By Emma Ujah, Abuja Bureau Chief
The International Monetary Fund, IMF, has denied advising the Federal Government to devalue the Naira in its 2010 Article IV Consultation Report.
The IMF Senior Resident Representative and Country Chief, Mr. Scott Rogers, told journalists in Abuja, yesterday, that the fund only noted that the Naira was overvalued.
According to him, what the Fund recommended was a flexible approach to exchange rate stability which did not necessarily mean devaluing the Naira.
“We recommended that the CBN should be more flexible in the management of the exchange rate while working on price stability and efforts to bring inflation down.
“To recommend devaluation is to ask for movement of value of a currency from one level to another. In recommending exchange rate flexibility is not to devalue the currency. What it means is that some times it could go up or go down”, Mr. Rogers said.
The Fund, therefore, urged that Nigeria’s “monetary policy should focus on reducing inflation, while allowing for more flexibility in interest rates and the exchange rate.”
According to the organization, forth coming national elections were putting pressure on the government to spend, while monetary policy has focused on supporting the exchange rate and keeping interest rates low.
The IMF’s 2010 Article IV consultation which lasted between November 4-18 indicated that Nigeria’s external balance deteriorated in 2010 despite a favorable external environment.
It warned that the inflation risk hinges crucially on the 2011 budget as the National Assembly could pass a more expansionary budget for 2011 than was submitted, undermining the CBN’s ability to deliver on inflation.
The Fund added that speculation against the naira could even become intense should reserves continue to fall, forcing the hand of the CBN to react quickly, resulting in excessively high interest.
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We didn’t ask FG to devalue the Naira-IMF