Mindfulness:


Not true. Several developed countries import more than they export.

ok, perhaps i should have said they have lower trade deficits at least.

NavierStokes:


Source:http://www.bloomberg.com/news/articles/2016-04-20/nigeria-economics-loses-to-politics-as-buhari-takes-naira-stand


Having observed the issue of SAP and the IMF coming up repeatedly here on nairaland, I will be doing a thread with the true history of events that diacusses the SAP so some Nigerians can let go off the paranoia assoiciated with the IMF or western governments. If course they look out for their best interests and yours too. Because every time you run into problems you still come to bother them with your issues like Aid moneys and hangouts, immigration issues etc.

Thank you.

IMF loans have helped countries like South Korea in recent past. Why do we vilify them all the time

benji93:

ok, perhaps i should have said they have lower trade deficits at least.

Lower than who?

but i keep wandering in the land of wonder, if all countries develop, who go serve who?

We don't really have to officially devalue tho.
What we need to do is to remove that peg we have put on the naira, and then let the naira's real value emerge.

I lived in a country WHERE the difference vetwwwn black market and official in quote rates was not more than 30 naira.

Doesn't something tell you that it is because if this peg that has driven the black market up?

TANTUMERGO007:
Buhari is a failed man leading us to a failed land(failed state)

the Failed Man defeated your god and Hero, Jonathan by a landslide in the last election.

Ugosample:


Thank you.

IMF loans have helped countries like South Korea in recent past. Why do we vilify them all the time

Loans will only help Nigeria - and other African countries for that matter - if the country is ready to encourage foreign investment simultaneously combined with several structural adjustments.

This won't happen as long as the government and the people are unable to provide a sane, save and secure environment.

Ugosample:



Thank you.

IMF loans have helped countries like South Korea in recent past. Why do we vilify them all the time

Because it's easier to blame the IMF and "The West" for allegedly trying to "hold the black man down" than to criticize our own corrupt and inept leaders (and therefore our own foolishness in choosing them).

AZeD1:

This is probably one of the most stupi.d things i have read on here.

My 3 bedroom flat in the UK cost £600 a month which is £7200 a year, I have a 3 bedroom in Yaba for N600,000 a year use your formula there and give me the purchasing power of the Naira to the pound.

See as you just exposed your ignorance on economics
Is Coca-Cola the same price globally? is it not the same thing?

Mindfulness:


Loans will only help Nigeria - and other African countries for that matter - if the country is ready to encourage foreign investment simultaneously combined with several structural adjustments.

This won't happen as long as the government and the people are unable to provide a sane, save and secure environment.

Exactly! Someone who gets it! This is why artificially pegging the currency, imposing arbitrary import bans, and dismissing the withdrawal of foreign investment as being of a merely "portfolio" nature (and therefore somehow not worthwhile) are all of the worst possible things for the government to be doing.

Instead of adopting policies that will reassure foreigners that Nigeria is a safe place to put their money in for the long term, the present government prefers to mouth pretty words while passing measures that seem designed to put the maximum of fear into investors. Who would want to put their money into a country where they can never get their profits out at a realistic exchange rate, or they can be forced to shut down production at any time due to bans on imported inputs they need?

To put it bluntly, Buhari's economic policies are insane.

erico2k2:

we should stop this mentality that we must manufacture before we can export, NO we don't have to,there are loads of materials exportable in Nigeria.We just have to dig deep.However we all need to source for initial capital

Your statement is contradictory. If we have loads of exportable materials, it still need be explored, processed, packaged, before export. That process is called manufacturing.

Ugosample:


See as you just exposed your ignorance on economics
Is Coca-Cola the same price globally? is it not the same thing?

You do know Coca-Cola is produced under licence by different companies?

And if you use the guy I quoted example then the PPP of GBP to the Naira is 1/10

Saintp:


Thank you. The truth is that neither devaluation or non devaluation will save us. If Buhari wants to forever put his name in gold then this is the time to do something different and that is structural correction. he must champion true federalism or regionalism now. Let us all go back to the drawing board and start afresh.
Let us work and develop from within so that even if oil rises and crashes 10yrs from now, we wont be holding this argument
Until the foundation of real development is laid, we will never develop, we will keep blaming IMF and WB till the next 100 yrs or even china when our deal is not showing results. But if we keep playing to the gallery, then we will continue blaming others.

