N900-N1200/$ exchange rate would be fair value – Moghalu

Professor of Economics and Former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has said it is wishful thinking for those expecting the exchange rate to return to N400 to the dollar.

Moghalu in his “X” page, formerly Twitter said: “Those who want the Naira to be N400 to the $ are living in a dream world.

“Even discounting for the negative impact of speculative attacks on the value of the naira, the exchange rate will (and should) reflect its market value in reality, not the artificiality that the Emefiele era central bank sought to maintain to please economic illiterates in political power at the time.”

He argued that that artificiality created room for massive arbitrage by speculators which bled the economy.

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He said: “Nigeria does not (yet) have a productive export economy. That’s the heart of the matter and we do not have $100 billion in foreign reserves. So, on what basis would the naira forex rate return to some fantasy land soon?”

He also said, it will also take time to regain or achieve full investor confidence such as when he was deputy governor (and the rate was N150-N165 to the $).

Moghalu noted that the sooner the government focuses on a painstaking creation of a value-added manufacturing export economy that earns forex beyond oil in real and significant terms, the better.

He said: ‘Key to this is the electricity conundrum in which we are at less than 4,000 megawatts of generation for a population of 200 million for decades now.

“Take power to even 20K megawatts (let’s not talk of 50K for South Africa’s 60 million population or Brazil’s 181K megawatts for a population only slightly larger than Nigeria) and you will see what the Nigerian entrepreneurial spirit is capable of.”

He said the naira is undervalued currently, “but our goal should not be for it to be artificially overvalued. If we can get to the N900-N1200 to a $ range that would be fair value. I hope CBN‘s efforts continue to bear fruit and gains become sustainable. Stability of the rate is key.”