Nigerian Currency Overvalued 10%, Central Bank Governor Says – Economics Bitcoin News

Central Bank of Nigeria (CBN) governor Godwin Emefiele has reportedly told investors that the country’s currency is overvalued by 10%. The governor’s remarks, confirmed by two unnamed sources, suggest that the central bank plans to devalue the naira again.

Another devaluation of naira is charged

As reported by Bitcoin.com News, in May 2021, the authorities in Nigeria allowed the exchange rate of the naira to be reduced to the US dollar from a fixed rate of 381 per dollar to the current official rate of 410. This devaluation was the third one in less than 18 months and briefly narrowed the gap between the official and the parallel market rate. However, at the time of writing, that gap had widened again.

Nevertheless, as a Reuters report explains, the CBN boss now expects this gap to be narrowed. According to the report, the governor said, “The spot naira of 410-412 per dollar would eventually weaken 5 to 10%.” A 5 to 10% weakening of the naira means that the CBN expects the spot rate the naira fluctuates between 430 and 450. Still, this new CBN target remains below the current parallel market exchange rate of 500 for every dollar.

World Bank calls for standardization of the exchange rate

The report also explores why Emefiele, who previously defended the overvalued exchange rate of the naira, is now warming to the idea of ​​devaluing the national currency. According to the report, a further devaluation of the naira could be related to the World Bank’s call for a standardization of Nigeria’s various exchange rates. The global credit institution reportedly wants “tighter parity before releasing a much-needed $ 1.5 billion budget support loan.”

In addition to the demands of the World Bank, the CBN is facing increasing pressure to devalue the naira from companies that do not have access to the resources through official channels. This in turn leaves the parallel market as the only source of foreign exchange.

What do you think of Emefiele’s comments on the overvaluation of the naira? You can let us know what you think in the comments section below.

Photo credits: Shutterstock, Pixabay, Wiki Commons

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