PBundles:
Sorry but this doesnt translate to good news to me. This simply shows that the CBN may be in more dire straights and the reason why the are stating this is because news must have gotten out that they wouldnt be able to meet their forward contract obligations. In short a forward is a contract in which parties agree to deliver a certain amount at a certain date. As these are $ forwards, the customer (could be banks,or those authrised to trade with the CBN) has a contract to deliver other currencies ( Im assuming Naira) to the CBN and will get in this case $. They can also choose at the delivery date to pay/receive the difference, depends on the wording of the contract.

Seems they dont have enough $ to meet this and since they are obligated they mahe decided to intervene. I wonder how long they will and can continue to intervene. The Swiss tried for years against the Euro, they ultimately failed.

This is a short term (as most things are in Nigeria, God forbid we try anything long term) plan as usualm and then keeping our fingers crossed hoping it will solve it self.

Let the Naira free float and save yourself the headache, the market is already telling you the worth of the naira, no need trying to keep up the facade which will only cost you $ you urgently need yourself. Its like a unattractive woman applying tons of make up to get a man, wont he see your true face one day, and then what.

Well just my two cents and +20 years in international banking...........

Buharimustgo:
I hate all this jargons, simply sale cheap dollars to manufacturers and mandate them to sale cheap products to Nigerians very simple,and u r busy speaking grammar

PBundles:
Sorry but this doesnt translate to good news to me. This simply shows that the CBN may be in more dire straights and the reason why the are stating this is because news must have gotten out that they wouldnt be able to meet their forward contract obligations. In short a forward is a contract in which parties agree to deliver a certain amount at a certain date. As these are $ forwards, the customer (could be banks,or those authrised to trade with the CBN) has a contract to deliver other currencies ( Im assuming Naira) to the CBN and will get in this case $. They can also choose at the delivery date to pay/receive the difference, depends on the wording of the contract.

Seems they dont have enough $ to meet this and since they are obligated they mahe decided to intervene. I wonder how long they will and can continue to intervene. The Swiss tried for years against the Euro, they ultimately failed.

This is a short term (as most things are in Nigeria, God forbid we try anything long term) plan as usualm and then keeping our fingers crossed hoping it will solve it self.

Let the Naira free float and save yourself the headache, the market is already telling you the worth of the naira, no need trying to keep up the facade which will only cost you $ you urgently need yourself. Its like a unattractive woman applying tons of make up to get a man, wont he see your true face one day, and then what.

Well just my two cents and +20 years in international banking...........

69MissedCalls:
This dollars they are pumping can be used for other things. Forget exchange rate let's get productive

PBundles:
Sorry but this doesnt translate to good news to me. This simply shows that the CBN may be in more dire straights and the reason why the are stating this is because news must have gotten out that they wouldnt be able to meet their forward contract obligations. In short a forward is a contract in which parties agree to deliver a certain amount at a certain date. As these are $ forwards, the customer (could be banks,or those authrised to trade with the CBN) has a contract to deliver other currencies ( Im assuming Naira) to the CBN and will get in this case $. They can also choose at the delivery date to pay/receive the difference, depends on the wording of the contract.

Seems they dont have enough $ to meet this and since they are obligated they mahe decided to intervene. I wonder how long they will and can continue to intervene. The Swiss tried for years against the Euro, they ultimately failed.

This is a short term (as most things are in Nigeria, God forbid we try anything long term) plan as usualm and then keeping our fingers crossed hoping it will solve it self.

Let the Naira free float and save yourself the headache, the market is already telling you the worth of the naira, no need trying to keep up the facade which will only cost you $ you urgently need yourself. Its like a unattractive woman applying tons of make up to get a man, wont he see your true face one day, and then what.

Well just my two cents and +20 years in international banking...........

Truth234:



Since the modification of the foreign exchange policy by the CBN, over $1bn had been made available to meet the needs of various users of foreign exchange.

PrinceMario:
You're getting it wrong Sir. Some of this manufacturer are also involved the forex rounding tipping.
For example, the CBN sells $100,000 to company XYZ at the rate of 300/$. Company XYZ pays #30,000,000 to CBN.
Company XYZ, knowing how much dollar costs at the black market, and knowing how much he could make with this cheap dollar without going through the stress of manufacturing or whatever now head to an Aboki (Berue D Change) . XYZ negotiated with the aboki and decide to sell at maybe 430/$ making a profit of #130 on a dollar, and banking a net profit of #13,000,000 without actually going through any stress of producing anything or rendering any service. The Berue D Change Operator who bought the dollar from company XYZ at the rate of 430/$ may decide to sell at the rate of say 520/$ making a profit of #90 on a dollar and also banking a net profit of #9,000,000 from the transaction.


This is just a typical illustration of how some few people sabotage the economy and make the masses bear the loss.

