Dear Intellectual,

The CBN is NOT meeting ALL legitimate requests for forex as it states it will into perpetuity. The regular 'talkers' in the media keep talking about speculators being the bane of the exchange rate and dollar supply crisis presently engulfing Nigeria. I do not share this "off-the-cuff' view. The widening disparity is caused by wrong 'signalling.' The CBN is not meeting all legitimate requests for dollars while stating that it will. This sends a wrong signal by showing everyone that dollar supply is being rationed. If something is being rationed (excluding sadism,) it is because it is in short supply relative to demand. Panic sets in and demand increases geometrically in the expectation that dollar scarcity will get worse and everyone that needs dollars (now and in the future) tries to get some now before supply gets worse or dollars gets exhausted.

This is forcing people with legitimate and illegitimate dollar requests to meet their needs elsewhere, which has increased demand from BDCs in excess of their CBN allocation which has been reduced twice in the past two weeks and is now at $10,000 weekly. The black market acting as a market of last resort meets the leftover rising demand at ever increasing prices to suppress demand and/or increase supply of dollars from those who may be hoarding it but hopefully can no longer resist the surreal exchange rate.

The banks are also applying the black market rate for their customer dealings (sabotages the CBN's efforts) through foreign ATM withdrawals and foreign currency online purchases. This increases the pressure to devalue, increases inflation and makes banks reluctant to meet legitimate requests from its retail customers at official rates. The desire to round-trip and make 30% - 40% PROFIT and rising by supplying their limited supply of dollars to the BDCs and black market dealers instead of meeting direct customer demand is too alluring to resist. This is why only 3 or less banks still selectively meet request for PERSONAL or BUSINESS Travel Allowance. Banks are not interested in supplying dollars at the official rate locally to customers when they already pay out dollars to foreign banks on behalf of customers at the black market rate.

Crisis is looming fast and the CBN governor may become the ultimate scapegoat. He is playing Russian Roulette with the Naira and the economy indirectly. He is serving two Masters, the banks where he came from surreptitiously and trying to save his job by hopefully pleasing someone who did not appoint him.

People can still not make foreign currency cash deposits into their bank accounts for the past four months. It has not helped narrow the spread between the official and black market rates while destabilizing people and their businesses. Bank customers with foreign-denominated bank accounts in Nigeria are complaining that the banks cannot even cash their over -the-counter checks and give them funds from their dollar accounts when they need it! If banks could receive cash deposits of dollars, the current scenario would not be this bad.

Those at the helm of affairs should allow banks to receive cash dollar deposits to allow banks have bottom-level supply of cash to meet dollar demand at the branch level and travel allowance requests. Banks have pretty much on their own refused to meet travel allowance requests from customers while the Central Bank keeps mute as a bad situation has gotten worse. The CBN must meet all legitimate requests for dollars in a timely fashion (as it said it would and is not) and consequently drain foreign reserves or devalue the currency officially. You cannot have it both ways. The attempt to have it both ways has created and is creating more chaos that is causing massive business disruptions which is hitting economic growth.

Late President Yaradua did not renew the term (he was interested in another term) of CBN governor Soludo who was appointed by President Obasanjo. Late President Yaradua appointed Lamido Sanusi. President Jonathan took over and did not let Lamido Sanusi (who was not interested in another term) complete his term, firing him unceremoniously in February 2014. President Joanathan did not appoint Lamido Sanusi. President Jonathan appointed Godwin Emefiele. President Jonathan is no longer in power. President Buhari is now dealing with a CBN governor he did not appoint. What is the next scene in this unfolding drama?



Oil exporting countries in a down market and stock market performance.

Nigeria: 22% DECLINE

Mexico: +0.83%

Russia: +27% (also has economic sanctions)

Canada (TSX): 11% DECLINE

UAE: 19% DECLINE

Venezuela: +275% (the power of the RETAIL investor on show)

Norway: +2.3%

Three of these countries are OPEC members and three are not. It is not an automatic fact that a persistent decline in oil prices will crash the stock market of an oil exporting country into negative territory. I agree it is a ready-made, surface-level logical excuse. It is time to look beneath the cracks of the crash and find out what are really the underlying issues beneath the surface and tackle them. A persistent rise in oil prices may just paper the cracks over and we all go to sleep once again. Earthquakes take place in a split second but the fault lines do not form in a split second.