Ari Aisen, the Nigeria-based representative of the International Monetary Fund (IMF) recently discussed the Central Bank of Nigeria (CBN) policy targeting crypto companies. In a special virtual press conference, Aisen reiterated some of the CBN’s claims that cryptocurrencies were used “for illegal transactions such as money laundering and drug trafficking”.
CBN act in the interests of the stability of the financial sector
According to a report, Aisen, who says other central banks have taken similar measures, believes that “some caution should be exercised” when using cryptocurrencies. In an obvious justification for the directive, Aisen suggests that the CBN only wants a solution that is “in the interests of the payment system and the sustainability of the financial sector”.
During the same briefing, however, Aisen also called on the Nigerian monetary authorities to examine the “unification of exchange rates”. While the CBN keeps the exchange of the naira against the US dollar at 380: 1. The parallel market, on the other hand, offers a significantly higher rate of 475: 1.
By maintaining an overvalued exchange rate, the Nigerian government can easily meet its obligations. On the other hand, this overvalued exchange rate is partially blamed for the decreasing monthly cross-border transfers to Nigeria. Remittances, which are a major source of foreign exchange, went from $ 2.05 billion in January 2020 to just $ 54 million in September this year, according to Nairanalytics.
History of two exchange rates
In the meantime, Aiesen tries to convince the CBN to work towards a standardization of exchange rates and a transparent management of this resource. The resident representative is quoted as saying:
It would be useful to standardize rates to allow currency to fluctuate and to make foreign exchange easier for those in need.
The Nigerian government, like its counterparts on the African continent, has seen a significant drop in sales due to the effects of the Covid-19 pandemic. In addition to lower revenue, Nigeria is facing persistent currency scarcity, which in turn is increasing pressure on the local currency.
In order to alleviate some of these challenges, the IMF representative advised the Nigerian government against increasing taxes. Instead, Aisen urges Nigeria to strengthen the tax administration by expanding the tax base and blocking leaks.
What do you think of the remarks made by the IMF representative? Let us know what you think in the comments section below.
Tags in this story
Bitcoin transfers, CBN crypto ban, Central Bank of Nigeria, COVID-19, cryptocurrencies, foreign exchange, IMF, International Monetary Fund, money laundering, naira, parallel market
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