Bank of America economist Tatonga Rusike says the Nigerian currency is overvalued by 20% and will likely devalue by 2030. The economist’s remarks come days after the currency’s exchange rate reportedly hit a record low of just under 750 naira to the US dollar on the parallel market.
Currency Fair Value Analysis
According to Bank of America economist Tatonga Lusike, the Nigerian currency, which has officially remained below 450:1 since May 2021, is 20% overvalued and by 2023, the same amount He expects it to be devalued. Rusikereportedly came to this conclusion in an October 18 note to clientsafter examining indicators such as the central bank’s real effective exchange rate and the widely used parallel market exchange rate.
In addition to these two exchange rates, the bank used its own currency fair value analysis to determine the extent of the naira’s overvaluation. Meanwhile, Rusike’s devaluation statement came just days after the currency’s exchange rate was reported to have hit a new low of just under 750 naira to the US dollar at the parallel market.
Prior to that, Bitcoin.com News reported on October 3 that the exchange rate of the naira to the dollar had fallen to a then low of 735 to the dollar. This led to the situation. The ongoing shortage of critical resources is also seen as a contributing factor to the naira’s plunge.
Authorities may devalue the naira in 2023
Like other Nigerian experts, Rusike asserts that the naira is likely to continue weakening against the U.S. dollar, which continues to rise against other global currencies. This economist stated that.
We see the naira weakening by the same amount over the next 6-9 months and possibly rising to 520 per US dollar.
Nigeria’s statistics chief Prince Semiu Adeyemi recently suggested that the naira’s continued plunge was part of the reason the country’s inflation rate rose slightly from 20.52% in August to 20.77% in September.
Meanwhile, the Bank of the United States warned that if the difference between the official exchange rate and the parallel market rate is not narrowed, there is a greater “possibility of an increase in excess demand for foreign currency in the parallel market.”
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