Bismarck Rewane Declares Naira Undervalued by 11%, Predicts Fair Exchange Rate
Renowned Nigerian economist Bismarck Rewane has asserted that the naira is currently undervalued by approximately 11% based on purchasing power parity (PPP) estimates. Speaking at the 2026 Economic Outlook event organized by the Association of Corporate Treasurers of Nigeria (ACTN) over the weekend, Rewane, who serves as the managing director of Financial Derivatives Company, provided a detailed analysis indicating that the fair value of the naira should be around N1,256.79 per US dollar. He emphasized that currencies typically adjust toward their PPP-implied values over a five-year horizon, suggesting a potential strengthening of the naira if economic conditions align favorably.
Factors Influencing the Naira's Valuation
During his presentation, Rewane delved into the structural and cyclical factors that impact exchange-rate movements in Nigeria. He highlighted key elements such as inflation dynamics, capital flows, productivity trends, and external balances. According to reports from BusinessDay, his analysis underscored the complex interplay of these economic variables in determining the naira's true value. Rewane expressed optimism about the future, noting that if all goes well, the naira could move closer to its fair valuation, potentially brightening Nigeria's economic outlook.
Insights from Corporate Treasury Experts
The event also featured a panel discussion with notable figures in corporate treasury management. Adeyinka Ogunnubi, group treasurer of CFAO Nigeria and national president of ACTN, emphasized that treasury management revolves around maximizing every unit of cash at the lowest possible cost and risk. He pointed out that working capital should always be the top priority, as companies often transition from net negative to net positive cash positions, necessitating strategic allocation decisions. Ogunnubi advised treasurers to consider options like paying suppliers early or identifying the most efficient uses of cash at any given moment.
Titilola Osinowo, group head of treasury and investments at Ardova Plc, shared practical measures for enhancing liquidity management. She recommended that treasurers increasingly explore instruments such as FX swaps and FX options to mitigate foreign exchange risks. Osinowo stressed the importance of structured hedging and aligning cash flows, advocating for natural hedging strategies. For instance, she suggested matching dollar receivables with dollar expenses to reduce exposure to currency fluctuations, thereby optimizing a company's liquid resources with cautious optimism.
Current Naira Performance and Economic Indicators
In related developments, the Nigerian Foreign Exchange Market (NFEM) reported a slight weakening of the naira on Thursday, with the rate slipping by N1.38 to N1,422.07 per dollar from N1,420.69 on Wednesday. Conversely, in the parallel market, the currency strengthened marginally to N1,487 per dollar, up from N1,490 where it had remained stable for about two weeks. Additionally, Nigeria's external reserves continued to show positive growth, reaching $45.98 billion as of January 21, 2026. These indicators reflect the ongoing volatility and challenges in the foreign exchange landscape, underscoring the relevance of Rewane's analysis and the need for effective treasury management strategies.
Rewane's insights come at a critical time for Nigeria's economy, as stakeholders seek clarity on currency valuation and economic stability. His call for a fair exchange rate based on PPP principles highlights the potential for the naira to appreciate if underlying economic factors improve. As the nation navigates these complexities, the role of corporate treasurers in managing risks and optimizing resources remains paramount, with experts like Ogunnubi and Osinowo offering valuable guidance for businesses operating in a dynamic financial environment.
