PapaBrowne:


Best comment in a while. You have a clear picture of the challenges many of which are stemming from faulty understanding of the basics.
A devalued currency would even help our productivity as the price competitiveness of our goods become quite impressive.
I like using Chivita fruit juice as an example. At N200 per juice wholesale, it would have sold in say Saudi for $1 last year at an exchange rate of N200/$. At an exchange rate of N400/$, that same juice would sell for 50 cents, making Chivita juice more competitive in Saudi vs other juice manufacturers. This is the direction I would have expected the government to push encouraging the best of our goods to be shipped out.

To what extent do we export refined goods?


As to your analogy, do you think a N200/chivita juice before devaluation can still be produced with profit margins of 200/juice after devaluation of naira.

urboy1:
it might be a joke to many sha.. but when I started my PhD in 2013, I paid 4Mnaira.. tomorrow I am going to pay 7.3Mnaira... we can be playing politics here and there... but d Middle class will soon feel the heat.. because this isnt funny..

oga which school did you do ur phd?..and how many phd?.....which country?.....cos someone just finished phd in english from unilag he did not spend up to 5 million

chinchum:
If the main problem is hoarding like you said, you must realise people hoard what is scarce, and there need to be stiffer controls by CBN to monitor those who have access to dollar @ official rate.

As to your other assertion, Yes crude oil accounts for roughly 35% of our import , consequently 35% forex demand, but forex reserves is export value minus import value. Our export value has dropped considerably also due to low crude oil price, in actual fact, we lost more from export value, than we lost at the import value from the differential of crude oil export and refined oil import.

The biggest impact to our declining forex reserves would be functional refineries that meet our local demand, and if we can get surplus, we start exporting refined product (foreign exchange earner), the current refineries are virtually moribund, we need new ones possibly on old sites, but new refineries is a LONG term plan, we hope DANGOTE refinery will save us before 2018, the FG is yet to give an official statement after the dec, 2015 deadline to assess the 4 refineries.

About refineries, I think a short term solution could be to buy or lease existing refineries overseas or enter swap agreements. Ship crude out, get it refined and ship back to base. No much exchange of currency. We save all that 35%.
As regards export value vs import value, I think available statistics would indicate that import values might have tanked to a greater degree across board than our exports.

stevecantrell:


Pleading the 5th.

Too bad, i assume this forum bestow on you a pseudo anonymity. Why not tell us here how you know ? I am asking you do that because too many people call their gut feelings fact, and it is not necessarily true.

stevecantrell:
There is a new class multi millionaire emerging from the forex crises. I think rather than complain, one should try to get his foot into this exclusive door to effortless cash.

You're right. I know some that made over 800,000 profit in less than 1 hour. This happened right in my presence. But he was able to access forex because he knew someone at the top, not even CBN.

chinchum:


To what extent do we export refined goods?


As to your analogy, do you think a N200/chivita juice before devaluation can still be produced with profit margins of 200/juice after devaluation of naira.

The price of Chivita is still selling retail at N250. They surely would sell below cost of production. Plus they source majority of inputs locally.
If you want a better example, use Dangote cement whose price has actually dropped today vs say 2014.
Or commodities we export like cocoa, sesame, cashew et al.

PapaBrowne:


Best comment in a while. You have a clear picture of the challenges many of which are stemming from faulty understanding of the basics.
A devalued currency would even help our productivity as the price competitiveness of our goods become quite impressive.
I like using Chivita fruit juice as an example. At N200 per juice wholesale, it would have sold in say Saudi for $1 last year at an exchange rate of N200/$. At an exchange rate of N400/$, that same juice would sell for 50 cents, making Chivita juice more competitive in Saudi vs other juice manufacturers. This is the direction I would have expected the government to push encouraging the best of our goods to be shipped out.

Question though is, is Chivita exported? Even if Chivita sells at 25 cents would that make a difference as far as making it a product other countries want? Honestly, I can't say I know enough but I don't support devaluation because besides oil, I'm not sure we have the products for exportation that devaluation will make more attractive.

boneruns:


You're right. I know some that made over 800,000 profit in less than 1 hour. This happened right in my presence. But he was able to access forex because he knew someone at the top, not even CBN.

