CBN Gov Godiwn Emefiele
CBN Governor, Godwin Emefiele

That Nigeria has one of the most complex currency systems in the world is an open secret to professionals. However, up until now, analysts have been able to agree on a tight range of figures as the appropriate value of the Naira. However, this is no more the case as it seems the Naira has decided to play the famous hide and seek game with currency analysts as to its true value. If recent reports are anything to go by, the Naira is quite good at the game.

Since the country tightened currency controls as an aftermath of the crash of crude oil prices in 2014, economic crisis leading to an economic recession, the first of its kind in a quarter of a century plagued the country. In addition, importers and investors who transact in foreign exchange were squeezed out and chased away respectively as the country became a no-go area for investors. At that time, the consensus was still clear. The Naira was over-valued. Everybody, from the International Monetary Fund (IMF) to the World Bank and all other currency analysts agreed that the Naira’s true value was far less than was being touted by the Central Bank of Nigeria (CBN).

However, even back then, the Naira had started toying with the experts, albeit more subtly, as there was no consensus of what the true value of the Naira should have been. Instead of coming out boldly with exact figures, what we were hearing were ‘between 10% and 20% overvalued’. It seemed that these experts were getting scared to cite exact figures of what the fair value of the Naira should be. The Naira sensed this and, aided by Emefiele’s decision to rejig the forex policy, it intensified its hide and seek game.

Now, with every certainty, we can say that experts are as confused as the ordinary man on the street as to what the true value of the Naira is. Doubt this? Well, Bank of America Corporation said in August, or a few weeks ago, that the naira needs to weaken 20 percent to about 450, from its current exchange rate of 360, before it reaches fair value. Compare that to the forecast of Goldman Sachs Group, and Citi Group, who say the N400/$1 rate is what will represent fair value. You might say the N50 disparity is not high but hardly have these institutions differed so greatly as to what the fair value of a currency should be.

As if that was not enough, just last week, Renaissance Capital adjusted its year-end forecast for the Naira to 332 per dollar, from N447, still opining that the fair value is still stronger, at about N310. In effect, the Russian bank is stating the exact opposite of what other analysts are saying. An amalgamation of these forecasts give a somber picture for anyone trying to understand what the true value of the Naira is. Is it over valued or under-valued? As confusing as the answer to this question is, the next question is even more perplexing- ‘By how much is it either over-valued or under-valued?’ As it is, no one knows. Not even the gurus with their decades of experience and world class software. As such, we beg the Naira, please stop your hide and seek game and show us what your fair value is.

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