Is leaving the naira to 'float' on the premise that a 'free market' will eventually help it to attain fair value the best approach?
If this policy has moved us from the point of disparity to parity, which has been in the direction of depreciation, does that then suggest this convergence point as fair value for the naira? What, in fact, is the fair value for the naira? Can we possibly get to a point of attainment of fair value? What, indeed, is the best approach at finding a fair value for the naira?
What do we make of this development? While the move has been generously welcomed by local players across different sectors, foreign investors, speculators and analysts, for some of us, it has been one of cautious optimism, conscious of the fact that what we are looking at is not necessarily what those behind the Hallelujah chorus are looking at, and mindful, in particular, of the possible wild side of a supposed ‘floating’ regime.
If this policy has moved us from the point of disparity to parity, which has been in the direction of depreciation, does that then suggest this convergence point as fair value for the naira? What, in fact, is the fair value for the naira? Can we possibly get to a point of attainment of fair value? What, indeed, is the best approach at finding a fair value for the naira?
But given the structural deficiencies in the economy, along with a heavy dependence on the importation of essential products, the idea of leaving the exchange rate to the market to wholly dictate, made sense to only ‘devout’ liberal economists., whose strategies are: “restricted growth rate of money supply, floating exchange and interest rates, reduction in budget deficits, elimination of government subsidies, privatisation or commercialisation of public enterprises, etc.
But a pricing model prepared by Coronation Research, working with a rate of N720.36/$1, projects an expected retail price band of N488-492.34 per litre. NNPCL has not made its pricing template public, so it is difficult to confirm what rate is used in its computation. But if its argument is that it used the old exchange rate, it means that there would be another rise in the prices of refined products soon.
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