira show more signs of stability,” the IMF stated in its report.
Under the leadership of Governor Olayemi Cardoso, the central bank has implemented multiple interest rate increases aimed at curbing inflation, which has been a pressing issue in the country.
Most recently, on September 24, the CBN’s monetary policy committee (MPC) raised the interest rate by 50 basis points, bringing it to 27.25 percent.
ThE move, however, faced immediate criticism from key business groups such as the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI).
The groups argued that higher interest rates would negatively impact the manufacturing sector and hinder business growth.
Tobias Adrian, the IMF’s financial counsellor and director of monetary and capital markets, praised the CBN’s efforts to stabilize the naira and control inflation.
Speaking at the press briefing, Adrian acknowledged the CBN’s shift towards an inflation-targeting regime and the liberalization of the exchange rate.
His words: “The central bank has been transitioning to an inflation-targeting regime and has liberalized the exchange rate, which we welcome.
“The rate hikes implemented so far have been appropriate, especially given the challenges posed by high inflation, which still stands around 30 percent.”
Despite the recent gains in naira stability, the currency has struggled in 2024. On October 16, the World Bank reported that the naira remains one of the worst-performing currencies in sub-Saharan Africa.
However, the IMF noted that the currency has shown signs of improvement in recent months, fluctuating between N1,700 and N1,600 per dollar in the parallel market and stabilizing between N1,500 and N1,600 in official trading windows.
