Nigeria vow to implement Unified, Flexible Exchange Rate in letter to IMF

Nigerian naira banknotes are seen in this picture illustration, September 10, 2018. Picture taken September 10, 2018. REUTERS/Afolabi Sotunde/Illustration - RC15864538F0

Officials wrote in letter to IMF before $3.4 billion funding

Central bank to intervene only to smooth large currency moves

Nigeria has vowed to seek a more flexible and unified naira to respond to the external shock brought by the coronavirus pandemic, leaving foreign-exchange interventions for only when there are large fluctuations.

In a letter of intent to request funding from the International Monetary Fund, the government said more currency flexibility would help protect dwindling international reserves and avert economic distortions.

“We are committed to maintaining this more unified and flexible exchange-rate regime, which will operate in a market-determined manner and be allowed to respond to shocks, with the Central Bank of Nigeria only intervening to smooth large FX fluctuations,” the government said in a letter contained in the IMF’s staff appraisal of the financing request.

The letter dated April 21 was signed by Finance Minister Zainab Ahmed and central bank Governor Godwin Emefiele.

A few days later, the central bank debited 1.47 trillion naira ($3.8 billion) from commercial banks as additional cash reserves for failing to meet regulatory targets, a move seen by bankers and analysts as a way to ease pressure on the naira.

On April 28, the IMF approved $3.4 billion of emergency funding for Africa’s biggest oil producer, the single biggest disbursement for any country yet with the coronavirus pandemic.

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