Oh boy !

Why u sitting on d fence ?
Tell ur guy we should collabo !

PapaBrowne:


About refineries, I think a short term solution could be to buy or lease existing refineries overseas or enter swap agreements. Ship crude out, get it refined and ship back to base. No much exchange of currency. We save all that 35%.
As regards export value vs import value, I think available statistics would indicate that import values might have tanked to a greater degree across board than our exports.

Home > Business > Industries > Economy > [size=15pt]Nigeria’s trade balance weakens as oil prices bite
Nigeria’s trade balance weakens as oil prices bite[/size]

By BusinessNews Staff on December 20, 2015
Nigerian exports plunged in the third quarter from a year ago and imports also fell, the National Bureau of Statistics said, as currency controls introduced by the Central Bank of Nigeria this year to support the economy start to bite.

The balance of trade in the third quarter was N645bn, down from N2.87tn in the third quarter a year ago.

Africa’s biggest economy relies on oil exports for about 58 per cent of government revenue. But the price of crude has been falling, reaching its lowest in more than six years last week.

Consequently, Nigeria faces its worst economic crisis in years, since exports of oil also bring in the hard currency that pays for imports. And because of its limited manufacturing, Nigeria imports most of what it consumes.



Nigeria’s exports fell by 50.3 per cent in the third quarter from a year ago and imports declined 7.3 per cent , the NBS said. The fall in crude oil exports, which accounted for 69.1 per cent of total domestic exports this year, hit the economy the most.

“The sharp decline in exports and slight decrease in imports contributed to a continued fall in the country’s trade balance, by 32 percent,” the NBS said in a report.

Crude exports fell 18.8 per cent in the third quarter from the second. Imports dropped 1 percent from the second quarter, the NBS said. http://businessnews.com.ng/2015/12/20/nigerias-trade-balance-weakens-as-oil-prices-bite

This NBS statistics gives the picture. If you said import value has declined, you are right, but you are only half right, because export value has declined way more, no thanks to drop in crude oil price. We export mainly commodities, and close to nil refined goods. Devaluation of the currency will bring further hardship and wont solve the intended problem.

stevecantrell:


Oh boy !

Why u sitting on d fence ?
Tell ur guy we should collabo !

It isn't that I am sitting on the fence. I don't have the kind of authority he has. He even didn't have to stand up from his desk, even thing was done via exchange of email. Man, the whole thing surprised me because I never imagined such amount could have been made in short period of time. The kind of racketeering going on in forex market can make someone buy choice property in Lagos.

Although the method he used was kinda one-off, but I suspect he may have other methods he in his brain bank.

boneruns:


It isn't that I am sitting on the fence. I don't have the kind of authority he has. He even didn't have to stand up from his desk, even thing was done via exchange of email. Man, the whole thing surprised me because I never imagined such amount could have been made in short period of time. The kind of racketeering going on in forex market can make someone buy choice property in Lagos.

Although the method he used was kinda one-off, but I suspect he may have other methods he in his brain bank.

Well at least you corroborated my assertion. Money is being made and made big in these hard times. 800k / hour is very modest, going by what we have seen so far.
The middle classes who don't have access to these methods, will be decimated if this trend continues and that isn't good for anyone.

2sex:
if I reply you the way I want, I will surely get a ban as it has been the custom in this section.

What sort nonsense are you talking or do you think you are the only supporter of buhari?

You don't have to support anybody to figure out that Nigerians went to the polls and gave the president a mandate to manage our affairs and this is exactly what he's doing and if for whatever reason you don't agree with his stewardship, you have your constitutional rights to vote him out come 2019, it's called democracy in case you still don't know.


Btw. Do you really think I care about whatever insults you stored under your tongue? Please go ahead if you must.

