The Managing Director of Financial Derivatives Company, Bismarck Rewane, has expressed confidence in the Central Bank of Nigeria’s foreign exchange policies, stating that they are delivering positive results and bringing the naira closer to its fair value.
Speaking on Arise TV’s Global Business Report on Monday, Rewane highlighted the impact of these policies on market stability.
Rewane stated that a Purchasing Power Parity analysis values the naira at ₦1,102.15/$, showing it is 26.35% undervalued.
He emphasized that while defending an overvalued currency distorts market forces, supporting an undervalued one helps restore balance.
The naira has been gaining strength in both the official and parallel markets in recent weeks. On Monday, it closed at ₦1,503.63/$ at the Nigerian Foreign Exchange Market Window and ₦1,500.00/$ in the parallel market.
According to Rewane, the CBN’s interventions are guiding the naira back to its appropriate value.
He said, “What is the fair value of the naira? When you do the PPP analysis of the naira, it comes out at 1,102.15/$ in other words, the naira is 26.35 per cent undervalued. 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.
“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. Why do we say that, number one, the difference between the official and parallel market had dropped to less than one per cent? It was as much as 10, 15, and 20 per cent.
“The market and price discovery is efficient, we are no longer saying Aboki FX and blaming all those shadowy (entities). Three, the balance of trade is now $18.6bn. It is the highest level in a long time.
“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 noted that the policies were working and that the market recognized the profitability of import substitution.
Last week, the Monetary Committee of the Central Bank of Nigeria retained the benchmark interest rate at 27.50 per cent
CBN Governor, Olayemi Cardoso, announced the decision during a press briefing on Thursday, stating that all parameters were unanimously held as the committee assessed the economic outlook for 2025.
“The committee was unanimous in its decision to hold all parameters and thus decided as follows: 1. Retain the MPR at 27.50 per cent. 2. Retain the asymmetric corridor around the MPR at +500/-100 basis points.
“3. Retain the Cash Reserve Ratio of Deposit Money Banks at 50.00 per cent and Merchant Banks at 16 per cent. 4. Retain the Liquidity Ratio at 30.00 per cent,” Cardoso said.
