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Nairaland Forum / Nairaland / General / Business / CBN Floats The Naira, The Implications For You And I (77790 Views)
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Re: CBN Floats The Naira, The Implications For You And I by 19naia(m): 12:52am On Jun 16, 2016 |
Sure this means devalue of the Naira but its the devaluation that has been waiting to float after being held back by Naira Pegging and $ scarcity. The pegging was done to protect the dwindling oil dollar income without having to raise the price of Nigerian oil to compensate for the devalued Naira-(they cannot just raise oil prices because of international price standards,they would lose customers and ALL oil revenue, so they just peg the currency to an unatural high value instead -to stop naira devalution effects in the weakened oil market). Now that oil price is coming up to a stable place and reserves have started to stabilize, there is no more need to peg the naira and risk the imbalance it does to the economy as a whole. Right now, the CBN stands to gain in this devaluation move because it is sitting on $ reserves valued at 199 per unit , that will soon become around 285 per unit or more. That is a very profitable move for them. They prevented massive losses as reserves dwindled by pegging naira at 199, and now they are ready to rake in massive naira gains by selling those N199 dollars for much higher. CBN retains the right to *move in from time to time* and that is the clause they need to move in and peg the Naira again down the road for when it favors them to set up for another round of collecting dollars under a high naira value and then releasing the naira peg later to bring in a profit. Also move in when the market goes rougue under wreckless influences. Free Market is prone to all kinds of economic disasters especially in corupt and greedy markets. This is good proof also that CBN has confidence in stable future $ revenues coming in -but the Niger-delta damage to oil revenues has not yet settled. I recall it was forcasted to dent budget plans in months to come. Selling dollar futures is also a CBN hedge against dollar scarciry in the future, they can always print new Naira bills to pay the $ owed to those who bought dollar futures. Buying dollar futures from CBN is a bit of a risk because dollar scarcity is a clear possibility again in CBN coffers. But, you can get your Naira back even if CBN has to print Naira to pay you. A devalued Naira in CBN eyes right now is a great profit as it is for any one who has dollars. That profit may be just the hedge they need for the Niger-Delta oil revenue damages to affect budgets in months to come. Eventually it will permeate through the economy and balance out. The lower value of Naira will also come to a great advantage when all the refinery projects come on line in years to come. Other wise the Naira value will be lowered when it comes time to export refined petrol so as to encourage customers to bring their revenues in. Maybe they will lower refined petrol prices instead but that may be under strict international price setting. So, to avoid the consequences of lowering prices, if any, they will lower the value of the currency. Low value currency is a good thing when you have lots to export for revenue income or to attract foriegn investors with money and essential services. Thats what they mean when life gives you sour lemons, add value to it and make lemonade. When life gives you low value currency, turn it into a chance to attract foriegn customers and investor , then watch revenue flow in. All it requires is productivity. Refinery products in quantities to meet export demand is a major step. Dangote consistently lowered his price of cement as he expanded production, it secures his niche in the market and solidifies his customers commitment. Sugar Market as well but i am not so clear about that. Dangote is in Tomato market also. Produce, produce and produce in variety and quantity, that is the only way out of the currency and scarcity problems. Any economy and government so heavily dependent on one product, is bound to ups and downs and extreme vulnerability if it is not the world leader of that particular market or does not have formidable military and international diplomatic influence around the world to use to shape market and governement policy beyond its borders. Saudi Arabia is an example of being overly dependent on one product(oil) but having the advantage of world oil market influence and close support of a military and diplomatic superpower(USA). Saudi Arabia is the one that called for the drop of oil prices that