The International Monetary Fund, (IMF) under the leadership of Christine Lagarde, has accrued the double digit inflation rate in Nigeria to the challenges around foreign exchange market.
In a policy paper released at the weekend on Macro economic developments and prospects in low-income developing countries, the IMF had further attributed Nigeria’s economic challenges to delay in policy adjustment.
The IMF is of the believe that efforts of the Central Bank of Nigeria to defend the Naira by forex rationing, have gradually crumbled. This has resulted into the country’s present recession.
It would be recalled that the IMF boss, Christian Lagarde, in April, 2016, advised the Federal Government of Nigeria to make attempt to devalue the Naira to allow for a flexible exchange rate.
In her speech, back in 2016, She had described Nigeria as a great country with huge potential, but decried the current economic situation.
“Nigeria has very strong resourceful and great people. The
right policy mix is needed, which include, in our view, flexible exchange rate,” she said.
“Nigeria is one of those countries where there’s huge potential, fantastic youth but also a very alarming economic situation. It is heavily dependent on the oil resources.
“Both in terms of fiscal revenue and exports. As a result of that, we have gone public and actually gone to the senate of Nigeria to explain our views, we believe that a more flexible exchange rate is in the interest of the Nigerian population.
“If that doesn’t happen, we would continue to see the dual exchange rate. And putting in place a list of (those) product and services that are forbidden in Nigeria for import purposes cannot be a substitute to a more flexible exchange rate.”
“We are not suggesting that flexible exchange rate is the
panacea in all cases, but in this particular instance, we believe that it would help,” she said.
“I know it is going to be difficult, and we very much hope that the Nigerian government under the leadership of President Buhari will be able to distinguish the value of moving in that direction, rather than causing the circumstances that can precipitate, a much more difficult
decision making process at some stage.”
The Buhari led government, however, ignored the call insisting to allow the market free flow decide.
Lately, data from the National Bureau of Statistics, shows that Nigeria’s headline inflation has risen to 18.55 per cent which seems to be its highest in more than 11 years.
On the other hand, as mesmerizing as the IMF claims may seem, some African economists still have reserved views. The claim that IMF’s interference (or reforms as the case may be) is not always giving the governments sovereign rights to act effectively has they would want to (neo-colonialism). The effect amounts to cut backs in effective delivery to the people, reduces trade barriers and turning Africa economies into sources of cheap raw materials and labour for multinational corporations. The results have been a decline in average incomes, worsening conditions of poverty and under development, and an increase in Africa’s foreign debt profile.
To be or not to be, IMF has once again tipped on a reform. What do you think about it this time?