IMF Endorses CBN’s Policy on Cryptocurrency, Seeks FX Rates Unification

Ndubuisi Francis in Abuja

The International Monetary Fund (IMF) has expressed its support for the recent directive of the Central Bank of Nigeria (CBN) to financial institutions to ban transactions with cryptocurrency.

The IMF also commented on Nigeria’s burgeoning public debt, noting that the debt-to-gross domestic product (GDP) ratio is yet to reach a level of concern, but however advised that efforts should be made to ensure it does not not snowball to a level that would make it unsustainable.

The IMF Resident Representative for Nigeria, Mr. Ari Aisen, who spoke during a special virtual press briefing on the recently published 2020 Article IV IMF Staff Report for Nigeria, said that the use of cryptocurrencies for illegal transactions such as money laundering and drugs was a global concern.

He noted that many central banks in the world, had taken similar policy decisions similar to that by the CBN.
Arisen said: “The issue with some of the crypto currencies is that perhaps some care should be taken about their activities. The use of crypto currencies is a concern.

“That is why some central banks, not only in Nigeria have these concerns about what kind of the activities these crypto currencies are put and how best to monitor those activities.

“Some of them may be illegal activities and may be related to money laundering, even drugs or other illegal things.”
According to him, it is natural that the monetary authorities will be concerned about how best to supervise and increase their oversight regarding the use of cryptocurrencies.

He added that the CBN was thinking closely about its trade-offs and is trying to design the best policy in the interest of the payment system and the sustainability of the financial sector.

The IMF official called for the “unification of foreign exchange rates,” to make the management of foreign exchange (forex) more transparent.

On forex scarcity, Aisen stated that there had been some level of scarcity of foreign exchange, saying it would be useful to unify rates to allow the currency fluctuate as well as to make forex more accessible to those who needed them.

He lamented that the nation’s revenue profile was very low and therefore not enough to meet budgetary expenditure provisions.

Aisen stated that if there was one policy that has to be a top policy priority, it is how to raise revenue”.
Nigeria’s debt/GDP ratio, he observed, has not reached a level of overt concern, adding that it was imperative to ensure that it does not get to a level that it becomes unsustainable.

He said: “What is most important to be monitored is the ratio of debt service to revenue, noting that the nation’s revenue profile was very low and therefore not enough to meet budgetary expenditure provisions.

On borrowed funds, the IMF said it was important to manage such funds properly for the economic benefits of the nation.

He also advised that “this is not the right time to raise tax rate,” noting that the government should rather strengthen its tax administration by expanding the tax base and block leakages.