Wants CBN To Stop Economic, FX Intervention

International newswire- Reuters, on Wednesday reported the International Monetary Fund (IMF) as saying in a report Nigerians are getting poorer despite the country’s slow recovery from recession.
The report therefore noted the urgent need for “comprehensive and coherent” economic policies reforms, even as the Muhammadu Buhari administration snakes out of the mire in the medium term, even as progress could also be threatened if elections next year consume political energy and resources.
Since emerging from recession in the second quarter of 2017, Nigerian officials have repeatedly boasted that they have set the economy back on track.
Data by the National Bureau of Statistics (NBS) released on Tuesday, February 27, 2018 put Nigeria’s full-year 2017 GDP growth at 0.83%, driven majorly by the combination of crude oil output, helped by peace in the restive Niger-Delta region, and soaring prices at the international markets
The IMF said in the report that the outlook for growth has improved but remains challenging.
Such policy reforms, the IMF said in its annual Article IV review of Nigeria’s economy remain urgent and must not be delayed by approaching elections and recovering oil prices.
“Higher oil prices would support a recovery in 2018 but a ‘muddle-through’ outlook is projected for the medium term under current policies, with fiscal dominance and structural constraints leading to continuing falls in real GDP per capita,” the IMF said. The report listed risks to growth to include additional delays to implementing policies and reforms ahead of 2019 elections, security tensions, and oil prices, a fall in which could see capital flows reversed.
“Further delays in policy action — including because of pre-election pressures — can only make the inevitable adjustment more difficult and costlier,” the report said.
The IMF reiterated its call for Nigeria to simplify its complex foreign exchange system, a bugbear for the IMF for more than a year which has left large gaps between official rates and various windows that certain groups can use to get other rates.
“Moving towards a unified exchange rate should be pursued as soon as possible,” the IMF said. “(IMF) staff does not support the exchange measures that have given rise to the exchange restrictions and multiple currency practices.”
It also urged the Central Bank of Nigeria (CBN) to discontinue its direct interventions in the economy, the most popular of which is the frequent injection of hundreds of millions of dollars into the foreign exchange market to keep its own rates stable.
Commercial banks struggling to remain solvent were also called out, but not identified by the IMF, including one that the lender said was already insolvent: “Some of these banks are kept afloat through continuous recourse to the CBN’s lending facilities.” The IMF said it does not comment on purported leaks. A spokeswoman for the Fund said a statement would be issued after the lender’s board meets to discuss its assessment on Friday.
A Nigerian finance ministry spokeswoman did not immediately respond to a phone call and email requesting comment by Reuters.