caused all this problem to begin for Nigeria. Also productivity of oil world wide, influenced the Saudi decision and actually makes it better for the customer except in Nigeria where petrol prices have gone up because of complications with the government entwined oil market. Hence the privatization of sourcing fuel to depots and privatization of refineries in Nigeria, which will infact lead to the drop in fuel prices in Nigera in time when fully functioning in private hands. Dangote refinery is yet to be completed. Soon. All these meausres are right on track and the suffering period would have come any way under any elected official, but the recovery of looted funds now is helping things from being worse, as well as the economic future being lined up very well. Even the Currency devaluation will prove to be very beneficial when the works in progress are complete and bringing in foriegn customers with their money. I hope the focus on anti coruption continues because it is the prime factor all along the way that has made things harder for everyone than they have to be. Nigerian Oil revenue is enough to serve the country well as long as NG doesn't have to incur loss by being in the fuel import business. NG needs to let Dangote and others refine oil and export finished product while NG keeps the oil revenue for domestic expenses. That is already in the works. The Government should never have any hand in any imports. Anything imported in its hands such as executive cars or other advanced tech, should be purchased from local business who imported them as their business or manufactured them as their business. Even NG official Jets should be purchased in Nigeria through private Nigerian importers so that the government has no direct hand in spending its money abroad. Spend it into the hands of Nigerian citizens in Nigeria and let them do the work of importing if at all neccessary. If Innoson can make a reliable car, why must buhari ride in S class Mercedes? If Innoson cannot make 737 jet, then ok let boeing make it in USA but let a Private Nigerian company be contracted or paid for the work of making it avaialable to NG. It creates jobs locally and promotes NG revenues serving NG people every time those revenues are spent. Nigeria is on a good track and this suffering period was set up to come before buhari reached office. He made a bad currency exchange policy decision but it prevented worse things from happening in oil revenue reserves despite ruining the comercial investor markets. Maybe things would have been worse if he let Government collapse by having to pay N350 for dollars ,if private market was free to do whatever ,still dollar scarcity would expand and drive Naira even lower than 350. Maybe even crash the Naira to nothing along side a collapsed government and possible create so much civil unrest that River Niger would now be the new border of Nigeria. The key thing is that a complete collapse has been averted and the strangling currency exchange policy has been lifted ,as well as the needed devaluation being allowed all in due time. Its all working out despite the damages. Worse damage was waiting all along the way and this has all opened doors and set up a future for an economic boost beyond what was there before all this trouble. Nigeria will have Home made fuel at all the pumps and low fuel prices. The future fuel prices may even be able to fall as low or lower than subsidy prices and do so without subsidy. Nigeria will have increase oil revenues by the added value of refined petrol in quantities enough to export. Nigeira will now have revenue savings from not having to incur net losses due to expensive imported fuel to the pump. Nigeria will have less revenue lost to embezzlement. All of this will be better than ever and is owed to the problems faced now and the complete dismantle and restructure approach taken recently(dismantling governemt structure over fuel depot supply and refineries, its all shifting to private now). No more patch work slapstick economic house under a government that looted a combined total of over a single year's worth of natinal budget while under one presidential term. Huge net gains in store for Nigeria, the pain going on recently is just the pain of removing the metaphoric dagger that was embedded in the nation's back long ago. You cannot expect a doctor to just come and remove it and there be no explosion of pain and bleeding before the healing sets in. Maybe even a slight infection to be treated over time before the complete healing is done. Sadly, the scar will always be there but serve as a lesson and reminder of where to take caution for the next generation. 7 Likes 1 Share |
