The International Monetary Fund (IMF) has said that the depreciation of the Naira should not automatically be regarded as a negative development.
The Fund’s Financial Counsellor and Director of Monetary and Capital Markets, Mr. Tobias Adrian, stated this while addressing journalists at the Global Fiscal Sustainability Report press briefing during the ongoing Annual Meetings of the World Bank and IMF in Washington D.C., USA.
Responding to a question on what policy measures the Fund would recommend to help Nigeria strengthen the Naira, Adrian explained that exchange rate adjustments could play a stabilizing role in an economy facing external shocks.
“In terms of the Nigerian economy, exchange rates are important buffers to adjust the domestic economy relative to shocks,” he said. “A depreciating exchange rate is not necessarily a bad thing—it may actually be a good thing to restore equilibrium.”
He noted that Nigeria had taken several steps to strengthen its policy framework, especially in the area of monetary policy, and emphasized that the IMF generally recommends more flexible exchange rate regimes.
“In addition to monetary policy actions, revenue collection has strengthened in Nigeria, and transparency regarding FX reserve positions has improved,” Adrian stated. “All of this has contributed to lower inflation—from more than 30 percent last year to 23 percent this year—as well as improved foreign exchange reserves. So, the direction of travel appears to be positive.”
However, Adrian cautioned that Sub-Saharan Africa continues to face economic headwinds despite recent gains.
“While growth has been strong amid easier financial conditions and resuming capital flows, we could still see the familiar cycle of surges and retracements,” he warned. “When that happens, economies with underlying vulnerabilities could be exposed, particularly where foreign investments pull back.”
He urged countries in the region to continue strengthening fiscal and monetary fundamentals, enhance revenue mobilization, and improve debt management, adding that international support remains crucial.