Although there are many factors that has lead to the continous fall in the value of the Naira, I am going to concentrate on just one in this piece.

I remember going to the bank sometime in 2013. I had some Western Union transaction to carry out. After filling the necessary forms and presenting the proper documentation, I was shocked when my currency (Dollar) was forcefully changed to Naira against my wish. The bank personnel who attended to me said it was the new CBN policy to always convert foreign currency to local currency before paying out to customers.

I told her that this singular act will cause the Naira to depreciate further before the year ends and will cause the value of the Naira to continously spiral downwards if the policy is not reversed. She laughed it off, saying it won't. But my prediction came to pass and it is still holding true till today.

Ceteris paribus, the price of a commodity will rise if the commodity becomes scare. By that singular policy, CBN has made Dollar very scarce in the market and has thus caused the price or value of the Dollar to rise against the Naira. BDC operators are willing to pay a higher price for $1 since it is scare. This pressure from the parallel market is also carried into the official market as banks (who know they now have the larger share of the available foreign currency) also hoard it, in the hope of profiting from its appreciation against the Naira. Simply put, CBN has indirectly created artificial scarcity of the Naira in the parallel market and the resulting pressure from that market is what is pushing the value of the Naira down against other foreign currencies.

I believe that if CBN reverses this policy, the pressure on the Naira won't be too much and we can expect the Naira to start holding its own ground against other currencies. Otherwise, expect the Naira to fall further.

Constructive and meaningful contributions are welcome.

Source: Martins301

Cc: seun lalasticlala obinoscopy

Guy only increased productivity can help us .more farms more factories

oh k

Martins301:
Although there are many factors that has lead to the continous fall in the value of the Naira, I am going to concentrate on just one in this piece.

I remember going to the bank sometime in 2013. I had some Western Union transaction to carry out. After filling the necessary forms and presenting the proper documentation, I was shocked when my currency (Dollar) was forcefully changed to Naira against my wish. The bank personnel who attended to me said it was the [b]new CBN policy to always convert foreign currency to local currency before paying out to customers.

I told her that this singular act will cause the Naira to depreciate further before the year ends and will cause the value of the Naira to continously spiral downwards if the policy is not reversed She laughed it off, saying it won't. But my prediction came to pass and it is still holding true till today.

Ceteris paribus, the price of a commodity will rise if the commodity becomes scare. By that singular policy, CBN has made Dollar very scarce in the market and has thus caused the price or value of the Dollar to rise against the Naira. BDC operators are willing to pay a higher price for $1 since it is scare. This pressure from the parallel market is also carried into the official market as banks (who know they now have the larger share of the available foreign currency) also hoard it, in the hope of profiting from its appreciation against the Naira. Simply put, CBN has indirectly created artificial scarcity of the Naira in the parallel market and the resulting pressure from that market is what is pushing the value of the Naira down against other foreign currencies.

I believe that if CBN reverses this policy, the pressure on the Naira won't be too much and we can expect the Naira to start holding its own ground against other currencies. Otherwise, expect the Naira to fall further.

Constructive and meaningful contributions are welcome.

Source: Martins301

Cc: seun lalasticlala obinoscopy

The current CBN governor is supposed to be a seasoned economic technocrat but you just picked out a very elementary flaw in his guideline for defending the Naira.

Where do we draw the line between incompetence and brazen sabotage here ?

stevecantrell:



The current CBN governor is supposed to be a seasoned economic technocrat but you just picked out a very elementary flaw in his guideline for defending the Naira.

Where do we draw the line between incompetence and brazen sabotage here ?

Many of this socalled economic technocrats do not understand the real life dynamics. If you know how the real world functions, you would make less policy mistakes.

N. B: It was Sanusi Lamido Sanusi that introduced the policy not Godwin E.

mikolo80:
Guy only increased productivity can help us .more farms more factories

In the long term, your postulation will work. Before then, we must fight to defend the Naira, our national identity.