Re: CBN Floats The Naira, The Implications For You And I by macherie1: 12:54am On Jun 16, 2016 |
What CBN has just done is shoot themselves in the foot. An economy that is largely dependent on import has no business with a full float exchange rate policy. We are net importers. Devaluation of our currency doesn't help anyone. If we were exporters, devaluation will make our goods more competitive but as importers, we are at the mercy of the banks who will exploit the policy to their own benefit. Asian Tigers like China who understand their economy had a fixed exhange rate policy for decades and later changed to a managed float to encourage investment. Never free float. Why? As Net exporters, they had to keep their currency undervalued compared to other western nations. Hence their goods became very competitive so much that Americans now import largely from China. Most American companies even have their factories in China. What should Nigeria do as a Net Importer? Have a managed float exchange rate where the currency is prevented from being fully depreciated against market force to prevent a very sick economy from imminent collapse. Then Invest in infrastructure and develop export. The Asian Tigers broke the jinx of poverty in their countries by developing their export trade. The government should look at the things that Nigerians spend dollars on importing and loan money to Nigerians who can start producing those things here in our country. Invest in research and human capital development. But first, Buhari should fire every single member of his economic team. There are very weak and lack Ideas. Instead of them to study economies that have gone through this phase and what they did to get out of it, they keep applying trial and error economics, toying with the livelihood of over 200 million people. |
Re: CBN Floats The Naira, The Implications For You And I by Nobody: 3:06am On Jun 16, 2016 |
brixton:Well at least Sir Balewa you fit still buy sweets and chewing gum! 1 Like |
Re: CBN Floats The Naira, The Implications For You And I by onatisi(m): 5:05am On Jun 16, 2016 |
I still cant see the good thing about this move from cbn but since Nigerians love to suffer before learning then it is okay. |
Re: CBN Floats The Naira, The Implications For You And I by 989900: 5:54am On Jun 16, 2016 |
The new CBN policy to float the Naira 'sort of' (this is not a 'full/pure/clean float', rather, what we refer to as 'dirty/managed float')can either turn to be a good thing, or a bad thing. In this breakdown, I'll like to omit the hue: "appointed primary dealers" . . .. Pros: 1. The new policy will foster Forex inflow through FDIs, both portfolio (some rules need to be set for those as regards withdrawal) and long term investors. 2. It will lead to less hoarding (which is one of the major albatross of the Naira) if managed right. 3. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if the CBN will furnish it with far better supply than it has been doing lately. 4. It will lead to an even more appreciable value of the Naira in both the inter-bank and BM rates, if the CBN can implement the 'Boyo' approach by implementing 'dollar certificates' in payments to governmental organs. 5. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if the dollar weakens and oil prices keep going north of $50 along with increase in national production. 6. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if the Mining/Agric/manufacturing/export sector are well funded with Forex, low interest loans, and industry growth enabling laws. 7. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if reasonable stable power supply can be sustained. 8. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if we can get our refineries working at near top capacity. 9. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if the current transparency, prudence, and accountability campaign can be sustained along with recovered Forex loots. 10. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if reasonable/sustainable foreign withdrawal limits are set on Naira ATM cards. 11. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if the population can be educated on the need to patronize Nigerian made goods and services. 12. It will lead to appreciable value of the Naira in both the inter-bank and BM rates, if ultimately, the CBN can abort its criminal ways (I still wonder why banks are allowed to keep over 20 billion dollars cash money in their vaults without enough CRR nor SLR to back it up, or do they?). The Cons: Just flip the 'pros' on its head, and you'll have anarchy: demise of the Naira. |