My brother you funny oo.. this post is about Dollars to Naira... and you dey talk of Unilag... calm ooo..lol..

babyfaceafrica:
oga which school did you do ur phd?..and how many phd?.....which country?.....cos someone just finished phd in english from unilag he did not spend up to 5 million

urboy1:
My brother you funny oo.. this post is about Dollars to Naira... and you dey talk of Unilag... calm ooo..lol..

sowie..u did not specify

aresa:


You don't have to support anybody to figure out that Nigerians went to the polls and gave the president a mandate to manage our affairs and this is exactly what he's doing and if for whatever reason you don't agree with his stewardship, you have your constitutional rights to vote him out come 2019, it's called democracy in case you still don't know.


Btw. Do you really think I care about whatever insults you stored under your tongue? Please go ahead if you must.

how is he doing what he is elected to do? Aside gallivanting around and fighting corruption, I ain't feeling him, dude.

Fork off damn it!

boneruns:


It isn't that I am sitting on the fence. I don't have the kind of authority he has. He even didn't have to stand up from his desk, even thing was done via exchange of email. Man, the whole thing surprised me because I never imagined such amount could have been made in short period of time. The kind of racketeering going on in forex market can make someone buy choice property in Lagos.

Although the method he used was kinda one-off, but I suspect he may have other methods he in his brain bank.

are you saying surprise? Dude, please I beg you move with the jet age. You are still living in the past. Right now, you can make Millions within the shortest possible time if you have the right system.

I have seen guys do it.

Akin Alabi who own nairbett once did 3Million naira with 12 days, this was before he started Naira bet. I knew of another Nigerian who build a software used by Internet marketers and amassed $80,000 within 2 weeks. Give or take, he made over 70k pure profit from it.

The problem is they won't tell you exactly how they do it.

Shiiits are happening bro and information is the key.

I had to go meet a white guy to explain some part of the process used by the software guy. And I am still digging around.

[s]

2sex:
how is he doing what he is elected to do? Aside gallivanting around and fighting corruption, I ain't feeling him, dude.

Fork off damn it!

[/s]


Unintelligent nonsense..

PapaBrowne:
I am about to wail and wail really loud. My wailing is about the exchange rate. 354 Naira to the dollar.

This is terrible and has never happened with this speed ever before in this country. And the single reason for this terrible exchange rate uncertainty is Buhari's insistence that the CBN should not officially devalue the currency just to score cheap political goals.

I want to use this simple narrative to explain whats happening with our currency..and how Buhari's insistence is dealing deadly blows to the economy.The purported official exchange rate is 197 Naira to the dollar. The market rate as at yesterday was 354 Naira to the dollar.

Scenario 1
Now lets assume you are a company importing say industrial goods. So you want to restock and you need $10 million. So you apply for that amount to CBN (say in January) and you pay 1.97 billion Naira at the official exchange rate. CBN delays your approval by about a month(February), but no worries, you now have your $10 million. Typically, you would transfer your money to your supplier say in South Korea and say it takes another month to produce your order(March) and 2 months for shipping to Nigeria(May). Lets say it takes maybe 3 months to sell out your entire stock(August). Lets assume you usually mark up profits on your products by 20% after taxes et al.
So on an investment of $10 million, you would make a profit of say $2 million from January to August. At the official exchange rate that is approx 400 Million Naira in 8 months. Good money it seems yeah?

Scenario 2
You are still a company importing industrial goods. So you want to restock and you need $10 million. So you follow the same process starting in January. Apply, pay 1.97 billion Naira, you get your $10 million in February. You decide not to transfer it. Dollar is exchanging at 320 Naira in the black market. So you take $5 Million from that money and sell it to BDCs at 300 Naira. You are given 1.5 billion Naira cash instantly. In one day, you've made a whooping 500 million Naira in profits. You hoard the rest of the $5 Million overseas on the speculation that dollar would exchange for 500 Naira in the next 3 months. And when that happens, your $5 million would give you N2.5 billion cash. So in total by May/June, you would have earned 1.5 Billion +2.5 Billion= 4 billion Naira from your 1.97 billion Naira investment.

That is 2 Billion Naira returns in 5 months vs N400 million in 8 Months. And you can even make more iff you keep round tripping with the CBN.

