The United States is to engage the Federal Government in talks this week on the adoption of a more flexible foreign exchange (forex) rate to boost growth and investment.
Assistant Secretary of State for Africa, Linda Thomas-Greenfield, told an audience at the U.S. Institute of Peace that Nigeria should ensure that the value of the naira versus the U.S. dollar was “more realistic.” “While most people complain about the possibility of a devaluation, people are already operating on a devalued currency, and the only people who are not, are people who are doing it officially.
“Our recommendation is, and we will have discussions about it … that they should look at the exchange rate and try to make the exchange rate more realistic to what the value of the naira is to the dollar,”Thomas-Greenfield was quoted to have said by Reuters.
She spoke before the talks to be launched in Washington by Secretary of State John Kerry today. The talks will focus on Nigeria’s economy, security and development. Nigeria faces its worst economic crisis in decades as the falling prices of oil has slashed revenues, prompting the Central Bank of NIgeria (CBN) to peg the currency and introduce curbs to protect forex reserves, which have fallen to an 11-year low.
Some members of CBN bank monetary policy committee have backed the devaluation of the naira even though the President has ruled out devaluation of the currency.
Thomas-Greenfield said the parallel currency market in Nigeria was “alive and well,” warning that a rigid exchange rate, capital controls and import bans could undermine President Muhammadu Buhari’s efforts to expand economic growth and fight corruption. Buhari has rejected the idea of devaluing the naira.
“Capital controls that limit access to foreign exchange rewards insiders and undermines the stated goals of Nigeria to increase domestic production because both Nigerian and export investors alike tell us many businesses are unable to obtain the capital to purchase badly needed intermediate goods,” she said.
The naira trades some 40 per cent below the official rate in the black market versus the dollar. The CBN last year pegged the exchange rate to curb speculative demand for the dollar and conserve foreign exchange reserves after it restricted access to hard currency for imports of certain items, frustrating businesses.
The International Monetary Fund (IMF) has called on the Federal Government to lift the curbs and let the naira reflect market forces more closely, as the restrictions have significantly affected the private sector.
