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Bismarck Rewane Says Nigerian Naira Overvalued by 200%

The Nigerian Naira is overvalued by 200% compared to most global currencies that are undervalued.

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Naira Notes - Investors King

Bismarck Rewane, the managing director of Financial Derivatives Company Limited (FDC), has said the Nigerian Naira is overvalued by 200% compared to most global currencies that are undervalued.

The Nigerian Naira has been on the decline against its global counterparts since last year despite global oil prices trading at above $90 a barrel for the most part of 2022.

In recent weeks, the embattled currency plunged to a record low of N750 per dollar at the parallel market popularly known as the black market and dipped to as low as N431/US$1 at the Investors and Exporters Forex Window adopted by the Central Bank of Nigeria (CBN) as the nation’s official foreign exchange rate.

Experts have said CBN’s attitude of stage managing the Nigerian currency is responsible for its uneven exchange rates and persistent crisis.

Presently, the apex bank adopted a managed pegged foreign exchange market and intervene intermittently when necessary to prop up the value of the Nigerian Naira against its global counterparts.

This, Rewane said is responsible for the currency woes.

He said “Most currencies are undervalued but Nigerian naira [is] overvalued by 200 percent,”  the economist said at a breakfast session at Lagos Business School (LBS) in Lagos.

With the local currency under pressure and the CBN struggling with dwindling foreign reserves, it is expected that the CBN at some point in the third or final quarter of 2022 will be forced to adjust the Naira exchange rate to its global counterparts to ease pressure on Nigeria’s weak foreign reserves.

If this happened, Rewane predicted that Naira could return back to N700 per U.S. Dollar on the black market and N440 at the I&E forex window.

“The naira will likely depreciate again towards the N695/$-N700/$ range at the parallel market. The CBN will allow for a partial crawling peg in the forex market, and bring the I&E rate down to N440/$ in September”, he added.

 

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Naira Appreciates to N1,666 Per Dollar at FX Market, N1,704.11 at Parallel Market

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Naira Exchange Rates - Investors King

The Naira appreciated by 0.5 percent against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday following an N8.77 rise to close at N1,666.72/$1 compared with Thursday’s closing rate of N1,675.49/$1 despite worsening supply in the market.

The daily supply of FX as measured by secondary data from FMDQ Securities Exchange Limited indicated that turnover fell by $72.41 million or 43.5 per cent to $94.20 million from $166.61 million.

However, the local currency slid on the Pound Sterling and the Euro in the final session. For the British currency, the local currency depreciated by N10.10 and closed at N2,157.25/£1 from N2,147.15/£1 while it closed at the rate of N1,814.79/€1, a slump of N23.43 against N1,791.36/€1 against the Euro.

Meanwhile, the Naira rose further by N7.66 against the American in the parallel market segment to close at N1,704.11 to the US Dollar compared to N1,711.77/$1 it closed on Thursday.

Also, the domestic currency extended its gain against the British currency during the final session as the Naira made a further appreciation of N16 to trade at N2,207.76/£1 from N2,223.76/£1 that it sold at the previous session and against the Euro, it appreciated N14.82 to close at N1,852.25/€1 versus the previous day’s rate of N1,867.07/€1.

The local currency gained a marginal N1.62 to close at N1,233.99 per Canadian Dollar, compared to Thursday’s N1,235.61 per CAD.

The Central Bank of Nigeria (CBN) at the recently concluded World Bank/IMF meetings held in Washington, DC last week said the foreign exchange market will not depend on the apex bank’s intervention for supply and stability.

This is evidenced by the stop of sales of Dollars to the market as it plans to improve supply organically without its intervention from time to time while maintaining balance in the market.

“While you might see us intervene from time to time, we are trying to ensure the market is not dependent on the intervention of the central bank.

“I think that we are looking at conditions that market return as much as possible to improve supply organically without the Central Bank having to put in money all the time,” the CBN deputy governor on economic policy, Mr Mohammed Abdullahi, disclosed.

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Naira

Naira Loses 2.7% on Dollar at NAFEX, Gains N6 to N1,711/$1 at Parallel Market

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The Naira fell by 2.7 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEX) to exchange at N1,675.49/$1 on Thursday, October 311 as the local currency depreciated despite a slight increase in supply.

