The Central Bank of Nigeria (CBN) is relishing the success of its monetary policy, especially regarding the foreign exchange, as the efforts have been finally acknowledged by the international financial community.
The International Monetary Fund (IMF), in its recently released World Economic Outlook (WEO), had attributed Nigeria’s growth acceleration to “improved oil prices, revenue, and production, and the recently introduced foreign exchange measures that contributed to better foreign exchange availability.”
The Acting Director, Corporate Communications Department, CBN, Isaac Okoroafor, responding to the development, told journalists on the sidelines of the Spring Meetings of the IMF/World Bank Group, said: “It’s all positive news. We needed to underscore this to say, ‘yes, we were right!.’“We knew our economy, and we have done what was then wrong, which we believed is the right thing; and we are happy to report that everything we have done proved to be right, and we will continue to do that.”
But it’s not all victory yet, according to the IMF, as the CBN still needs to float the exchange rate to be more market determined.Speaking more on this, IMF Director, Africa, Abebe Aemro Selassie, said at a press conference: “Relative to where things were a year ago, inflation accelerating, and the very big gap between the official and parallel market rate. Of course, things have improved significantly.
“This is in no small part due to the reforms that have been undertaken in exchange rate regime as well as capital inflows, which with the recovery in oil prices and the uncertainty around exchange rate ameliorating, have been taking place in Nigeria. Inflation has also been decelerated.
“These are all welcome trends, but I do think that there remains a need to move towards having a more simplified exchange rate regime moving forward. That would also be important for the conduct of monetary policy so the idea is to go back to what you have before so that you have a liquid foreign exchange market.”
But Okoroafor is convinced that the CBN has achieved a considerable level of exchange stability. “The investors and exporters window since it was launched has continued to bring in a lot of foreign exchange. Stability is a relative thing; we have achieved stability in a significant way, and we are working towards a time when all the sectors of the market converge at one point. As time goes on, we will see it play out as we promised last year.
“About a year ago, we were here and the story was different. If you recall, the Nigerian economy was going through one of its worst situations. Inflation was high, the foreign exchange market was in turmoil, and the economy was in recession. Also, we faced a crunchy foreign exchange scarcity and everybody swooped on Nigeria. Our reserves were down, and the whole situation was ominous. “I can recall that at that time we knew what we were doing, and everybody was saying we were wrong; but we waited for the time to play out. Today, I’m happy to report that time has proved that we were right.’’and they were wrong about our economy. We have our reserves strong, over $47 billion, inflation has gone down to 13.34 per cent, foreign exchange market is now very stable, and growth has taken off; we are out of recession.”
With regard to the IMF advise for Nigeria to tighten its monetary policy rate (MPR), the CBN spokesman said that is a decision left for the Monetary Policy Committee (MPC).To further consolidate on its monetary policy and economic stability, Okoroafor noted that the CBN has intervened in the small and medium enterprises (SMES) and agricultural and manufacturing sectors.