U.S. Wants Realistic Naira/Dollar Exchange Rate

United States’ Assistant Secretary of State for Africa, Linda Thomas-Greenfield told an audience at the U.S. Institute of Peace that Nigeria should make the exchange rate of its currency, Naira, against the U.S. dollar more realistic.

Thomas-Greenfield said the parallel currency market in Nigeria was “alive and well,” warning that a rigid exchange rate, capital controls and import bans could undermine President Muhammadu Buhari’s efforts to expand economic growth and fight corruption.

“While most people complain about the possibility of there been a devaluation, people are already operating on a devalued currency, and the only people who are not, are people who are doing it officially,” Thomas-Greenfield said.

“Our recommendation is, and we will have discussions about it … that they should look at the exchange rate and try to make the exchange rate more realistic to what the value of the naira is to the dollar,” she added.

She spoke ahead of talks in Washington to be launched by Secretary of State John Kerry on Wednesday which would focus on Nigeria’s economy, security and development.

“Capital controls that limit access to foreign exchange rewards insiders and undermines the stated goals of Nigeria to increase domestic production because both Nigerian and foreign investors alike tell us many businesses are unable to obtain the capital to purchase badly needed intermediate goods,” she said.

Nigeria faces its worst economic crisis in decades as the falling price of oil has slashed revenues, prompting the central bank to peg the currency and introduce curbs to protect foreign exchange reserves, which have fallen to an 11-year low.

Some members of Nigeria’s central bank monetary policy committee have said the naira should be devalued, an idea that was rejected by President Mohammedu Buhari.

The naira trades some 40 percent below the official rate on the black market against the dollar as the central bank last year pegged the exchange rate to curb speculative demand for the dollar and conserve foreign exchange reserves after it restricted access to hard currency for imports of certain items, frustrating businesses.

The International Monetary Fund called on Nigeria to lift the curbs and let the naira reflect market forces more closely, as the restrictions have significantly affected the private sector.