“…Providing an answer to the question of ‘whether to float or to devalue the naira’ cannot be arrived at without establishing whether and to what extent the current real exchange rate (RER) deviates from the equilibrium exchange rate of the economy, that is, the level of exchange rate misalignment, since the effectiveness of the devaluation tool depends on it. Nouira and Sekkat () opined that to assess the extent of currency misalignment it is necessary to compare the observed exchange rate, in this case the real effective exchange rate (REER), with its equilibrium value (EREER), which is the value it should have been under the hypothesis that the macroeconomic equilibrium is maintained. However, the equilibrium exchange rate is not directly observable and the literature provides three ways, namely the purchasing power parity equilibrium exchange rate approach, the fundamental equilibrium exchange rate approach and the behavioural equilibrium exchange rate approach (see Nouira and Sekkat, ).…”