The International Monetary Fund (IMF) has noted signs of stability in the naira, Nigeria’s local currency, attributing this development to recent interest rate hikes and the clearing of foreign exchange backlogs by the Central Bank of Nigeria (CBN). This assessment was highlighted in the IMF’s global financial stability report, released during a press briefing in Washington, D.C.
The CBN announced on March 20 that it had settled all verified outstanding foreign exchange (FX) obligations, although an unverified amount of $2.4 billion remains under investigation. The IMF credits these actions for contributing to the naira’s stabilization, despite recent criticisms from stakeholders regarding CBN’s monetary policies.
Under the leadership of Governor Olayemi Cardoso, the CBN has implemented multiple interest rate increases to combat rising inflation. The latest adjustment occurred on September 24, when the monetary policy committee raised the interest rate by 50 basis points. This move, however, faced opposition from the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI), which expressed concerns about potential negative impacts on the manufacturing sector and business sustainability.
During the press briefing, Tobias Adrian, the IMF’s financial counsellor and director of monetary and capital markets, acknowledged the CBN’s efforts in inflation control and foreign exchange market stabilization. “The central bank has been transitioning to an inflation-targeting regime and has liberalized the exchange rate, which we welcome,” Adrian stated. “The rate hikes implemented so far have been appropriate, especially given the challenges posed by high inflation, which still stands around 30 percent.”
Despite a recent report by the World Bank on October 16 identifying the naira as one of the worst-performing currencies in sub-Saharan Africa in 2024, the naira has shown signs of stabilization over the past month. It has fluctuated between N1,700 and N1,600 per dollar in the parallel market and between N1,500 and N1,600 in the official trading window. These developments suggest a potential turning point for Nigeria’s currency amidst ongoing economic challenges.