Posted by The undervaluation of the Naira is a result of the recent floating of the Naira in the foreign exchange window, according to Idakolo Gbolade, CEO of SD & D Capital Management.
On Friday, Gbalode told the KURYALOADED about it in an interview.
Remember that Bank of America claimed the Naira was undervalued by 12% because of the federal government’s recent FX changes, bringing the exchange rate to N680/$1.
Gbolade responded to the news by saying that operational reforms in forex invariably result in currency undervaluation, citing the example of China a few years ago.
He explained that this is because the Central Bank of Nigeria’s June 14 forex changes have made it possible for market forces to determine the value of the currency in response to demand.
He claimed that the government of Nigeria is following China’s lead.
He predicted that President Bola Ahmed Tinubu’s administration would see progress in the near and far future as a result of its efforts.
A few years ago, China adopted a program of exchange rate liberalization, which inevitably undervalues a country’s currency. This method permits the value of the currency to be set by market forces in response to demand and encourages international investment thanks to greater trade freedom. He claimed that the Chinese model will bring immediate and long-term benefits to the Nigerian government.
Here are the top ten consequences he foresees:
Find out where our foreign reserves stand and how much debt the country actually has in foreign currency.
Find out how much money really changes hands between Nigeria and its trading partners abroad so that you may make precise budgeting judgments.
Having a flexible exchange rate is a great way to entice overseas investors.
Increase trading on the Nigerian stock exchange and implement policies that will have a favorable effect on the economy as a whole through increased trade and investment.
To quote the report, “Near or total elimination of forex arbitration by a few unscrupulous individuals; steer the country on the way to prosperity and lead to the eventual strengthening of the Naira when there are increased foreign inflows.”