Thursday, July 29, 2021

    Gap between Nigeria’s numerous exchange rates frustrating investors

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    Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

    ABUJA, June 29 – Nigeria’s spot naira rate is overvalued by up to 10%, Central Bank Governor Godwin Emefiele told investors last week, two sources familiar with the briefing said.

    Emefiele told an investor call last week arranged by Standard Bank that the spot naira rate of 410-412 per dollar would eventually weaken by 5% to 10%, according to one person on the call and another who was briefed on it afterward. He based his comments on the central bank’s real effective exchange rate (REER) model.

    The central bank did not respond to calls and messages seeking comment.

    The gap between Nigeria’s numerous exchange rates has frustrated investors. The World Bank has demanded closer parity before the release of a much-needed $1.5 billion budget support loan. Importers have also struggled to access the foreign currency they need to buy goods.

    Since March last year, the bank has devalued the naira three times. The devaluation in May, which was an attempt to unify the rates, effectively weakened the currency by 7.7%.

    But the currency recently slid to a more than three-year low of 500 naira on the black market as dollar liquidity dropped.

    The source on the call said that Emefiele said the currency market would continue operating as it is and “eventually converge towards the fair value”.

    Emefiele also estimated that there was a backlog of less than $1 billion in dollar demand that the central bank had a framework to meet, and said that investors would be able to get their money out of Nigeria in an orderly manner, the sources said.

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