{"id":14631,"date":"2022-11-20T11:43:43","date_gmt":"2022-11-20T11:43:43","guid":{"rendered":"https:\/\/crowdfundjunction.com\/blog\/nigerias-rising-inflation-and-foreign-exchange-shortages-fueling-devaluation-speculation-imf-mission-economics-bitcoin-news\/"},"modified":"2022-11-20T11:43:43","modified_gmt":"2022-11-20T11:43:43","slug":"nigerias-rising-inflation-and-foreign-exchange-shortages-fueling-devaluation-speculation-imf-mission-economics-bitcoin-news","status":"publish","type":"post","link":"https:\/\/crowdfundjunction.com\/blog\/nigerias-rising-inflation-and-foreign-exchange-shortages-fueling-devaluation-speculation-imf-mission-economics-bitcoin-news\/","title":{"rendered":"Nigeria’s Rising Inflation and Foreign Exchange Shortages Fueling Devaluation Speculation \u2014 IMF Mission \u2013 Economics Bitcoin News"},"content":{"rendered":"

(Originally posted on : Bitcoin News )<\/b>
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According to the International Monetary Fund (IMF)\u2019s mission concluding statement, Nigeria\u2019s rising inflation rate as well as the continuing shortage of foreign currency are fueling the naira devaluation speculations. To achieve a unified naira exchange rate, the global lender said Nigeria needs to dismantle \u201cthe various exchange rate windows at the CBN [Central Bank of Nigeria]\u201d <\/strong><\/p>\n

The Widening Gap Between the Official and Parallel Market Exchange Rate<\/h2>\n

The International Monetary Fund (IMF) has said Nigeria\u2019s foreign currency shortages, the rising inflation, and the country\u2019s limited debt servicing capacity are fueling naira devaluation speculations. This, in turn, hinders the \u201cmuch-needed capital inflows, encourages outflows and constraints private-sector investment.\u201d<\/p>\n

In the global lender\u2019s staff concluding statement<\/a> of the 2022 Article IV Mission, the IMF reiterated its call on Nigerian financial authorities to consider moving \u201ctowards a unified and market-clearing exchange rate.\u201d To achieve this, the IMF said Nov. 18 statement that the Central Bank of Nigeria (CBN) needs to abandon the multiple exchange rate system.<\/p>\n

As has been reported by Bitcoin.com News, Nigeria officially pegs<\/a> its currency at just under 450 nairas for every dollar. However, in practice, many Nigerian businesses and individuals can only source the greenback and other global currencies on the parallel market where the rates recently touched<\/a> an all-time low of N900:$1.<\/p>\n

Further, the IMF\u2019s concluding statement suggested that the CBN\u2019s influence or control of foreign exchange markets needs to be curtailed.<\/p>\n

\u201cIn the medium term, the CBN should step back from its role as main FX intermediator, limiting interventions to smoothing market volatility and allowing banks to freely determine FX buy-sell rates,\u201d the IMF statement explained.<\/p>\n

Nigeria Falling Short of Its Financial Inclusion Targets<\/h2>\n

Despite expressing its concerns about Nigeria\u2019s exchange rate policy, the global lender\u2019s concluding statement still lauds the CBN for tightening liquidity and curbing \u201cinflationary pressures through increasing the monetary policy rate (MPR) by a cumulative 400 basis points.\u201d A tighter monetary policy<\/a> is often adopted by central banks when prices are rising too fast or when an economy is growing quickly.<\/p>\n

However, in the statement, the IMF mission insisted that overall conditions remain accommodative \u2014 Nigeria\u2019s monetary policy rate<\/a> (MPR) of 15.5% is below the inflation rate which peaked at 21.1% in October. The global lender\u2019s mission also said that the funding for the country\u2019s budget and as well as the central bank\u2019s \u201cdirected lending schemes continue to drive strong monetary expansion.\u201d<\/p>\n

On financial inclusion, the IMF mission said Nigeria \u201ccontinues to fall short of its inclusion targets, particularly in access to financial products.\u201d However, the mission commended the CBN\u2019s plan to launch a regulatory sandbox for fintech. It also urged authorities to \u201cprovide more targeted training in using financial products, and extend the e-naira further to the unbanked population.\u201d<\/p>\n

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What are your thoughts on this story? Let us know what you think in the comments section below. <\/strong><\/em><\/p>\n

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\nTerence Zimwara <\/h6>\n

\nTerence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits<\/b>: Shutterstock, Pixabay, Wiki Commons, Editorial photo credit: Tayvay \/ Shutterstock.com<\/em><\/p>\n

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Disclaimer<\/strong>: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com<\/a> does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.<\/p>\n<\/div>\n

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