Wale Edun, one of the ministerial nominees of President Bola Tinubu, says the exchange rate should be at N700/$1 as liquidity flows in.
Speaking while he was being screened by senators on Tuesday at the national assembly, Edun said speculators may lose their shares if liquidity inflows increase and the exchange rate rapidly comes down.
“The issue of foreign exchange is clearly uppermost in the minds of the monetary authorities. What I can say is this. For a country that revenue flows from oil revenues, from remittances, from other non-oil exports, and from financing of over $100 billion a year, there is no reason that there should not be a stable exchange rate,” he said.
“All other things being equal and provided inflation is kept under control, the N860/$ that we are seeing is not backed up by the fundamentals of the Nigerian economy.
“The rate, when you move aside speculation and the fact that there is as a result of foreign exchange managing practice of the past, the inefficiencies and the corruption involved has meant that there is an overhang of unpaid dollar bills and that is what is putting pressure on the exchange rate and that is what night and day the monetary authorities and the monetary team of Mr. president is looking to resolve by raising revenue, by looking at other sources of investment funding, by attracting investment funds, equity funds not debt, from around the world interested in investing in the Nigerian economy.
“But I would just like to warn that all the models are showing that the fundamental value of the naira should be somewhere around 700. So, a note of caution to the speculators, as liquidity flows in and the rate comes rapidly down, there is a chance that they could lose their shares, it is just a warning.”
Since the government unified the exchange rate windows, the naira has consistently experienced fluctuations at the official window.
At the investors and exporters (I&E) forex window, the local currency appreciated by 2.43 percent to close at N756.94/$ on Monday, after trading at over N800.
The naira weakened to N871 per US dollar at the parallel section of the foreign exchange (FX) market, as demand for the greenback continues to increase in the street market.
The figure represented a depreciation of N6 or 0.7 percent compared to the N865 it traded last week.
Recently, the Economist Intelligence Unit (EIU), an arm of The Economist of London, predicted that the Nigerian government would go back to a system where they have more control over the exchange rate.
The UK-based platform said the move would be taken to try and stop the naira from losing its value much further.
“The CBN lacks experience in conducting monetary policy under a float, and the need to control rapidly increasing inflation will become more acute over time,” EIU said.
Source: Top Stories