IMF spokesman, Gerry Rice, said that the Fund wanted to see how effectively the Naira exchange market functions once the new float system is put into effect next Monday (today).
Reacting to a question during a press driefing on the Nigeria's elimination of currency peg, Mr Rice said; You know, just on your latter point, clearly there is no blanket policy recommendation to groups of countries. I think it's case-by-case. In general, we think exchange rate flexibility is something beneficial to an economy, but I wouldn’t want to make any generalizations about what groups of countries should do.
On Nigeria, however, I think the announcement yesterday, to revise the guidelines for the operation of the Nigerian interbank foreign exchange market, is an important and welcome step to allow greater flexibility in that market, in the foreign exchange market.
The new system comes into effect on Monday, and we need to wait and see how effectively the market functions going forward. As we have said before, the significant macroeconomic adjustment that Nigeria urgently needs to eliminate existing imbalances, and support the competitiveness of the economy is best achieved through a credible package of policies involving fiscal discipline, monetary tightening, a flexible exchange rate regime, and structural reform, allowing the exchange rate to better reflect market forces is an integral part of that adjustment.
Mr. Emefiele, the CBN governor had said in a letter to President Muhammadu Buhari that the apex bank expected the Naira to settle at around 250 to the dollar after it abandons the peg of 197 to the dollar it has supported for 16 months.
Senior IMF officials, including Christine Lagarde ,Managing Director, have urged the Federal Government to allow the Naira to fall to absorb some of the shock to the economy from a plunge in oil prices and revenues.
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