The United States said it would advise Nigeria in talks this week to adopt a more flexible foreign exchange rate in order to boost growth and investment in the country.
The Central Bank of Nigeria (CBN), backed by President Muhammadu Buhari had insisted on keeping the naira pegged at 197 – 199 to a dollar despite growing calls for devaluation.
“While most people complain about the possibility of there being a devaluation, people are already operating on a devalued currency, and the only people who are not, are people who are doing it officially,” Reuters quoted Linda Thomas-Greenfield, U.S. Assistant Secretary of State for Africa to have said.
“Our recommendation is, and we will have discussions about it … that they should look at the exchange rate and try to make the exchange rate more realistic to what the value of the naira is to the dollar,” she added.
The naira exchanges at N320 on the parallel market despite the official rate still being held at N197. Most Nigerians accessing forex do so at the parallel market rates leading job cuts in several industries relying on foreign sourced services or raw materials for their activities.
Nigeria, Africa’s largest economy faces its worst economic crisis in decades as the slump in prices of oil hurt revenues. As foreign exchange reserves (over 80 percent of which is gotten from oil) depleted to an 11-year low, the CBN pegged the currency and introduced restrictions aimed at protecting the vanishing reserves.
The International Monetary Fund called on Nigeria to lift the curbs and let market forces determine the value of the naira, especially with the restrictions significantly hurting the private sector.
Thomas-Greenfield who spoke before talks in Washington which will focus on Nigeria’s economy, security and development and will be launched by Secretary of State John Kerry on Wednesday, said the parallel currency market in Nigeria was very existent, and warned that the current policy decisions could undermine efforts to expand economic growth and fight corruption in the country.
“Capital controls that limit access to foreign exchange rewards insiders and undermines the stated goals of Nigeria to increase domestic production because both Nigerian and expat investors alike tell us many businesses are unable to obtain the capital to purchase badly needed intermediate goods,” she said.