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.