69MissedCalls:
This dollars they are pumping can be used for other things. Forget exchange rate let's get productive

PrinceMario:
You're getting it wrong Sir. Some of this manufacturer are also involved the forex rounding tipping.
For example, the CBN sells $100,000 to company XYZ at the rate of 300/$. Company XYZ pays #30,000,000 to CBN.
Company XYZ, knowing how much dollar costs at the black market, and knowing how much he could make with this cheap dollar without going through the stress of manufacturing or whatever now head to an Aboki (Berue D Change) . XYZ negotiated with the aboki and decide to sell at maybe 430/$ making a profit of #130 on a dollar, and banking a net profit of #13,000,000 without actually going through any stress of producing anything or rendering any service. The Berue D Change Operator who bought the dollar from company XYZ at the rate of 430/$ may decide to sell at the rate of say 520/$ making a profit of #90 on a dollar and also banking a net profit of #9,000,000 from the transaction.


This is just a typical illustration of how some few people sabotage the economy and make the masses bear the loss.

PrinceMario:
No country become productive with her currency worthless.
Sensible investors (who drives the economy) wouldn't want to have anything doing with your country.

Trust me, you wouldn't want to go and invest in Zimbabwe where $1 is about 10000000000Kwacha

postemail:


Morning bro. I have a question about this topic, and your concerns for CBN's weekly intervention.

(1)If CBN don't intervene and allow a free float, won't the naira exchange rate get unhinged and just shoot for 1000 or less per dollar?

That would mean "massive" inflation because we are an import dependent nation.

(2) without CBN's dollar supply, can the BDCs and banks source enough dollars to meet traders, travelers and politicians demand?

-I'm not sure they can because our banks are just piggybacking on gov't.

CC Truth234

Truth234:


CBN is following a plan/strategy. Last week, the CBN mopped up N373 billion through sales of treasury bills in order to prevent too much Naira pursuing the available foreign exchange resources and putting pressure on exchange rates. It was a success as the cash in the market dropped to N2 billion from N74 billion, prompting increase in overnight lending rate to 15 percent.

The idea is to reduce cash availability in the market so greedy capitalists/investors won't mop up dollars when those forward contracts matured. Hence, end-users can access them at moderate rate.

I also think the CBN would be able to meet those agreement going by our forex generation and current oil output.

Buharimustgo:


My dear,the same way they pay directly to the end point irrespect to school fees etc ,they should do same for the manufactures,moverover what is form M meant for again?

onatisi:


Hehehehehehe
Nigerians never see anything.
$1 billion dollars gone within 2 weeks . Next time ppl will think twice before voting

onatisi:


Hehehehehehe
Nigerians never see anything.
$1 billion dollars gone within 2 weeks . Next time ppl will think twice before voting

PBundles:
Im not privy to their plan/strategy so I cant comment on that, but certain things dont make ssense.

You donty mop up loacl currency by issuing TBills, at least not Niara TBills. Something tells me that those who bought TBill were investors, possibly international. And I think it was more a funding reaction. What are T Bills actually, simply IOUs from the CBN to external holders, why, to fund. Not to mop up Naira. I stand to be corrected but have never seen that in all my years. If you have examples I would be interested to know.

On the second part, that is incorrect. The CBN has no choice, those contracts will be concluded and they will need to deliver. These indivuals already have $ accounts, otherwise they wouldnt be able to enter these contracts, so on settlement date, $ will be delivered and Naira/Or what ever currency was on the other leg, will be paid. Its that simple.

On the CBN meeting the $ obligations, they cant thats the whole problem. The $ they have are enough for Cap spending and funding the exchange window. If they could then why the problem, why the intervention?

I wrote a a post a year ago where I predicted the trading range of the Naira to USD based on certain inputs, I wasnt off. I will see if I can find it and repost. I do this for a living, I can dream this.

Truth234:


I don't even know how to respond to you, given your submission. When gov issue TBills its usually to raise fund to finance capital projects. Now what the CBN is doing is raising fund via Tbills and also using it as a tool to reduce naira availability in order to curb investors excesses in terms of dollar liquidity. Also, most of the investors are locals as foreign investors are bend on having a free floated currency before jumping in, at least that was obvious from the 87 percent subscription. Likewise, if there is no scarcity of fund overnight lending rate won't jump to 15%.

Again, going by our oil output and surge in global oil prices, the CBN is generating about $3 billion per month. I am still yet to see how they can't meet this IOU.

For the record, the intervention is part of the CBN plan to clear backlogs, it does not mean the apex bank is not generating enough forex.

PBundles:
You dont need to respond, im noty looking for your confirmation believe me. I think it was I that mentioned that there are used for funding, you claimed that by mopping up the Naira this would eliviate naira purchases of $, but its fine. As I mentioned I wasnt privy, but maybe you are. I think they are trying a.o. to control the inflation rate. The oil income is not enough, otherwise you wont issue T Bills I would assume. I could go into that but not interested in explaining that, you should get that. Also revenue is nothing, its bottom line Im interested in. If you get $3bn but have an expense higher then that means nothing. Its all about efficiency margin. No need to go back and forth but will leave you with one question:

If the T Bill was a success as you mentioned, O/N was 15 percent, then why is it now 17.63 NIBOR @ 1.20 BB screen Nigeria BTMM( 13% rise in 2 days) . I know you don know how to respond to me.