I believe that's what the president is figuring out how to do- going back to the drawing board. Time will tell.

obailala:
Still on external forces mounting pressure on Nigeria to devalue its currency. Since the 80's this has always been the advice to African countries. Nigeria has devalued and devalued and devalued from N1 = $1 to the present N200 = $1 but has all these devaluations in the last 30 years ever helped Nigeria?


And you think devaluing will miraculously take care of the sufferings we are subjected to at present because some oyibo economics textbooks says so?... How much foreign investments can possibly come in instantly to counter the prevalent scarcity of forex?.... With sky-high oil prices and excess forex in the NIgerian system between 2010-2014, how much of forex was really introduced into the country by these 'foreign investors'?.... If they couldn't help or impact so much in Nigeria when the going was good, how are we so sure that if we devalue , enough investors would rush in to help the Nigerian economy now that things are bad?

as far as Nigeria derives most of its revenue from exporting crude, the best thing to do would be to devalue the Naira to eliminate the discrepancy between its real value and that set by the cbn. I think pmb is trying to forstall doing it while diversifying the economy (which should be a combined effort at all government levels-the can start by rapidly sorting out the 2016 budget mess).
the only reason his stance not to devalue hurt us in the first place, is because we are heavily dependent on imports of both goods and skilled labour.

Mindfulness:


And the money came from where?

T

PLEASE! We don't export anything? We export more than we import.



China's success story is very much based on its opening to foreign investment.

Free education for you again.

You have nothing to offer........absolutely NOTHING!!.

Mindfulness:


Lower than who?

which classes are we juxtaposing here, developed against developing of course

Devaluation won't change anything Jare. All Nigeria needs in the short run is for it to produce all its petroleum products needs 100% and provide stable power supply at least 10hrs a day, and some infrastructures here and there like the railway project. And everything will be alright for a while.

TonyeBarcanista:

The benefit are enormous though not immediate, it outweighs the suffering we are subjected to at present

Hmmmmmm like seriously Enormous benefits... But u didn't even state @ least 1 of d benefits n besides we have tried dis so called devaluation thing..... What good has it done to d country if not harm.. Guess we all know how d dollar keeps skyrocketing after IBB devalued our currency N we are still wallowing in dt pain n regret up till now.... Are u suggesting we embrace IMF idea again so dt we can sink further ba.....enormous benefits indeed #saynotodevaluation

musicwriter:


You have nothing to offer........absolutely NOTHING!!.

Guy, educate yourself first before you spew rubbish.

benji93:

which classes are we juxtaposing here, developed against developing of course

Nigeria's export rate has been MUCH higher than its import rate. The surplus has decreased considerably but the export rate is still higher than the import rate.

TonyeBarcanista:

The benefit are enormous though not immediate, it outweighs the suffering we are subjected to at present

As if he knows it all,economist of the head rather than the brain

musicwriter:


Your statement is contradictory. If we have loads of exportable materials, it still need be explored, processed, packaged, before export. That process is called manufacturing.

With due respect NOT
This is the Business definition of manufacturing
The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications. Manufacturing commonly employs a man-machine setup with division of labor in a large scale production.

Read more: http://www.businessdictionary.com/definition/manufacturing.html#ixzz46Ufz8VXS
Good example is I cannot manufacture crude oil but I can manufacture vegetable oil,I cannot manufacture charcoal but i can manufacture chacoal canister.Hope this is a bit clearer.

omohayek:


Exactly! Someone who gets it! This is why artificially pegging the currency, imposing arbitrary import bans, and dismissing the withdrawal of foreign investment as being of a merely "portfolio" nature (and therefore somehow not worthwhile) are all of the worst possible things for the government to be doing.

The irony of it all is that he wants to reduce the import rate (even though it is much lower than Nigeria's export rate) but does not want to devalue the currency (which has long been depreciated), which would lead to the reduction of imports, which he intends. He doesn't know what he is doing.

Instead of adopting policies that will reassure foreigners that Nigeria is a safe place to put their money in for the long term, the present government prefers to mouth pretty words while passing measures that seem designed to put the maximum of fear into investors. Who would want to put their money into a country where they can never get their profits out at a realistic exchange rate, or they can be forced to shut down production at any time due to bans on imported inputs they need?

To put it bluntly, Buhari's economic policies are insane.

