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IMF proposes naira devaluation

05 March 2015, 13:23

Abuja - Executive Board of the International Monetary Fund (IMF) has called for the implementation of reforms, including devaluation, to shield the country from risks presented by uncertainties characterizing the economy.

The call follows the IMF directors concluding the Article IV consultation1 with Nigeria last week.

According to IMF, during the consultation, executive directors commended the authorities for progress in promoting Nigeria’s economic diversification and for their macroeconomic response to collapsing export prices.

“Directors noted, however, that vulnerabilities remain high in view of the uncertainties about oil price, security, and the political situation, and concurred that additional policy adjustments and broader structural reforms will be necessary in the period ahead to reconstitute buffers, mitigate risks, and meet pressing development needs,” read a statement made available to this publication.

According to the statement, the directors agreed that tightening fiscal policy and allowing the exchange rate to depreciate while using some of the reserve buffer were appropriate responses to the recent fall in oil prices.

Also read: 'Further devaluation of naira imminent'

“Nonetheless, Directors stressed that achieving the authorities’ fiscal targets will require a careful prioritization of public spending and a cautious implementation of capital projects. They also highlighted the importance of improved budgeting at the level of state and local governments to help better manage their fiscal adjustment.”

IMF said directors agreed that mobilizing additional non oil revenues is critical to open up fiscal space and improve public service delivery over the medium term.

They welcomed ongoing initiatives to strengthen tax administration, and encouraged the authorities to also rein in exemptions, keep tax rates under review, persevere with subsidy reform, and improve the management of oil revenue.

“Furthermore, Directors saw merit in reviewing the current revenue sharing arrangements to help address regional disparities over the longer term and ensure that social and development needs are addressed,” read a statement.

IMF said its directors welcomed the recent unification of the foreign exchange rates, noting that greater exchange rate flexibility could help cushion external shocks.

“As the largest single supplier of foreign exchange, it will be important for the central bank to intermediate this supply in a transparent, efficient, and fair manner.”

- CAJ News

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