What's the true value of the naira?

The Governor of the Central Bank of Nigeria, Godwin Emefiele, recently expressed concerns over the use of parallel market rates to argue for the devaluation of the Naira. Emefiele emphasized the stability of the Naira at the official window, highlighting that the currency had already been devalued by approximately 28% this year. The gap between the official Naira exchange rate and that of the parallel market has raised alarms among analysts, leading to discussions on the true value of the Naira. Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria, shared his insights on the issue, along with Dipo Ajayi, Head of Fixed Income and Forex at Chapel Hill Denham. Gwadabe emphasized that the parallel market rate is not a transaction rate and should not dictate the country's currency value. He highlighted that structural imbalances and speculation contribute to the discrepancy between official and parallel market rates. Gwadabe urged for regulatory intervention to curb speculation and stabilize the Naira. Ajayi raised concerns about foreign portfolio investors and importers driving demand to the parallel market due to perceived limitations in accessing official rates. He suggested that the Central Bank of Nigeria's efforts to close the gap between multiple exchange rates have been thwarted by external influences. Ajayi underscored the importance of addressing these challenges to prevent abrupt devaluation and maintain currency stability. As debates continue regarding the true value of the Naira, regulatory measures and market interventions will play a crucial role in shaping the currency's future trajectory.