Re: CBN Floats The Naira, The Implications For You And I by grandstar(m): 7:15am On Jun 16, 2016 |
tiwiex: Buhari's understanding of economics is lamentable and should leave policies to First Class advisors. Unfortunately, Adeosun and Emefiele do not fall into that class. Emefiele's biggest sin was he allowed the president to take over the affairs of the autonomous CBN. His lesser sin was that he began applying some restrictions on foreign controls. They still need to lift restrictions on 41 items 2 Likes |
Re: CBN Floats The Naira, The Implications For You And I by manmidtexy(m): 7:16am On Jun 16, 2016 |
davide470: What is going to be the General Online Platform or website of Operation for this Government / CBN / Interbank / Approve Dealers to End user and Coys Rate initiative ? |
Re: CBN Floats The Naira, The Implications For You And I by grandstar(m): 7:20am On Jun 16, 2016 |
989900: You have never ever supported devaluation! What is all this? 1 Like |
Re: CBN Floats The Naira, The Implications For You And I by 989900: 7:37am On Jun 16, 2016 |
grandstar: This is different from devaluation. This is 'dirty float', and this could as well go terribly bad, if not backed up with honesty and matching fiscal policies. ATEOTD, these are all grammar and terminologies, what we do in real world demand and supply, would define where we stand. |
Re: CBN Floats The Naira, The Implications For You And I by onatisi(m): 7:58am On Jun 16, 2016 |
grandstar:
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Re: CBN Floats The Naira, The Implications For You And I by davide470(m): 8:06am On Jun 16, 2016 |
manmidtexy:I think FMDQ OTC |
Re: CBN Floats The Naira, The Implications For You And I by PatcomAutos: 8:40am On Jun 16, 2016 |
If you can read through the lines below as seen on Reuters news, for those who think the autonomous/black market will just get out of the way like that, then we are still learning because if you read through the lines you will understand exactly what i am trying to say. Mr Emefiele said that categories of items classified as “not valid for foreign exchange” would continue to be shut out of the official dollar markets, raising the prospect of continued trade on a parallel market. Chart: Nigerian Naira Instead, the government rationed foreign currency to so-called strategic industries, bringing other businesses that could not access foreign currency to a standstill or forcing them to a flourishing black market where the naira has regularly traded at above N350 to the dollar. Razia Khan, chief economist for Africa at Standard Chartered Bank, said that Nigeria had boxed itself in by leaving the devaluation too late. That had left a backlog of $6bn-$9bn of unsatisfied foreign exchange requirements, which would be impossible to fulfil in one go without reducing foreign reserves to dangerous levels. |
Re: CBN Floats The Naira, The Implications For You And I by Horus(m): 8:43am On Jun 16, 2016 |
https://www.youtube.com/watch?v=_6tXeKYlZHE [size=14pt]Nigeria's Central Bank floats the embattled Naira currency[/size] |
Re: CBN Floats The Naira, The Implications For You And I by wellmax(m): 8:54am On Jun 16, 2016 |
macanu: And you that has no President, why not seek to understand simple Economics before spewing trash. |
Re: CBN Floats The Naira, The Implications For You And I by macanu(m): 8:58am On Jun 16, 2016 |
wellmax:professor tell me |
Re: CBN Floats The Naira, The Implications For You And I by fleczon(m): 9:14am On Jun 16, 2016 |
dolpaz: no |
Re: CBN Floats The Naira, The Implications For You And I by BLWeb: 10:28am On Jun 16, 2016 |
davide470: You didn't explain anything to us who can't comprehend your economic jargons. Explain to the layman. |
Re: CBN Floats The Naira, The Implications For You And I by onatisi(m): 12:28pm On Jun 16, 2016 |
#000000 |
Re: CBN Floats The Naira, The Implications For You And I by hotdi(m): 12:30pm On Jun 16, 2016 |
CHANCEMAN: It is called single window Forex. CBN will no longer fix official price for exchange rate anymore, but let the demand and supply forces of the market determine the rate. Single in the sense that they wouldn't be official price on one side, and parallel market on the other side. In this case, the CBN ceases to be the only supply of e.g. Dollar into the market. Also, CBN becomes a participant in the market instead of playing the boss. Its influence becomes minimal base only on regulatory roles. Are u satisfied? |
Re: CBN Floats The Naira, The Implications For You And I by onatisi(m): 12:31pm On Jun 16, 2016 |
