CBN’s Forex Policies Driving Naira Towards Fair Value, Says Rewane
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Bismarck Rewane, Managing Director of Financial Derivatives Company, has praised the Central Bank of Nigeria’s (CBN) foreign exchange policies, asserting that they are effectively aligning the naira closer to its fair value.
Speaking on Arise TV’s Global Business Report on Monday, Rewane highlighted the recent strengthening of the naira across both official and parallel markets. At the close of trading on Monday, the naira stood at ₦1,503.63/$ at the Nigerian Foreign Exchange Market Window and ₦1,500.00/$ on the parallel market.
‘Naira Undervalued by 26.35%’
Rewane cited a Purchasing Power Parity (PPP) analysis that placed the fair value of the naira at ₦1,102.15/$, indicating that the currency is currently undervalued by 26.35%. He argued that the CBN’s interventions are helping to correct this misalignment, rather than distorting market forces.
“If you intervene to protect an overvalued currency, that is bad, but if you intervene to support an undervalued currency, you’re actually bringing the currency back from its misalignment to its alignment. So that is what the Central Bank of Nigeria is doing and we applaud them,” he said.
Rewane noted that the gap between the official and parallel market rates has now narrowed to less than one per cent, a significant drop from the 10 to 20 per cent disparity seen in the past.
Market Stability and Trade Gains
According to Rewane, the improved exchange rate dynamics are contributing to more efficient market pricing and boosting Nigeria’s balance of trade, which now stands at $18.6 billion—its highest level in years.
“The balance of trade is the difference between your exports and your imports. In other words, Nigerians are importing less and exporting more. Why? Because the exchange rate has moved against them, also there are policies to discourage import and encourage exports,” he explained.
Rewane also noted that market confidence is growing as import substitution becomes more profitable under the current policies.
Policy Endorsement Amid Economic Challenges
Rewane’s endorsement comes at a critical time for Nigeria’s economy, which continues to face inflationary pressures and foreign exchange challenges. His support for the CBN’s approach suggests that the policies could help stabilise the naira while fostering export growth and reducing import dependence.
“The big picture is, are these policies working and are they for the good of the country? In our humble opinion, the policies are working,” he concluded.
With Nigeria’s forex market showing signs of stabilisation, all eyes will be on the CBN’s next moves as it navigates the complex dynamics of currency valuation and economic growth.
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