In
a new report released today, the International Monetary Fund has said
that Buhari's foreign exchange exchange restrictions were significantly
distorting the economy and weighing on economic activity.
President Buhari and IMF CEO, Christine Lagarde during her visit in Nigeria
In a staff report for the 2016 article IV consultation, the
International Monetary Fund (IMF) who is happy with President Buhari’s
progress with the fight against corruption and insurgency, disclosed
that his foreign exchange restrictions were 'significantly distorting the economy and weighing on economic activity.'
The IMF said in its report released on Friday that, "Policy
uncertainty amplified the impact of global developments. President
Buhari was inaugurated in May 2015, having led the All Progressives
Congress (APC) - a merger of four opposition parties - to victory in the
March 28 elections, the first democratic transition of government in
Nigeria’s history.
"The administration has listed fighting corruption, enhancing
transparency, improving security, and creating jobs as key elements of
its policy agenda.
"While progress has been made against Boko Haram, in addressing
corruption, and strengthening governance, the delay in appointing a
cabinet until November 2015 limited the scope for a timely and
comprehensive policy response to the oil price shock."
The global financial institution also warned that foreign exchange
policy operated by the apex bank under Buhari has been distorting the
economy.
"The strategy of supporting a de facto exchange rate peg
through exchange restrictions is significantly distorting the economy
and weighing on economic activity. The restrictions have served to
protect certain sectors of the economy, but many other sectors are
cutting production and shedding labor, resulting in cuts to investment
and consumption.
"Foreign exchange shortages and the associated increase in the
spread between the interbank rate and the rates on the BDC and parallel
markets have also contributed to higher prices, undermining the desired
anti-inflationary impact of the restrictions," the IMF said.
The IMF advised that the Central Bank of Nigeria (CBN) adopt a rather flexible foreign exchange regime.
"In staff’s view, a more flexible regime would facilitate
attempts to diversify the export base and permit the economy to adjust
more smoothly to changes in fundamentals, lowering the potential for
episodes of exchange rate misalignment and reducing reliance on reserves
to buffer external shocks."
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