The first and direct consequence on this is the the continual rise in the exchange rate. Now that's a problem in itself but maybe not too big of a problem because a weak Naira can actually help your products sell well overseas.

The bigger problem however in the scenario for instance, is the sudden conversion from an industrial goods importer to a Forex Trader. Imagine what would suddenly happen to all those companies who depended on the industrial goods this trader was importing to keep thier factories running. Suddenly, they start laying off staff because they can't produce and then the whole economy suffers the ripple effect.

With Buhari, our economy is in real trouble. The bigger danger is that he doesn't even appear to understand the implications of his action and the near irreversibility of a badly battered economy.

I am not here to insult the President. I don't believe in that. He is the President, so the office should at least be respected.
But something is not right and every patriotic Nigerian would do well to speak.I think we have not just an unintelligent President, but a stubborn one that completely lacks an understanding of basic economic principles and refuses to listen to even the best of his aides.
I say this because I know the likes of Fashola who understands the rudiments of basic economics would have the same understanding of the scenarios painted and the long term implications they would have on this country.

Pat Utomi has spoken. Emir Sanusi has spoken. Many others are dying to speak. I beg, if you love this country, its imperative Buhari must be told to remove his hands from monetary policy and leave it for the professionals at CBN.

I am responding to your post because i respect your views a lot, i know you love this country and would like to see it progress, unlike some people who pray day and night to see Buhari fail even if it means the destruction of Nigeria.

You do no seem to understand the seriousness of the problems created by PDP 16 years of looting, profligacy and visionlessness. Have you ever heard of the word zugzwang? Zugzwang is a chess position, whereby whichever move you make is a bad move. Nigeria and Buhari is in an economic Zugzwang.

Now, what do you think will happen if the naira is allowed to float against other currencies. I think the same 2 scenarios would still play out. If you buy your $10million dollars in January when crude prices was $35 to the barrel and naira was N197 to the dollar, three months later when oil falls to $27, naira might have fallen to N300. You keep forgetting that our main source of foreign exchange is crude and the supply of dollars into the Nigeria market depends on the price of crude.

If the naira is allowed to float, it might lead to free fall as lots of speculators would buy and hoard every available dollar in anticipation of the naira falling further, leading to the naira falling further. Remember, crude prices are speculated to fall as low as $20 later this year, so we expect the naira to fall even further.

I know Buhari trying to restrict demand for dollars is an exercise in futility, the pressure on the naira is to great and so the more oil prices fall, the more the disparity between the official and parallel markets, the more banks and speculators take advantage to make billions, due to the weak regulatory capacity of CBN.

I know Buhari is just bidding for time, hoping that somehow crude prices would rebound to around $40 -$50 per barrel. If it continues to fall, then i am sorry to say, we are in trouble, whether we control or float the naira.

Bihari is toooo dumb to understand your scenarios. He believes you can simply order or solve economic problems via military fiat.
That is why he is called a dulllard

aresa:
[s][/s]


Unintelligent nonsense..

retarded response.

aresa:
[s][/s]


Unintelligent nonsense..

Sliced bread is now 400 Nairal. Something that used to sell for 200. If I swear for you ehen...

Your analysis is not entirely correct. The CBN does not just hand out dollars to importers. Most imports are done through LCs (Letters of Credit), and the bank will settle those payments only after there is evidence that the importer has taken delivery of the items.
---
It is possible that some roundtripping still exists but clearly not at the exaggerated levels you are trying to portray.
---
Finally, I am also a proponent of devaluation, but we all need to be aware of the unintended consequences it will bring. Fuel will become more expensive leading to higher inflation - basically, every item in the market will react instantly once the devaluation is official. There is also the possibility of industrial action from labour unions who will demand wage increase to counterbalance the effect of devaluation and inflation on REAL wage.

tripplephi:


so would you prefer JONATHAN?

Wow
You just had to 'politicise' it!!!

FastShipping:


You are not the only person supporting Buhari. I am too; likewise my friends, families and many more.

Buhari seems to be very stubborn and lack basic economic skills. He seems to be someone stubborn and believes he knows better than anyone. With the way exchange rate is going, you should expect $1-550 by May 1st. There are thousands of companies who buy raw materials from overseas. When those companies have no access to foreign exchange market, their business will shut down and millions of Nigeria will lose their jobs.

