Ex-CBN Deputy Governor has bad news for those who want naira to be 400/$

A former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has described as a dream the expectations of some citizens that the naira should appreciate to ₦400 against the United States dollar.

Last week, the naira experienced a massive turnaround in fortune, going on a stellar run to gain over ₦500 on the dollar.

The resurgence comes on the back of a series of reforms of the foreign exchange policies introduced by the CBN to help the currency maintain some stability.

A few weeks ago, the naira had plummeted to its all-time low, exchanging for around ₦2,000 against the dollar. The free fall was triggered by the government's decision to float the currency, coupled with the activities of speculators.

Elated by the naira's recent positive run, some Nigerians have expressed optimism that the nation's currency would continue to strengthen against the dollar.

However, Moghalu has thrown a dampener into the mix, insisting that such expectations are overly ambitious and only exist in the dreamland for now.

In a post on his Twitter, now X, account on Sunday, March 24, 2024, the former CBN deputy governor highlighted the factors that continue to impede the growth of the naira as expected.

"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.

"That artificiality created room for massive arbitrage by speculators which bled the economy. Nigeria does not (yet) have a productive export economy. That’s the heart of the matter," his post partly read.

Moghalu further stated that the foreign reserve is insufficient to support sustained currency growth, adding that it would take some time to regain the full confidence of investors to return the naira to its glory days.

"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? It will also take time to regain or achieve full investor confidence such as we had when we were there (and the rate was N150-165 to the $ )," he said.

The former CBN official proposed that the best way to wriggle out of the economic doldrums is to create manufacturing exports, which will help the nation earn forex beyond oil.

"The sooner we focus on a painstaking creation of value-added manufacturing export economy that earns forex beyond oil in real and significant terms, the better. 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," Moghalu concluded.