The International Monetary Fund (IMF) has noted signs of stability in Nigeria’s local currency, the naira, attributing this progress to interest rate hikes and the Central Bank of Nigeria’s (CBN) efforts to clear the foreign exchange (FX) backlog.
The IMF made these observations in its Global Financial Stability Report, released during a press briefing in Washington, DC.
The CBN, in March, announced the successful resolution of all verified FX obligations, while an unverified $2.4 billion remains under investigation.
“… in Nigeria, rate hikes and the clearing of overdue domestic central bank foreign exchange obligations have helped the naira show more signs of stability,” the IMF said.
However, these monetary policies have drawn criticism from stakeholders. The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI) voiced concerns that the continuous rise in interest rates would negatively affect business growth and sustainability.
On September 24, the CBN raised the interest rate to 27.25 percent, a decision that sparked backlash, particularly from the manufacturing sector.
Despite the criticism, Tobias Adrian, IMF’s financial counsellor and director of monetary and capital markets, supported the CBN’s efforts.
He emphasized the need for the ongoing interest rate increases to tackle the persistent inflation, which remains around 30 percent.
Furthermore, while the World Bank recently named the naira one of the worst-performing currencies in sub-Saharan Africa in 2024, the currency has shown relative stability in recent weeks.
The naira 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, offering hope of a more stable exchange rate.