Martins301:


In the long term, your postulation will work. Before then, we must fight to defend the Naira, our national identity.

how my good man how.with Which reserve. We don't have one cos we have been importing for last 60yrs. Only increased productivity can defend Naira. Slow is steady. Steady is fast.

https://www.youtube.com/watch?v=VWTR9UXtQRE


https://www.youtube.com/watch?v=V7oLw6LuWqM


Watch the above, and read the below. There you'll have your answers. The CBN, FG, banks, and BDCs are all in bed together, and are loving it.

The sad part is, as at 2012, Henry Boyo predicted all what we are going through now, and he was just so on spot -- insanely accurate!

http://thenewsnigeria.com.ng/2015/05/19/okonjo-iweala-a-failure-henry-boyo/

mikolo80:
how my good man how.with Which reserve. We don't have one cos we have been importing for last 60yrs. Only increased productivity can defend Naira. Slow is steady. Steady is fast.

The CBN can start by removing the above restriction placed on foreign currency transaction in Nigeria. If we wait for increased productivity to come before taking meaningful action, we may end up having a currency as worthless as the Zimbabwean dollar.

Op you are accurately wrong by light years!
you analogy is totally off!
the policy you highlighted actually control s the dollar from killing the naira.
there are many things that affe t the exchange rate
I,the important is how many dollars do you have to sell against the number of people who are asking to buy.
2,who are the major suppliers of the dollar
3,your inflation rate and economic instruments.

Op you are accurately wrong by light years!
you analogy is totally off!
the policy you highlighted actually control s the dollar from killing the naira.
there are many things that affe t the exchange rate
I,the important is how many dollars do you have to sell against the number of people who are asking to buy.
2,who are the major suppliers of the dollar
3,your inflation rate and economic instruments.

the CBN is practically the supplier of 70% of dollar.and the supply is reduced by half as of present.you have the ffg scenarios
1.totally run out of dollar and have a crisis like Zimbabwe
2.totally shut down sales only for govt and parastatals and leave the economy to suffer
3.priotize sales of the dollars and let parallel market come into the .market enabling it to grow its own supply of the dollar.

The oly way out is for Cbn to open autonomous window.I.e allowing banks to sell to BDC's.That will create supply in the market and exchange rate will come down to atleast 180

I still strongly believe that Emiefele doesn't know anything especially in matters that affects monetary policies.He made the mistake of recapitalizing BDC's with 35 Million Naira.unfortunately, that exercise didn't bring about the desired change of reducing the number of BDC's.

His Policies has killed the naira instead of saving the naira.
On a final note, I put all the blame on Jonathan for bringing somebody Like Emiefele when Sarah Alade is there.

Sentiment apart I'm a christian from south-south, Sanusi is better than Godwin.

GudluckIBB:
The oly way out is for Cbn to open autonomous window.I.e allowing banks to sell to BDC's.That will create supply in the market and exchange rate will come down to atleast 180

I still strongly believe that Emiefele doesn't know anything especially in matters that affects monetary policies.He made the mistake of recapitalizing BDC's with 35 Million Naira.unfortunately, that exercise didn't bring about the desired change of reducing the number of BDC's.

His Policies has killed the naira instead of saving the naira.
On a final note, I put all the blame on Jonathan for bringing somebody Like Emiefele when Sarah Alade is there.

where will the banks buy their dollars or where do you expect to get their supply of the dollar.

ncpat:
Sentiment apart I'm a christian from south-south, Sanusi is better than Godwin.

how?

baralatie:

where will the banks buy their dollars or where do you expect to get their supply of the dollar.

Where were they getting dollars from before Emiefele stopped it?

Don't you know some Commercial banks have licence to import dollars?

@Martins301

Dollar is scarce, Banks dont even have it to pay you, Politicians have the dollars bought over with looted money and hidden in private vaults, Naira will not appreciate with billions of dollars hidden in private vaults by politicians still apprehensive of what Buhari will do to them having seen the eye popping amount of loots in the previous government.