Dont know why I fall trap to these discussions. Later.................

Truth234:


The oil income won't be enough to finance the 2017 budget but would be more than enough to finance 2.2 trillion of the 2017 budget (7.3 trillion) stipulated to come from oil revenue. Also, mopping up naira will not elevate naira purchases but reduce investors/capitalists buying power, therefore, end-users would be able to access it.

Here is a link http://www.vanguardngr.com/2017/03/scarcity-funds-worsens-cbn-mops-n373-billion/

Again, the Nigerian Inter bank Offered Rate I quoted was for last week. To be honest you strike me like an investment banker, and to even come on here and throw it in the conversation as if it matters than the discussion itself is 'surprising'. I am a foreign exchange research analyst and trader myself with over 15 years experience. An investment banker should know NIBOR changes based on fund availability. Goodbye.

Truth234:


The oil income won't be enough to finance the 2017 budget but would be more than enough to finance 2.2 trillion of the 2017 budget (7.3 trillion) stipulated to come from oil revenue. Also, mopping up naira will not elevate naira purchases but reduce investors/capitalists buying power, therefore, end-users would be able to access it.

Here is a link http://www.vanguardngr.com/2017/03/scarcity-funds-worsens-cbn-mops-n373-billion/

Again, the Nigerian Inter bank Offered Rate I quoted was for last week. To be honest you strike me like an investment banker, and to even come on here and throw it in the conversation as if it matters than the discussion itself is 'surprising'. I am a foreign exchange research analyst and trader myself with over 15 years experience. An investment banker should know NIBOR changes based on fund availability. Goodbye.

PBundles:
Please dont tell me you based your info on a newspaper article. Ok fine. I never stated I was an investment banker (you assumed ....again, a most of your claims are assumptions) feel free to read my post. Im simply stated I was in banking for over 20 years, but my field of specialization is not that far off. Nice to know you are a analyst. I also teach at an European Business school, have been since 2002.

One thing though, you stated that an investment banker would know that know that NIBOR changes based on fund availability Um No.. sorry I had to chuckle NIBOR like all bank offer rates is simply that rate at which BANKS want to lend to each other.
different things, in fact I can show you even in the case of Nigeria where the 3 or 6 months TB moved opposite for NIBOR on the same day.

No qualms you do your thing I do mine.

Again, the Nigerian Inter bank Offered Rate I quoted was for last week.

Truth234:




Again I didn't know what to say. Sir, thanks for the discussion.

PBundles:
Good morning my brother, stay blessed.

Now to your questions.

They dont have a choice at this moment they MUST abide by the contract. If they dont that would send SHOCK waves to the international system, since word will get out that a whole CBN cant abide by their contracts. So for all outstanding forwards, they must but[b]for all new forwards simply price them at the black/parallel market rate. Hence sending a clear message.[/b]Then I would float. Believe me ppl are making a killing with these forwards if you have the right connection. Also note that the foward rate is linked to bank interest rates so they cant keep this up.

On the free float, we have a saying in investment banking, when being shaved sit still. Look we are were we are for a reason. Mismanagement etc, you know the story. I would free float but..........and here it come............tax heavily I mean exorbitantly all goods that I feel we have industries in Nigeria. I would call it the home grown tax. If we can make it and you import it get read to pay 200-500% tax. Guess what, these goods will decrease. Then I would appoint a committee to oversee that the goods we make can be at least 90% level of those imported, if not I will also tax you, that way keeping the quality levels high since this is the biggest fear with buying made in Nigeria over imported.

On quest 2, I would let the market sort itself out. How does a market work, Eco 101, at constant demand if supply increases prices fall, if supply goes down they go up, at a pointy we will find equalibrium and we should live with it. At least it will be constant.

There is this fallacy that international companies want a strong or weak Naira, NO..they want a STABLE Naira.

Hope I have answered your questions.

postemail:


Thanks for the reply. I think in all of these we must put in the "naija factor" in every economic policy. From my laymen point of view, Nigeria tend to defy textbook economics. A typical example is this: gov't decides to let the naira fall to it's natural value. ..say 800/$. The southern traders spin it to mean Buhari is secretly trying to enrich his northern brothers by robbing the southern traders. Those at the creeks dynamite a few pipelines. Oil sales volume drops.. Fewer earnings for our reserve. Then it really gets messy. Opposition party sees an opening, steps in to support those agitating by calling the whole mess - tribalism by the northern cabal.

Honestly I really can't think through the mess. It's a Naija thing...call it Naija factor. Simple issues tend to be spun into a complex web of half-lies and half-truth. I see it everyday in the newspapers. Another example is the T. B. Joshua church building collapse a couple of years back... Something as simple as faulty structure that caused the collapse was spun in a way you'd think UFO (Aliens) nuked the building
Pardon me for trying so hard to explain this naija factor.

Also I think many SMEs determine the price of their goods based on the forex rate on the street -aboki rate.