As a fallout of the economic crisis caused by the coronavirus outbreak, the International Monetary Fund (IMF), on Tuesday, April 28, 2020, approved the sum of $3.4 billion, as emergency financial support for Nigeria.
The financial support, which is under its Rapid Financing Instrument (RFI) programme, is to help mitigate the impact of the coronavirus pandemic on the Nigerian economy, especially with plugging the revenue gaps.
As part of the highlights of the IMF statement, the Deputy Managing Director/Acting Chair of the Bretton Woods Institution, Mitsuhiro Furusawa, expressed special interest in getting Nigeria to follow through with the unification of the multiple exchange rates.
In his words, the IMF Chief said, ‘’Steps taken towards a more unified and flexible exchange rate are also important and unification of the exchange rate should be expedited.’’
While approving the $3.4 billion loan for Nigeria, the IMF is still pressuring Nigeria to fast track the unification of various exchange rates that are currently applicable in Nigeria.
The global lender has been very consistent with its opposition to the usage of multiple exchange rates because it believes that it creates a lot of distortion in prices, hurts businesses, and encourages corruption as it is susceptible to manipulation. The unified exchange rate will encourage transparency and help attract more Foreign Direct Investment (FDI).
The single exchange rate has been identified as a very effective tool for resource allocation.
The Central Bank of Nigeria (CBN), on its part, pointed out that it operates multiple windows, rather than multiple exchange rates.
However, as a fallout of the crash in crude oil prices globally and the gradual depletion of the country’s external reserve, the CBN moved towards the unification of the exchange rate, when it adjusted the official rate from N305 per dollar to N360 per dollar, and adjusted the rate for Bureau de Change operators from N360 per dollar to N380 per dollar.
The investors and exporters window was also adjusted from N366 per dollar to about N380 per dollar.
The IMF had earlier acknowledged that the country is already working towards that direction through the Economic Recovery and Growth Plan (ERGP).
It pointed out that unifying the exchange rate will impact the economy more positively than the multiple exchange rates, which create a lot of opportunities for arbitrage. Also, it avoids situations where public and private sector decisions are distorted due to uncertainties.