The International Monetary Fund last week said that the naira is currently over valued. Immediately, the CBN Governor, Sanusi Lamido Sanusi reacted and criticised calls from the IMF for greater exchange rate flexibility, saying he did not believe the naira exchange rate to dollar was overvalued and that the advice was based on flawed logic. After ending consultations with Nigeria, the International Monetary Fund had noted in a statement that forex reserves had been falling and said speculation against the naira could become “intense”. The Fund said its staff believed the naira, which has traded around N150 to the U.S. dollar for more than a year, was overvalued and that greater flexibility would cushion external shocks to Nigerian economy.

This has sparked off debates and controversy as to the true value of the naira exchange rate. Many may wonder the fuss about what the naira is exchanging for. In a highly productive economy with high export base, depreciation of the currency is encouraged to make export cheaper. But in a mono product economy like Nigeria, concerns are raised whenever devaluation is contemplated. In the first instance, Nigeria as OPEC member does not determine the volume of crude it exports but fixed by OPEC quota. The price of the commodity is also outside its power to determine. So devaluation does not pay such an economy in real terms.

The IMF has projected what it thinks the naira exchange rate should be, giving a programme of depreciation of the naira in the coming years and believed it will exchange for N202.7 to a dollar by 2015. Projection by the multilateral institution said that in 2009, the naira will exchange on the average for N148.7 to the dollar and it actually exchanged for N149.69 by December of that year. In 2010, while the IMF said it will go for N149.9 to the dollar, the naira as at end of December exchanged for N150.48. In 2011, the naira is projected to exchange for N155.1 to the dollar and in the first two months of the year, the naira exchange rate is N151.2 on the average. In 2012, the IMF has projected it will exchange at N166.1 to the dollar.

IMF data projection on the exchange rate of the naira further indicates that in 2013, the exchange rate of the naira will depreciate further to exchange for N177.7 to the dollar and that in 2014, it will exchange for N189.9 to the dollar and in 2015, N202.7 will exchange for one dollar. As at today, the naira is already exchanging officially at N151.1 to the dollar at the official market. At the parallel market, it goes for as low as N155 to the dollar. Between the CBN and IMF, who is right? Has the CBN any future trend data on the naira? No.

This trend in the loss of value in the nation’s currency is expected to continue and would by IMF projection, exchange for N202.7 to the dollar in the next four years.Sanusi while reacting to the IMF report said: “We do not believe that the naira is overvalued. We do not believe that at a time when the oil price is going up and output is going up, we should be losing the value of our currency.”

If the CBN Governor admits that “substantial foreign exchange is expended annually on importation of petroleum products, in addition to the huge amounts spent on import of food items such as rice whereas what is needed is the implementation of policies that will lead to food security and total self-sufficiency,” then the demand for foreign exchange in Nigeria outstrips supply, and the price will be higher. What the CBN Governor should tell the nation is that Nigeria cannot continue down this line of importation of just anything. Nigeria has no business importing petroleum products, toothpick, 15-year-old junk vehicles, table water etc. If the price for this import recklessness is devaluation of the currency, let the monetary authorities muster the courage to admit the obvious, let the foreign exchange market be thrown open for every operator to earn and spend what it can generate or purchase from the open market.


full report on http://www.vanguardngr.com/2011/02/between-sanusi-and-imf-who-is-right-about-the-true-value-of-the-naira/

Vanguard shd pls ask soludo for his opinion forget this mallam.

IMF is right not Sanusi

^^^^
and you say this because?

The price of Oil & Commodities is climbing on the International Market

Barrel of Oil - $111.68

SANUSI IS RIGHT,

IMF DOES NOT WANT US TO ENJOY ANY WINDFALL!!!

Nigeria Revenue just went up,

Nigeria's revenue jumps as oil hits $119.79 per barrel

http://odili.net/news/source/2011/feb/25/823.html