THE International Monetary Fund has said that the forex control policies put in place by the government of President Muhammadu Buhari since 2015 is actually killing the economy.
In its staff report for 2016, IMF said the strategy of supporting a de facto exchange rate peg through exchange restrictions is significantly distorting the economy and weighing on economic activity.
The restrictions have served to protect certain sectors of the economy, but many other sectors are cutting production and shedding labor, resulting in cuts to investment and consumption. ”Foreign exchange shortages and the associated increase in the spread between the interbank rate and the rates on the BDC and parallel markets have also contributed to higher prices, undermining the desired anti-inflationary impact of the restrictions.
“In staff’s view, a more flexible regime would facilitate attempts to diversify the export base and permit the economy to adjust more smoothly to changes in fundamentals, lowering the potential for episodes of exchange rate misalignment and reducing reliance on reserves to buffer external shocks.”
It said while progress has been made in the fight against terror group, Boko Haram and war against corruption, but the delay in appointing his cabinet for about six months has limited the scope for a timely and comprehensive policy response to the oil price shock.