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HomeTop NewsTinubu's ministerial nominee, Edun projects N700/$1 exchange rate as liquidity flows in

Tinubu’s ministerial nominee, Edun projects N700/$1 exchange rate as liquidity flows in

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Presidential adviser on monetary policy and a ministerial nominee, Wale Edun has suggested that the country’s exchange rate should stabilize at N700/$1 as liquidity flows in.

Edun made this statement during his screening by senators at the National Assembly on Tuesday.

Addressing the concerns regarding foreign exchange, Edun emphasized the importance of maintaining a stable exchange rate, given that Nigeria’s revenue relies heavily on oil revenues, remittances, non-oil exports, and annual financing of over $100 billion.

He expressed his belief that the current exchange rate of N860 to the dollar is not supported by the fundamentals of the Nigerian economy.

Edun attributed the existing challenges in managing the exchange rate to speculation, inefficiencies, and corruption from past foreign exchange practices, resulting in an overhang of unpaid dollar bills that put pressure on the exchange rate.

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He asserted that the monetary authorities, alongside the team of President Bola Tinubu, are actively working to resolve these issues by raising revenue, attracting investment funds, and addressing the reliance on debt in favor of equity investment.

However, Edun warned speculators against taking undue advantage of the situation, as various models indicate that the fundamental value of the naira should be around 700. He cautioned that with increased liquidity flows and a potential rapid decrease in the exchange rate, speculators may risk losing their shares.

“But I would just like to warn that all the models are showing that the fundamental value of the naira should be somewhere around N700. 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,” Edun said.

The Nigerian government recently unified the exchange rate windows, but the naira has continued to experience fluctuations at the official window. At the investors and exporters (I&E) forex window, the local currency depreciated on Tuesday on the I&E forex window as the dollar was quoted at N789.08 as against the previous close of N756.94.

Meanwhile, in the parallel market, the naira weakened further, trading at N872 per US dollar, compared to N870 it was exchanged on Monday.

In light of these developments, the Economist Intelligence Unit (EIU), an arm of The Economist in London, predicted that the Nigerian government might revert to a system with more control over the exchange rate. The move is anticipated to address the increasing inflation and prevent further devaluation of the naira.

EIU noted that the Central Bank of Nigeria’s (CBN) lack of experience in conducting monetary policy under a float makes the need for effective measures to control inflation even more pressing over time.

(Edited by Oludare Mayowa; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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