Naira Hits All-time Low, CBN Considering Devaluation.

From Businessweek.com

Nigeria’s naira fell to the weakest on record in the interbank market after the currency declined at a central-bank dollar auction and Governor Lamido Sanusi said the naira won’t be defended “at all costs.”

The currency of sub-Saharan Africa’s second-biggest economy lost as much as 1.8 percent to 164.425 per dollar and traded down 1.1 percent to 163.15 by 12:18 p.m. in Lagos, the commercial capital, the weakest since at least 1994, when Bloomberg began compiling the data.

The marginal rate at yesterday’s auction, which is also used as the prevailing exchange rate, weakened to 155.40 naira, the lowest on record. Sanusi made the comment on the currency in an interview on CNBC Africa television yesterday.

“Sanusi’s latest views somewhat represent a break with previous comments surrounding the naira and point to the increased possibility that the central bank is effectively starting to consider a controlled currency devaluation,” Matthew Pearson, the head of African equity products at Standard Bank Plc, wrote in an e-mailed research note today.

The central bank has been using foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions. It broke that band the first time on Sept. 26.

The West African nation will estimate its revenue using a crude-oil price of $75 a barrel and an exchange rate of 153 naira per dollar, weaker than the current 150 naira, according to the government’s budget proposal submitted to lawmakers on Oct. 4. If the 3 percent range is applied to the new 153 target rate, the upper band rises to 157.6, which is still above the present auction rate, Pearson wrote.

To prevent the dollar-naira rate becoming “a one-way and disorderly bet higher, the central bank will have to further tighten liquidity conditions and still provide ample foreign- currency supply at the auctions,” he said.

The central bank sold $400 million at yesterday’s auction, compared with $685.4 million demanded by lenders.

http://www.businessweek.com/news/2011-10-06/nigeria-s-naira-weakens-to-lowest-on-record-against-the-dollar.html

Every time the naira goes down, it means your salary and the value of the money in your bank account goes down as well. And the root cause is government overspending. When the government spends more than it earns, the difference gets taken out of every Nigerian's pocket.

Someone should please tell GEJ to stop spending so much money. The rate at which this government burns cash is just ridiculous. And its not like they are pending it on anything sensible, there are no new roads or railways or teaching hospitals or schools. Between salaries, allowances, bribes and corruption; all the money disappears with nothing to show.

Plus Jonathan wasted all the excess cash from the last oil boom on his s.tupid election campaign so that now that oil prices are falling, all of us must now become poorer. The guy deserves to be slapped hard.

From ibtimes.com

The Nigerian naira struck a new record low of 164.85 to the dollar in the interbank market on Thursday, pressured for a second day by the central bank's comments earlier this week that it would not support the currency at all costs.

After the market close, however, the bank took an alternative step to help protect the local currency, saying in a letter made publicly available that it would no longer allow oil companies to buy dollars at its auctions for buying oil product imports. Those companies should use the foreign exchange they earn from exporting crude oil, it said.

The ban applies to oil companies that have SWAP agreements with the state oil company, where they agree to market and export Nigeria's crude oil, in return for delivering fuel, like petrol and diesel, which is imported from other countries.

The decision is expected to reduce dollar demand at the central bank's bi-weekly auctions and support the naira.

"The move will reduce drastically demand at the official window and consequently help the naira appreciate. This could also be reflected in the interbank market as well," one foreign exchange trader said.

"What the oil companies do is to buy dollars at a cheaper rate at the auction and sell their export proceeds to banks or in the parallel market. It's good for the country in the long run because most of the oil firms are arbitraging on the naira currency," he added.

The naira weakened to 164.85 to the dollar, a new record low, at one point on Thursday, from 161.70 at the close on Wednesday. It remained under pressure after central bank Governor Lamido Sanusi said on Wednesday the naira could depreciate if oil prices and foreign exchange reserves continue to fall and attempts at monetary intervention are exhausted.

