The assertion on Wednesday by Yemi Cardoso, Central Bank of Nigeria, CBN Governor that the naira is undervalued is at best his opinion which may not be taken seriously by keen financial analysts who have watched the misfortune that has befallen the currency since June last year.
“We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term,” Cardoso said yesterday at the unveiling of the Nigerian Economic Summit Group, NESG, 2024 Macroeconomic Outlook Report, in Lagos.
The CBN boss spoke as the naira continues to decline in value at both the I&E and parallel windows. The currency was traded for N1, 355 to the Dollar on Wednesday at the parallel market while the official CBN rates stands at N882 to the American currency.
Analysts insist that the currency is inching towards N1,400 and N900 to the American greenback as the Dollar is popular, at the I&E and unofficial windows, respectively before the end of the month.
Instructively, the national currency has declined by at least 50 percent in the last one year.
The situation is not likely to get better says Bloomberg, a US-based media organisation, which predicted last month that naira will experience further decline this year.
The publication predicted that the currency will experience the worst devaluation since 1999, noting that naira has become the worst performing currency globally.
Bloomberg made this known in a report released on Friday, December 29, 2023.
At the time of the report naira was traded N1,043 per dollar, “and that’s in the official market. On the streets, the currency trades at 1,208 naira per dollar,” Bloomberg stated.
The publication warned that the situation could even get worse except the federal government ramp up efforts to attract foreign capital into the country, in other to shore up the foreign reserves.
Bloomberg said: “Foreign reserves in Africa’s biggest crude producer are at the lowest in six years with most of them encumbered by overdue short-term overseas obligations.
“Unless President Bola Tinubu’s government lures international investors or ramps up oil output, the naira may slip further, according to Vetiva Capital Management Ltd.”
In the non-deliverable forwards market, Bloomberg said the naira’s 12-month contract is trading near a record low of N1,294.44 to the dollar.
“It’s clear that further devaluation – alongside tighter monetary policy – is needed to reduce imbalances in the FX market,” Bloomberg quoting a senior economist at Tellimer Ltd, Patrick Curran, stated.
Meanwhile, analysts insist that the worst misfortune that has hit the naira started in June last year after the CBN announced the unification of all segments of the Nigerian forex market.
The CBN policy had collapse all windows into the Investors & Exporters, I&E, window, saying it took the decision as part of the Nigerian government’s efforts to improve liquidity and stability in the market and attract foreign investors into the nation economy.
Angela Sere-Ejembi, Director, Financial Markets while releasing a statement to that effect said “All transactions will now be done through the Investors and Exporters (I&E) window, where the exchange rate will be determined by market forces. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.”