Tell me what happens when millions of Nigerians lose their jobs.

Anarchy looms in Nigeria very soon.

etu te Fastshipping?

2sex:
all this one you dey yarn na story. You know someone. Did the person tell you how they do it? I have been watching it from sideline and no ONE wants to tell HOW they do it.

If you know it, please send me a PM or permit me to send you a PM RIGHT NOW.

You wan do round tripping too? .. Bros they will catch you oo and of course, you know what it means to be in EFCC's net this time around

CyberWolf:
You wan do round tripping too? .. Bros they will catch you oo and of course, you know what it means to be in EFCC's net this time around

see, I go find way start. Anyway, na way.

wirinet:
I am responding to your post because i respect your views a lot, i know you love this country and would like to see it progress, unlike some people who pray day and night to see Buhari fail even if it means the destruction of Nigeria.

You do no seem to understand the seriousness of the problems created by PDP 16 years of looting, profligacy and visionlessness. Have you ever heard of the word zugzwang? Zugzwang is a chess position, whereby whichever move you make is a bad move. Nigeria and Buhari is in an economic Zugzwang.

Now, what do you think will happen if the naira is allowed to float against other currencies. I think the same 2 scenarios would still play out. If you buy your $10million dollars in January when crude prices was $35 to the barrel and naira was N197 to the dollar, three months later when oil falls to $27, naira might have fallen to N300. You keep forgetting that our main source of foreign exchange is crude and the supply of dollars into the Nigeria market depends on the price of crude.

If the naira is allowed to float, it might lead to free fall as lots of speculators would buy and hoard every available dollar in anticipation of the naira falling further, leading to the naira falling further. Remember, crude prices are speculated to fall as low as $20 later this year, so we expect the naira to fall even further.

I know Buhari trying to restrict demand for dollars is an exercise in futility, the pressure on the naira is to great and so the more oil prices fall, the more the disparity between the official and parallel markets, the more banks and speculators take advantage to make billions, due to the weak regulatory capacity of CBN.

I know Buhari is just bidding for time, hoping that somehow crude prices would rebound to around $40 -$50 per barrel. If it continues to fall, then i am sorry to say, we are in trouble, whether we control or float the naira.

Finally, someone with an objective understanding of the gravity of the situation. A real economic zugzwang, indeed!
---
You see, even the Oil price narrative is only one aspect of the story. We must also consider the profit per barrel of crude oil. Say, if our average production cost is ~$25/bbl and oil sells for $50, then we earn a profit of $25. But if oil price falls to $30, then we earn only $5/bbl. So, a 40% drop in oil price leads to an 80% drop in oil revenue.
---
The situation is really dire and we are in an economic quagmire.

2sex:
see, I go find way start. Anyway, na way.

Take am easy oo bros unless you are well connected in CBN and your bank otherwise, you will have to answer some questions and you know what that means.. Me self just chill for corner dey observe events first..

CyberWolf:
Take am easy oo bros unless you are well connected in CBN and your bank otherwise, you will have to answer some questions and you know what that means.. Me self just chill for corner dey observe events first..

yeah... we dey observe and men dey hammer lol

Where is 4play when u need him most

2sex:
Sliced bread is now 400 Nairal. Something that used to sell for 200. If I swear for you ehen...

Why are you crying now that bread is N1000?

Do you not know that when you steal your treasury dry, when you drain and share your foreign reserve, when you mismanage your resources and when you refused to save your money when you were making $100/per barrel from oil sales for rainy days like today when oil is selling for $27 that there's going to be serious consequences down the road like when bread is going to sell for 400 naira like you are complain now.


You sat there like mumu for 16 long years shouting GEJ till 2019 when they were doing serious damage to your economy, while they were looting and sharing your reserve, now you are crying over bread and looking for somebody to blame for your mumuness..


You better wake up and smell the garri, there's no free lunch of free ride after failing to save and prepare for tomorrow, you reap what you sow..