The International Monetary Fund (IMF) has advised the Central Bank of Nigeria (CBN) on how to solve the Naira depreciation and exchange rate crises.
According to the IMF, for Naira to appreciate and for current forex crises to be solved, the CBN should empower commercial banks to determine dollar buy-sale prices.
It said if commercial banks have the power to set exchange rates, it will boost foreign capital flows into the economy.
The IMF gave the recommendation in its 2022 Article IV Consultation concluding statement published recently.
IMF said: “Maintaining a uniform and market-clearing currency rate is vital to increasing foreign investor confidence in the economy.”
Also, IMF insisted that persistent forex shortages, a stabilized exchange rate regime, rising inflation, limited debt servicing capacity, and administrative restrictions on current transactions trigger devaluation speculations.
IMF said: “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.”
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