GudluckIBB:

Where were they getting dollars from before Emiefele stopped it?
Don't you know some Commercial banks have licence to import dollars?

enlighten me how commercial banks import dollars!
you have answered where the other banks get their dollars?

Diversifying the economy. #datsall

baralatie:
Op you are accurately wrong by light years!
you analogy is totally off!
the policy you highlighted actually control s the dollar from killing the naira.
there are many things that affe t the exchange rate
I,the important is how many dollars do you have to sell against the number of people who are asking to buy.
2,who are the major suppliers of the dollar
3,your inflation rate and economic instruments.

the CBN is practically the supplier of 70% of dollar.and the supply is reduced by half as of present.you have the ffg scenarios
1.totally run out of dollar and have a crisis like Zimbabwe
2.totally shut down sales only for govt and parastatals and leave the economy to suffer
3.priotize sales of the dollars and let parallel market come into the .market enabling it to grow its own supply of the dollar.

I know very well that there are many other factors that affect the exchange rate but my point in this piece is that the CBN is creating artificial scarcity of the dollar in the informal sector. This scarcity is what is driving up the value of the dollar in the parallel market and the pressure is later transferred to the official market.

Someone sends you $100 from USA. Instead of handing you your $100, CBN orders that the ban gives you the equivalent of the amount in Naira. Ordinarily you would have taken that $100 where you would have gotten a higher value. Now the BDC can't find enough foreign currency to do business and so they are willing to pay higher and higher amount of Naira for any dollar, euro, pound, etc they find. If they go to bank to purchase the foreign currency, the banks will sell it at a higher price to them because they know that it is scarce. And so the circle continues and the Naira suffers more. Don't downplay the power of the informal sector or parallel market. That is what those at CBN are doing.

GudluckIBB:

Where were they getting dollars from before Emiefele stopped it?
[s] Don't you know some Commercial banks have licence to import dollars? [/s]

Banks don't import dollars. Chai!

Martins301:


The CBN can start by removing the above restriction placed on foreign currency transaction in Nigeria. If we wait for increased productivity to come before taking meaningful action, we may end up having a currency as worthless as the Zimbabwean dollar.

that's what I said.gov doofus needs to get his head out his asss and in the game cos importation of toothpick not our problem.wonder why he and his ilk never thought of settin up a toothpick factory among others . Na so so theory and do as I say not as I do. Gaddem dumbasss stupidass lazyass mo'fos

Martins301:


I know very well that there are many other factors that affect the exchange rate but my point in this piece is that the CBN is creating artificial scarcity of the dollar in the informal sector. This scarcity is what is driving up the value of the dollar in the parallel market and the pressure is later transferred to the official market.

Someone sends you $100 from USA. Instead of handing you your $100, CBN orders that the ban gives you the equivalent of the amount in Naira. Ordinarily you would have taken that $100 where you would have gotten a higher value. Now the BDC can't find enough foreign currency to do business and so they are willing to pay higher and higher amount of Naira for any dollar, euro, pound, etc they find. If they go to bank to purchase the foreign currency, the banks will sell it at a higher price to them because they know that it is scarce. And so the circle continues and the Naira suffers more. Don't downplay the power of the informal sector or parallel market. That is what those at CBN are doing.

Please save your breath, and stop arguing with textbook economists. Let the technocrats continue farting around with our currency. Let them roll with their Lagrangian functions about what the real value of the naira should be, as though there's something mystical about the exchange rate.

They have continued to "defend" the naira with policies that further put pressure on the naira. And In stead of reversing their mistakes, they point accusing fingers on dwindling oil prices and crumbling foreign reserve: jolly convenient, isn't it?

Underestimating the influence of the parallel market on the naira exchange rate has been a fatal flaw on current CBN efforts to defend the naira.