In the official market, the domestic currency lost N44.32 on the American currency in the official market versus N1,631.17/$1, which it closed in the previous session on Wednesday.

In a turn of fortune, the Naira rose N6.66 against the greenback in the parallel market segment to close at N1,711.77 to the US Dollar compared to N1,718.43/$1 it closed on Wednesday.

Data showed a rise in supply as the turnover published on the FMDQ Group website stood at $166.61 million indicating that the session’s turnover jumped by 29.2 per cent, indicating a rise of $37.63 million compared to $128.98 million that was published in the last trading session.

Equally, the Naira weakened its value against the Pound Sterling in the official market by N3.75 to sell at N2,147.15/£1 compared with the preceding session’s N2,143.40/£1.

It followed the same path against the Euro, depreciating N9.29 to quote at N1,791.36/€1 versus midweek’s closing rate of N1,782.07/€1.

In a different outcome in the black market, the domestic currency headed up against the British currency during the Thursday session as the Naira made an appreciation of N10.86 to wrap the session at N2,223.76/£1 from N2,234.62/£1 that it sold at the previous session.

However, the Naira followed a different pattern against the Euro as it depreciated N12.51 to close at N1,867.07/€1 versus the previous day’s rate of N1,854.56/€1.

The local currency gained a marginal 9 Kobo to close at N1,235.61 per Canadian Dollar, compared to Wednesday’s N1,235.70 per CAD.

Investors King reports that the Nigerian macro environment is placing pressure on the FX market with latest data showing that there is a high money supply in the system complemented by a wider government budget deficit.

The Central Bank of Nigeria (CBN) revealed that Nigeria’s money supply often known as M3 grew 62.8 percent in the last one year to N109 trillion from N66.9 trillion in September 2023.

 

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Naira

Naira Declines Amid Dwindling FX Supply as Official Rate Nears N1,631 per Dollar

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Naira Exchange Rates - Investors King

The Naira depreciated against the US Dollar at both the official and parallel foreign exchange market segments on Wednesday, October 30.

The Naira dropped 0.04 per cent in the Nigerian Autonomous Foreign Exchange Market (NAFEX) The local currency lost 72 Kobo to close at N1,631.17/$1 at the official window.

According to data obtained from FMDQ Securities Exchange compared to N1,630.45/$1 published in the preceding session on Tuesday.

This happened as supply decreased at the FX market as secondary data showed that $128.98 million worth of turnover was recorded compared to the preceding session which $242.59 million was settled. This indicated a $113.61 million or 46.9 per cent slump.

In the black market, the Naira lost N4.08 against the greenback to close at N1,718.43 to the US Dollar compared to N1,714.35/$1 it closed on Thursday.

Meanwhile, the local currency appreciated against the Pound Sterling and the Euro in the midweek session for the week. For the British currency, the local currency appreciated by N18.57 and closed at N2,143.40/£1 from N2,161.97/£1 while it closed at the rate of N1,782.07/€1, a jump of N18.90 against N1,800.97/€1 against the Euro.

In a different outcome in the black market, the domestic currency headed south against the British currency during the midweek session as the Naira made a depreciation of N9.38 to wrap the session at N2,234.62/£1 from N2,225.24/£1 that it sold at the previous session

However, the Naira followed a different pattern against the Euro as it appreciated N15.38 to quote at N1,854.56/€1 versus the previous day’s rate of N1,856.79/€1.

The local currency dropped N2.31 to close at N1,235.70 per Canadian Dollar, compared to Tuesday’s N1,233.56 per CAD.

The supply challenge in the FX market comes as the Central Bank of Nigeria (CBN) continues to filter sales into the market alongside recommendations from the World Bank.

The US-headquartered bank in its latest report noted that permitting market participants to trade FX with more flexibility across time would also contribute to deepening the FX market, adding that the CBN should continue efforts towards deepening the official FX market.

This includes facilitating formal remittance inflows, allowing international oil companies to fully concentrate their FX sales in the official market, restoring intermediated market access to bureaux de change, and refraining from ad-hoc FX auctions.

“Allowing market participants to trade FX with more flexibility across time would also contribute to deepening the FX market,” the October report said.

 

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