Last week the bank breached its policy and allowed the naira to trade outside the weakest limit of its target band but said it had not yet decided on whether to change the +/- 3 percent target band around 150 to the dollar.

Traders said the central bank's failure to fill all demand for forex at a bi-weekly auction on Wednesday, as well as its breach of the target band and its comment on the outlook for the currency have eroded confidence in the market.

FLEXIBLE APPROACH

"Many importers are now bringing forward their obligations in the face of the recent position of the authority on the naira's valuation," one dealer said.

"We have seen the forex reserves going down at a time when the oil price was above the 2011 budget benchmark, and the fact that next year's budget is being premised on (an exchange rate of) 153 (to the dollar) -- all these are indications that the government is no longer willing to defend the naira at the present level."

The exchange rate of 153 to the dollar assumed in the 2012 budget is weaker than the 150 per dollar rate on which Nigeria's 2011 budget is based.

The IMF said earlier this year that the naira was over-valued and that a more flexible approach to currency control would cushion external shocks to sub-Saharan Africa's second-largest economy.

http://www.ibtimes.com/articles/226522/20111006/nigerian-naira-hits-record-low-cbank-unveils-new-move.htm

Evil Brain:

Every time the naira goes down, it means your salary and the value of the money in your bank account goes down as well. And the root cause is government overspending. When the government spends more than it earns, the difference gets taken out of every Nigerian's pocket.

Someone should please tell GEJ to stop spending so much money. The rate at which this government burns cash is just ridiculous. And its not like they are pending it on anything sensible, there are no new roads or railways or teaching hospitals or schools. Between salaries, allowances, bribes and corruption; all the money  disappears with nothing to show.

Plus Jonathan wasted all the excess cash from the last oil boom on his s.tupid election campaign so that now that oil prices are falling, all of us must now become poorer. The guy deserves to be slapped hard.

You posted an article that points out the root cause to be the massive drop in oil prices, yet you immediately begin to invent a story about over spending. Na wa for you, sir!

First law of creating a thread:
Understand what you post before commenting.

. . .Now slap yourself!

Beaf:

You posted an article that points out the root cause to be the massive drop in oil prices, yet you immediately begin to invent a story about over spending. Na wa for you, sir!

First law of creating a thread:
Understand what you post before commenting.

. . .Now slap yourself!

@Beaf
Overspending = spending more than you can afford. If the oil price has dropped and the the government is still burning money like it was during the boom, that means they are overspending. You sir, are a re.tard. Now slap yourself.

@Everybody else.
The root cause is the government spending more than it earns. Oil prices rise and fall. Everybody except GEJ knew the prices would go down eventually. Not only did he waste the excess money that we should have been saving for a rainy day, he expanded the government and increased salaries right before the bubble burst.

Obasanjo used the proceeds of the penultimate oil boom to pay off 30 years worth of national debt. What did Jonathan do with the money from the last one? (Hint: It rhymes with Shmesidential Champagne.)

^
None of the two articles you posted mentions overspending even once. . . So, hurray!!! You just declared yourself an "inventor!!!!"
Now, jump up and slap yourself! Twai!

Beaf:

^
None of the two articles you posted mentions overspending even once. . . So, hurray!!! You just declared yourself an "inventor!!!!"
Now, jump up and slap yourself! Twai!

So its not mentioned in the 2 articles, therefore it doesn't exist? Did you forget to take your antistupid drugs this evening or what? Its like I'm talking to a goat.

That's it! I'm not replying to anymore of Beaf's trolling. If anyone else wants to have a rational discussion about what's happening to our dear country, I'm available.

^
Carry go, sir! You are very entertaining!
Any new "inventions" for us? LOLZZZZZZZZZZZZZ!!!

Oya, give yourself one Tyson punch! Gbooom!

Odechukwu retardeen is on top of the situation

I start to wonder if Beaf is not the main reason people hate GEJ.

What "Evil Brain" said is simple and follows laws we learnt as children - diminishing returns, demand & supply - a value (or situation or whatever) can only go so high, take so much punishment etc. And of course, throw enough money on the streets and you will get to where its no longer valuable!