Exactly BUT BH, corruption and vandalism are stopping foreign investors, so I think it would be fair to give him some credit for fighting BH and corruption with determination.

It would be relatively easy to turn things around with foreign investment and it would be a win-win situation but the government can't do it alone. People need to change their mentality and how do you go on about it - especially when there is no proper education system and no press that could enhance people's understanding and shape people's way of thinking?

Mindfulness:


The irony of it all is that he wants to reduce the import rate (even though it is much lower than Nigeria's export rate) but does not want to devalue the currency (which has long been depreciated), which would lead to the reduction of imports, which he intends. He doesn't know what he is doing.



Exactly BUT BH, corruption and vandalism are making foreign investors not invest in this country either so we have to give him some credit for fighting BH and corruption with determination.

It would be relatively easy to turn things around with foreign investment and it would be a win-win situation but the government can't do it alone. People need to change their mentality and how do you go on about it - especially when there is no proper education system and no press that could enhance people's understanding and shape people's way of thinking?

It is precisely the redoubled efforts at fighting Boko Haram and corruption which makes me find Buhari's economic policies such a terrible shame. A whole year has already elapsed without a budget even being passed, let alone any significant measures which might offer a light at the end of the tunnel; if in 3 years the average Nigerian is no better off than he or she was in 2015, won't the majority's conclusion be that fighting corruption is a bad thing that causes economic suffering? As far-fetched as that might seem, it's exactly the same "reasoning" behind why people blame the IMF (whose loan offer Babangida actually rejected) and SAP for Babangida's corrupt and inflationary policies.

Richydos:

Hmmmmmm like seriously Enormous benefits... But u didn't even state @ least 1 of d benefits n besides we have tried dis so called devaluation thing..... What good has it done to d country if not harm.. Guess we all know how d dollar keeps skyrocketing after IBB devalued our currency N we are still wallowing in dt pain n regret up till now.... Are u suggesting we embrace IMF idea again so dt we can sink further ba.....enormous benefits indeed #saynotodevaluation

At least you are asking the right questions and you notice when someone gives you an insufficient answer. Keep it up!

Here is the best answer to your question:

omohayek:

Exactly! Someone who gets it! This is why artificially pegging the currency, imposing arbitrary import bans, and dismissing the withdrawal of foreign investment as being of a merely "portfolio" nature (and therefore somehow not worthwhile) are all of the worst possible things for the government to be doing.
Instead of adopting policies that will reassure foreigners that Nigeria is a safe place to put their money in for the long term, the present government prefers to mouth pretty words while passing measures that seem designed to put the maximum of fear into investors. Who would want to put their money into a country where they can never get their profits out at a realistic exchange rate, or they can be forced to shut down production at any time due to bans on imported inputs they need?
To put it bluntly, Buhari's economic policies are insane.

Let me just add that devaluation on its own is not enough but defending the currency against all odds is worse.

Nigeria must take d right decision on dis issue at dis critical moment....

#Devaluation
Our forex reserve is low and one of d measure to curtail d massive outflow of forex is devaluation.

Devaluation favours exportation on a large scale

Devaluation discourages importation

Devaluation helps "permanent" foreign investors and FDI

#Non-devaluation
Also d issue of devaluation does not favour an economy dat is too much dependent on importation such that it's import exceeds her exports with a wide margin like nigeria

Non-devaluation help strengthen currency (subjective and not objective)......


Now there r tins we can do (My Submission)

1. If it is to reduce the depletion of our forex reserve then devaluation is d answer. Devaluation can help reduce d way dollar is massively going out but may not help to increase d way it flows in if d economy is importation dependent. This is a defensive mechanism

2. If it Is to increase our forex reserve, then increasing our exportation of goods and services is the answer. This is an offensive mechanism

3. If it is to be defensive and to be offensive at d same time.... then I think d naira can b devalued a little and BDC and commercial banks shud be placed under check so dat dey comply with with forex policy (devaluation) and at desame time grow our local industry and make them av capacity to export in large quantities.... Govt can start with fixing of electricity and refineries. Then dey shud provide capital and formulate strong policy against importation of what we produce locally.

4. If is to be offensive and to be defensive in anoda way round we can live d naira as it is now with its dual nature of 197 and 320 and reduce our importation on some cheap tins by producing dose tin by ourselves like paper, toothpick, etc. even if we cannot increase our exportation we shud b able 2 decrease our importation of unecessary goods. Thank God for Dangote, Innoson etc who is helping in dis area.

