On Monday, prominent economist Bismarck Rewane said that the nation’s official currency is going through a change rather than being cursed as some have assumed.
This was said by Rewane, the Managing Director of Financial Derivatives Company Limited, during an appearance as a guest on Politics Today, a late-night show on Channels Television.
The move follows the Central Bank of Nigeria’s denial that it intended to convert $30 billion in deposits held in domiciliary accounts into naira.
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Rewane acknowledged that difficult times are coming for Nigerians but insisted that there is a single solution to the naira’s decline.
No, I don’t believe the naira is jinxed, he remarked. It is merely money.
It is merely a transitional currency. As you can see, the value of a dollar was N499 in 2016. It was N1,468 as of this afternoon (Monday). It began to rise again sometime last week after falling to N1,531 per dollar.
So, these will be difficult days. However, the important thing to remember is that determining its fair value requires taking into account the currency in transition.
There are both transit-related and structural issues. Therefore, we must interpret it within that framework. However, as you are aware, the underlying issue with the naira is that a nation experiencing severe inflation and a crisis related to the cost of living will invariably have a weak currency.
“You need to take a broad view in order to solve that. There isn’t a single panacea that can address every issue.
For example, in 2004 you could get one pound for $1.70, Rewane continued. It costs roughly $1.27 to get one pound these days. Three categories of systems exist.
We have three types of exchange rates: fixed, floating, and managed. Three-quarters of the world’s currencies have what are known as flexible exchange rates. You refer to this additional 35% as the variable rate.