The International Monetary Fund (IMF) has commended Nigeria’s Central Bank (CBN) for recent monetary policies that have helped stabilize the naira.
In its latest Global Financial Stability Report, presented in Washington D.C., the IMF linked the currency’s recovery to the CBN’s aggressive interest rate hikes and its efforts to clear foreign exchange (FX) backlogs.
Under the leadership of Olayemi Cardoso, the new CBN governor, the CBN has raised interest rates multiple times in a bid to control inflation, which remains high.
The IMF acknowledged these measures, noting that they have begun to ease the pressure on the naira, which has faced significant depreciation in recent months.
The IMF noted that the latest measures—along with the clearing of overdue foreign exchange obligations—have helped stabilize the naira, a currency that had been under extreme pressure in both official and parallel markets.
The CBN’s March 2024 announcement, which declared the successful settlement of verified outstanding foreign exchange obligations, was a critical step. This followed the discovery of an additional $2.4 billion in unverified obligations still under investigation.
The IMF remarked that these actions have started to yield positive results for the naira, despite ongoing concerns surrounding inflation, which remains around 30 per cent.
Tobias Adrian, the IMF’s Financial Counsellor and Director of Monetary and Capital Markets, praised the CBN’s efforts to control inflation and liberalize the exchange rate.
“The central bank’s transition to inflation-targeting and exchange rate liberalization has been welcomed. The rate hikes have been appropriate, especially given Nigeria’s inflationary challenges,” Adrian said.
However, not all stakeholders share the IMF’s optimism. The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) have expressed concerns about the impact of the CBN’s policies on the business environment.
MAN warned that the interest rate hikes, including the most recent increase to 27.25 per cent in September, could negatively affect Nigeria’s struggling manufacturing sector by raising borrowing costs and stifling growth.
The LCCI similarly argued that while stabilizing the naira is essential, the high interest rates could hinder business expansion and sustainability.
According to the LCCI, businesses, especially in the non-oil sector, are already grappling with rising costs and limited access to credit, which these rate hikes could exacerbate.