These terrible times are coming upon us because GEJ threw away all OBJ got back and then threw away what was left after that.

Plus frankly, I don't think he had much in terms of plans in the first place with the clumsiness he shows - he just wanted to wear the emperor's clothes

Devaluation means harder times for Nigerians. Our economy is import dependent which means prices of food like rice and other products will go up. Remove subsidy and more people will be thrown into poverty. Beaf must be feeding fat from this to be in total support.

The Naira will ALWAYS be under pressure for as long as we are import-dependent until we 'allow' the currency to settle to its value. We've not seen anything yet as oil prices are also falling and corruption is unbridled.

At least a country that wants to develop should have comparative advantage in something, what is ours? What does the world buy from us apart from oil which is regulated in quantity and price (by OPEC)?

dustydee:

Devaluation means harder times for Nigerians. Our economy is import dependent which means prices of food like rice and other products will go up. Remove subsidy and more people will be thrown into poverty. Beaf must be feeding fat from this to be in total support.

Where did you pluck that from, oga? You guys always take an emotional viewpoint, rather than sit back and take a cold logical look at the issues confronting us. I think you need to read the article quite closely; oil prices are falling, therefore an economy that is 100% dependent on oil would have its currency value drop. . . Has nothing to do with overspending, so I have no regrets about bouncing evil brains brain like an Indian rubber ball.

If we want to avoid such economic swings in future, then we need to diversify our economy away from oil and embrace true federalism, but it seems ALL governors are seeking more oil money from Abuja instead of less, so the widening spiral to nowhere will continue.
Its a great opportunity the country has the for the first time our President believes in true federalism, but how is that ever going to be possible when no single state is imaginative or courageous enough to go it alone? You can't eat your cake and have it, depend solely on oil and our currency will swing with the oil price.

Everything has a consequence.

nuclearboy:

I start to wonder if Beaf is not the main reason people hate GEJ.

On the contrary, many people including me, love GEJ because of Beaf!!

Why? Because Beaf says the fact just as it is without sentiments and fear.

Take for example this thread.

How can a poster post something, and then be analysing something completely different.  Thats not not wisdom.

Even if the poster has something else to add, he should fist of all analyse everything based on what he posted, before  adding other stuffs.

Otherwise he can just change the topic of the thread!!

Beaf is very corrrect!!!

Now Punch yourself and roll on the floor Mr Poster!!!!

^
Lolzzzzzzzzzzzzzzzzzzzz!
Thanks bro!

dont have problem wit that. For its more cash in my pocket. Aboki i d come.

Poster you brought up an issue from an article and you have not allowede the house to express their diverse views and you hace started castigating GEJ. It make us feel as if you look for news that will pull GEJ down. You have to be logical with your criticism.

nuclearboy:

I start to wonder if Beaf is not the main reason people hate GEJ.

What "Evil Brain" said is simple and follows laws we learnt as children - diminishing returns, demand & supply - a value (or situation or whatever) can only go so high, take so much punishment etc. And of course, throw enough money on the streets and you will get to where its no longer valuable!

These terrible times are coming upon us because GEJ threw away all OBJ got back and then threw away what was left after that.

Plus frankly, I don't think he had much in terms of plans in the first place with the clumsiness he shows - he just wanted to wear the emperor's clothes

I have always warned people to stop expecting any logical conversation with BEAF. Watch him! People start thought-provoking threads about ills in our national lives; he jumps on the thread “pretending” to be God-assigned GEJ Angel Gabriel.
He does everything to derail such threads, swaying discuss away from the main issue. He incites insults and strives to make everyone loose focus.
If you love GEJ, and you wish our people well under his regime IGNORE BEAF and discuss issues dispassionately.
You give him too much attention; his ratings with the ‘fools’ soar and he smiles to bank for doing the dirty job and you and I pay for allowing him to derail intelligent discussions.

