Expert reveals why Naira should be devalued now

The Managing Director of Financial Derivatives Company Limited (FDC), Bismarck Rewane, said on Tuesday has called for the devaluation of the Investors and Exporters (I&E) foreign exchange window rate next month to help the Naira find its true value.

Rewane, who stated this in a programme on Arise TV, said the black market where Naira exchanged for N680/$ on Tuesday provided a true picture of the value of the Nigerian currency.

FSDH Research had in its macroeconomic report stressed that the Naira-dollar exchange rate at the official market did not reflect the current realities in the country.

In recent weeks, the Naira has depreciated against the dollar across the Nigerian foreign exchange market.

It fell to N431 per dollar, its lowest since the introduction of the I&E forex window. It weakened to a record low N710 per dollar at the black market last month.

Rewane said: “Most currencies are undervalued but Nigerian naira [is] overvalued by 200 percent.

“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.”

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According to him, at least 48 countries in the world, including nine in Africa, operate floating or flexible exchange rate regimes.

On Naira’s struggles, the expert insisted that demand pressure and limited foreign currency inflows triggered the depreciation of the country’s currency.

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“Forex market in Nigeria is a price discriminatory monopoly. The barriers between the markets are thin and permissible. Multiple exchange rates create room for arbitrage and encourage rent-seeking behaviour,” he added.

The FDC chief also stressed the need for the CBN to increase dollar inflows into the country to address the crisis.