... 3 is abt little devaluation of naira and increase in exportation

......4 is abt no devaluation for now and decrease in importation

# Mind u devaluation can help reduce importation but nigeria case is somehow wit dis....... Our philosophy is different here o.....




To the Government
Let dis government face d issue of Electricity and Refinery and we will be delivered from dis economy mess.

The two stronghold affecting our economy is Electricity and Refineries Let the government face dis two epidemic problem and once they r solved then our problem is solved.

Then we need 100% federalism to av capacity to compete with d outside world.
Thanks

Mindfulness:


Nigeria's export rate is MUCH higher than its import rate.

fortunately for me i just realized the trade deficit list is infested by developed countries, diversification among other factors is what defines them.

engrchykae:
what imaginary benefits?the benefits we never had after IBB devalued the naira.
These guys are gradually exposing themselves as culprits in IBB's coup against Buhari and the reason is clear,he refused to devalue the naira and the good boy maradona aka ibb came and did the bidding of his anglo american masters.
Please guys read through this frustration and see the threat on how pmb have not learnt his lessons after he was booted out from office.
If we devalue today,next tomorrow they will call for devaluation again ellusively hoping that there is an imaginary benefits.
They said he came to power as a strongman that will place the interest of Nigeria above that of foreigners and that buhari will stand up to foreigners.

Your comment is very insightful.

erico2k2:

With due respect NOT
This is the Business definition of manufacturing
The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications. Manufacturing commonly employs a man-machine setup with division of labor in a large scale production.

Read more: http://www.businessdictionary.com/definition/manufacturing.html#ixzz46Ufz8VXS
Good example is I cannot manufacture crude oil but I can manufacture vegetable oil,I cannot manufacture charcoal but i can manufacture chacoal canister.Hope this is a bit clearer.

In order to make crude oil you must produce it- that process of production is the same as manufacturing. Crude oil doesn't pop up from the ground and start filling ships without doing anything.

In order to make charcoal you must produce it- that process of production is same as manufacturing. Charcoals don't fall from sky.

It doesn't matter what you call it, you still must produce (manufacture) it.

Moreover, some words are used colloquially, so an advanced person doesn't even need that dictionary definition sometimes.

NavierStokes:


I had added a text to the original piece up there. A lot of Nigerians sorry Africans have this paranoia about anything west or IMF . The west have their humanitarian sides and their business sides, and in all they understand one thing that they do what is best for them self and for the group. Nigerians expect the IMF to do the job of the UNO or UNICEF, they are all set up for different reasons.

In all they protect themselves by giving us earnings because when we flip, we will still come to them to borrow or send refugees across or ask for hand outs you see either ways we are their problem.

exactly. I don't understand why many Nigerians distrust imf and other western financial agencies while happily applauding the Chinese.The substandard products flooding our markets today and knocking out the little indigenous companies present in naija are mostly Chinese. China is just exploiting US like the British back in the day-which is hardly any cause for euphoria. this is the case of a slave trading masters.
it's a given that for those top economies to prevail (China and Europe) , other countries would be underfoot (3rd world countries) but, that doesn't stop us from laying the blame on the appropriate doorstep. if our govt misuses the Chinese loan, we would also end up being dictated to by them because, we can't repay it.

omohayek:


It is precisely the redoubled efforts at fighting Boko Haram and corruption which makes me find Buhari's economic policies such a terrible shame. A whole year has already elapsed without a budget even being passed, let alone any significant measures which might offer a light at the end of the tunnel; if in 3 years the average Nigerian is no better off than he or she was in 2015, won't the majority's conclusion be that fighting corruption is a bad thing that causes economic suffering? As far-fetched as that might seem, it's exactly the same "reasoning" behind why people blame the IMF (whose loan offer Babangida actually rejected) and SAP for Babangida's corrupt and inflationary policies.

But the problem here is not that fighting corruption and BH is bad or unnecessary, the problem is that people are not aware why it is essential and urgent. And it is a government's duty to justify their decisions in a way that a simple person can understand it.

The issue with the budget is just terrible.

benji93:

fortunately for me i just realized the trade deficit list is infested by developed countries, diversification among other factors is what defines them.