IMF Wants Sanusi to ‘Hands-off’ Naira

The last time the International Monetary Fund (IMF) asked the Nigerian Central Bank Governor, Lamido Sanusi, to devalue the Naira, he didn’t listen to them. It’s surprising that they would ask him to liberalize the process again.

The IMF says the Naira is overvalued by 8.5%, however in the same sentence, the body states that it is difficult to actually measure the statistics that determine the value of the Naira due to problems measuring indicators on a country-by-country basis. The IMF said the statistics gap problem was compounded by the fact Nigeria is a low income country and also an oil exporter. This tinkers with the economists at the IMF’s development models.

According to the report, “[IMF] staff recommended [CBN] focusing on a clear inflation objective and allowing gradual adjustment of the naira over time in response to market conditions.”

The CBN did not directly ask that the Naira be devalued but it said it had mixed results in its foreign exchange rate assessment of Nigeria.

According to the body, “The three methodologies provide complementary perspectives on the exchange rate assessment for Nigeria, but the results must be treated with caution.”

It said the differences in modelling the underlying macroeconomic links and inherent difficulty of incorporating critical country specific information into cross-country approaches affected its results.

“These differences are most prominent for low-income countries and for oil exporters, which complicates the assessment for Nigeria. Defining a current account norm is complex also because of the relatively poor data quality,” the multilateral orgainsation said.

It said: “One method — relating the value of the naira to its fundamental determinants —  suggests that the naira is in line with equilibrium.

“Two other methods give mixed results: the  macroeconomic balance approach suggests an undervaluation of 10¼ per cent, reflecting projected current account balance that is stronger than the norm; while the external sustainability approach, comparing the projected current account surplus with the level needed to stabilize net foreign assets, suggests that the naira is overvalued by 8½ percent.”

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2 Comments

1. 

   T-boy

   July 27, 2012 at 6:26 pm

   Nobody knows and understands Nigeria better than its people. IMF has no business making recommendations to the Governor or telling the governor how to manage our economy. They are only after their own interests. They want Sanusi to create an environment that will enable them predict Nigeria’s financial system and take advantage of it by ripping us blind in the name of forecasting. MYB IMF, Mind Your Business and focus strictly on managing your funds. We didn’t ask for your help so don”t offer.
   • 

     Zizco

     July 29, 2012 at 3:50 pm

     I completely agree. We do not need to be dragged into the global financial mess caused by thee strange IMF policies.