PatcomAutos:God bless you for this comment . This is what I have been saying since yesterday,this policy is coming too late and it will only aggravate the problem on ground .,the deaf dullard president should have taken this step since last year but even how do I expect him to understand when he never even went to university |
Re: CBN Floats The Naira, The Implications For You And I by erico2k2(m): 1:05pm On Jun 16, 2016 |
designking:It would be an head ache cos it will be 2 expensive. Even if I plz to pass on the excess to the customer my goods would stay in the shelves for too long. The ROI would make no sense. |
Re: CBN Floats The Naira, The Implications For You And I by erico2k2(m): 1:05pm On Jun 16, 2016 |
hotdi:2 late. |
Re: CBN Floats The Naira, The Implications For You And I by erico2k2(m): 1:12pm On Jun 16, 2016 |
989900:Yeh but dnt you think he is on the Broadway to full divaluation? .cos if this magic flotation dnt work what next. |
Re: CBN Floats The Naira, The Implications For You And I by DisGuy: 1:23pm On Jun 16, 2016 |
macherie1: Until yesterday we have had a managed exchanged rate! Since '99 we have been investing in infrastructure and developing export- or at least that what they told us they have been doing, green revolution, operation feed the nation, agricultural transformation etc etc |
Re: CBN Floats The Naira, The Implications For You And I by 989900: 1:35pm On Jun 16, 2016 |
erico2k2: It would not work unless it is matched with sincerity and proper fiscal policies, with proper implementation to match. If the above is not done -- we are screwed as fcxk! I mean, we are going into the world now, so to speak . . . Yoruba will say "mo fi olorun si yin o" (I take God escort una). Now is the time to liberate 'NEPA' and 'NNPC' . . . I mean we are at that junction now, we cannot afford not to have regular power supply right now, nor afford to continue importing refined petroleum products now, or having fuel scarcity, or have a government (FG, State, or local) that embezzles recklessly -- it is make or break now! It is like when a child from the village leaves home for the first time for the city, to go and start surviving on his own. It is a 'dirty float' though, not a pure or 'clean float', so a first line safety net is still in place, à la CBN's interference via periodic buying and selling. |
Re: CBN Floats The Naira, The Implications For You And I by onatisi(m): 1:59pm On Jun 16, 2016 |
989900:The truth is the naira is messed up courtesy of the dullard president sluggishness, in the next few months the cbn will come out with another policy and dump this one they just announced when they realize that dollar has shot up to 400 - 500 naira |
Re: CBN Floats The Naira, The Implications For You And I by jpphilips(m): 3:10pm On Jun 16, 2016 |
jinglesbaby: You seem not to understand how the UK economy works albeit you live there, the UK earns from foreign investments not from physical commodities but robust stock market, EU banking hub, Arms and their local banking institutions, it is just about having that which attracts investors and spill forex for your economy, if you expect UK to attract supermarkets as investors you are wasting your time, UK is one country in the world that has partnered mostly with big corporations and controlling their equities hence profits, you may google Eurocopters, Airbus, Rover to mention a few. I wish you have an idea how much the premier league makes and how players transfer interpret to demand for the pounds sterling that have kept it afloat for decades. Uk is equally traditional and still make money from overseas territories despite stealing from the whole world during their colonial era, do you think the treasures have disappeared? hell no!! 3 Likes 1 Share |
Re: CBN Floats The Naira, The Implications For You And I by jpphilips(m): 3:18pm On Jun 16, 2016 |
Shym3xx: I think with the low crude price and the bombings in the delta has cut production significantly, hence the government's forex earning has been significantly downgraded. i don't think we are doing it as a way out but the only option. The Naira can not remain fixed under these circumstances I mentioned in a $500b economy? impossible!! 1 Like |
Re: CBN Floats The Naira, The Implications For You And I by jpphilips(m): 3:59pm On Jun 16, 2016 |
Shym3xx: |
Re: CBN Floats The Naira, The Implications For You And I by ritababe(f): 4:26pm On Jun 16, 2016 |
Seun: @ seun please why did you later ban thagift ? (the guy that ask if you support plagiarism). |
Re: CBN Floats The Naira, The Implications For You And I by jpphilips(m): 4:31pm On Jun 16, 2016 |
chrisnero: You actually quoted Ifeanyi Uba a NECO certificate holder in a serious economic discourse of this magnitude, brilliant!! 1 Like |
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