Nigeria’s Economic Turbulence: Soaring Inflation And Naira Woes

Published 1 month ago
By Forbes Africa | Oluwatomisin Amokeoja
Nigerian Economy Ahead of Rate Decision
Photographer: Damilola Onafuwa/Bloomberg via Getty Images

IMF acknowledges Nigeria’s economic challenges: 26% inflation, naira pressure. CBN lifts forex ban, but concerns persist over exchange rate unification. Analysts weigh in on potential dollar loan effects. Swift government action is urged to clear outstanding forwards amid rising demand for dollars.

Responding to recent economic challenges in Nigeria, the International Monetary Fund (IMF) has acknowledged the country’s 26% year-on-year inflation rate in August and pressure on the naira.

“As with every member country of the IMF, Nigeria can seek IMF financing if they see this as helpful to address external imbalances,” the IMF told The Punch.


The IMF also welcomed the Central Bank of Nigeria’s (CBN) recent decision to lift the ban on the 43 items previously restricted from accessing foreign exchange from the official window. “This is a positive step in the direction of a shift to a market-determined exchange rate regime.”

FORBES AFRICA’s investigation reveals the naira is trading at ₦1,186 to the dollar in the parallel market, while the official Investors and Exporters (I&E) window closed at ₦808 on Friday. Concerns arise about the effectiveness of the new free-floating system in response to President Bola Tinubu’s commitment to unify exchange rates.

Minister of Finance Wale Edun, in a conversation with Bloomberg, attributed the naira’s decline to overdue forward payments of $6.8 billion, suggesting the use of forward payments in the forex market played a role. The IMF urged Nigerian authorities to urgently tighten monetary policy, recommending measures like raising the Monetary Policy Rate and addressing excess naira liquidity. The IMF emphasized that clarity on the CBN’s dollar obligations would boost market confidence.

Despite challenges, the IMF expressed confidence in the abilities of Edun, and the new CBN governor, Olayemi Cardoso, believing they can make informed decisions to enhance the country’s economic fortunes.


Analysts speculate that a potential dollar loan could have mixed effects on the Nigerian economy. While it might offer short-term financial support, concerns about increased debt levels and the ability to meet repayment obligations linger.

Nigerian exporter Oluwaseun Obilana expresses concerns about the potential impact on the country’s business landscape.

Obilana highlights the challenges that a devalued naira could pose to businesses reliant on international trade. He states to FORBES AFRICA, “The stability of the naira is crucial for us exporters. Any depreciation adds uncertainty and affects our competitiveness in the global market.”

He acknowledges the need for solutions but emphasizes the importance of considering the implications for businesses. “While seeking a dollar loan might provide temporary relief, we must carefully weigh the long-term consequences on businesses like ours,” he remarks.


The exporter urges the government to explore comprehensive measures to stabilize the naira and boost the economy without compromising the interests of the business community. “A collaborative approach between the government and the private sector is essential to navigate these economic challenges effectively,” Obilana emphasizes.

Obilana remains cautiously optimistic, calling for transparent communication between the government and the business sector. “Clarity on economic policies and their anticipated impacts will help businesses adapt and make informed decisions,” he adds.

Also speaking with FORBES AFRICA, Nigerian economist Kelvin Emmanuel highlights that while borrowing against the special drawing rights (SDR) might appear reasonable for a low-income country like Nigeria, there are concerns about the associated conditions.

“The government is also concerned about the optics of using IMF, especially considering the conditions that will preclude such a facility,” remarks Emmanuel. He suggests an alternative approach, speculating that the Nigerian government might opt for a resource-backed loan from a global bank serving as an official external asset manager of the CBN.


Emmanuel further elaborates on the potential strategy, stating, “My best guess is that the Nigerian government will tap into this resource-backed loan and utilize the existing line of external reserves as an unsecured line of credit.” This approach, he believes, could offer a more flexible solution while avoiding some of the conditions attached to an IMF facility.

Highlighting the urgency of the situation, Emmanuel emphasizes the need for swift action by the government. He points out the necessity to clear outstanding forwards, especially with the demand for dollar expected to be at its peak in the fourth quarter.