The International Monetary Fund (IMF) has reported that Nigeria’s local currency, the naira, is beginning to show signs of stability, largely due to recent interest rate hikes and the clearing of foreign exchange (FX) backlogs by the Central Bank of Nigeria (CBN).
This observation was highlighted in the IMF’s global financial stability report, unveiled during a press briefing in Washington DC. The IMF noted that the CBN’s actions, particularly the settlement of verified FX obligations, have contributed to stabilizing the naira.
On March 20, the CBN announced it had successfully cleared all verified FX obligations, though an unverified amount of $2.4 billion remains under investigation. The IMF praised these efforts, stating, “Rate hikes and the clearing of overdue domestic central bank foreign exchange obligations have helped the naira show more signs of stability.”
The naira’s improved stability comes at a time of ongoing debate regarding some of the CBN’s monetary policies. Since Olayemi Cardoso assumed office as governor, the CBN has raised interest rates multiple times to combat rising inflation, which currently hovers around 30 percent.
In the most recent hike on September 24, the CBN’s Monetary Policy Committee increased the interest rate by 50 basis points, pushing it to 27.25 percent. The decision faced criticism from stakeholders such as the Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industry (LCCI). Both groups expressed concerns about the policy’s potential negative impact on business growth and the manufacturing sector.
Despite the pushback, Tobias Adrian, the IMF’s financial counsellor, commended the CBN’s efforts to transition to an inflation-targeting regime and liberalize the exchange rate. “The rate hikes implemented so far have been appropriate, especially given the challenges posed by high inflation,” Adrian said.
Though the World Bank recently described the naira as one of the worst-performing currencies in sub-Saharan Africa in 2024, the currency has shown signs of stabilization over the past month. It has been trading between N1,700 and N1,600 per dollar in the parallel market and N1,500 to N1,600 in the official window.