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HomeTop NewsNigeria's central bank admits naira overvalued by 10%

Nigeria’s central bank admits naira overvalued by 10%

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The Central bank of Nigeria (CBN) Governor, Godwin Emefiele told investors on a call last week that the country’s spot naira rate is overvalued by up to 10 percent,  two sources familiar with the briefing said.

Emefiele told an investor call last week arranged by Standard Bank that the spot naira rate of N410-412 per dollar would eventually weaken by 5 percent to 10 percent, 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, Reuters reports on Tuesday.

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

The gap between Nigeria’s numerous exchange rates has frustrated investors.

Nigeria had approached Standard Bank to help raise funding for its next set of rail line constructions and the investor’s call might be part of the campaign for the debt issuance by Africa’s biggest economy.

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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 percent.

But the currency recently slid to a more than three-year low of N500 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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