The forces of demand and supply should determine the true state of the economy. With that, we will know the true state of the econoy.

Subsidy is cool but its false perception in the first place cos the govt is burdened with so much financial responsibility, poster, when you say Jonathan overspends, you are wrong, Federal gov't overspends on subsidy of food and petroleum products. Yes, but if the Feds wanna stop spending, it therefore means subsidy should stop and the importers be discouraged from importing with the dollars, we can focus on Chinese currency for now.

The state gov'ts should take advantage of the true federalism that Jonathan government offers; to generate electricity, generate revenue from non-oil sector and carry on exports.

Banks should start lending, to enable the private sector hire. Government has no business in business other than regulation and creating enabling environment. The tax the businesses

AlanF100:


I have always warned people to stop expecting any logical conversation with BEAF. Watch him! People start thought-provoking threads about ills in our national lives; he jumps on the thread “pretending” to be God-assigned GEJ Angel Gabriel.
He does everything to derail such threads, swaying discuss away from the main issue. He incites insults and strives to make everyone loose focus.
If you love GEJ, and you wish our people well under his regime IGNORE BEAF and discuss issues dispassionately.
You give him too much attention; his ratings with the ‘fools’ soar and he smiles to bank for doing the dirty job and you and I pay for allowing him to derail intelligent discussions.

Who art thou? There is somfin suspicious about this person. You make use of two ID's, You must be Evil Brain

I have always warned people to stop expecting any logical conversation with BEAF. Watch him! People start thought-provoking threads about ills in our national lives; he jumps on the thread “pretending” to be God-assigned GEJ Angel Gabriel.
He does everything to derail such threads, swaying discuss away from the main issue. He incites insults and strives to make everyone loose focus.
If you love GEJ, and you wish our people well under his regime IGNORE BEAF and discuss issues dispassionately.
You give him too much attention; his ratings with the ‘fools’ soar and he smiles to bank for doing the dirty job and you and I pay for allowing him to derail intelligent discussions

BEWARE!!! There are GEJ men on Nairaland and [b]Beaf is their pointsman. Wont be suprised one day when Nairalanders will start being guests to SSS. You are warned [/b]

Those of you who are accusing me of unfairly targetting GEJ should go through my previous posts and point out any inacuracies you find. The link between exchange rate and government spending is secondary school economics. I don't see why we should be arguing about it or who else you expect me to blame other than the president.

@Beaf
You spoke about diversifying the economy. That is a perfectly valid point. But the truth is that the government has made zero progress is doing that and apart from a few flowery speeches, there's little evidence that they are even trying. Please correct me if I'm wrong.

The problem with some people on Nairaland is that they take serious issues for granted. Instead of analyzing issues objectively and in depth. They engage in vague criticism and character assassination. Even though, overspending wasn't mentioned in the article, it is one of the factors that affects the subject matter in the article.


There is a fundamental problem with our economy. Nigeria gets her foreign exchange mostly by selling oil in the international markets and remittance from Nigerians in Diaspora and to some extent Yahoo!Yahoo! boys(unjustifiable). It is very apparent that variations in supply and demand of crude products,which is the major source flow of foreign exchange into the country affects the national income. We import almost everything into this country. Importers and other international travelers scramble for the limited flow of hard currencies in circulation and that contributes to the fall of the naira and increase the prices of imported products.

Furthermore, Inflation increases, the value of your savings diminishes, wages remain stagnant, the common man suffers. CBN prints more money, thereby prompting the Government to overspend(which is what they know how to do best) without putting into consideration that inflation will hurt the lower strata of the society.

Does GED understand how the economy works? That is a question that needs to be addressed. I think he is under the control of people who are manipulating the economy.

This is day light robbery by our politicians. They do not need to point guns to our head to steal from us. All they need is initiate bad policies and milk us dry. The worst part is that a large segment of the Nigeria population don't understand basic economics and finance or are too cowardice to challenge the status quo.

Therefore, the suffering and smiling continues------Fela.

Mr--Why:

The problem with some people on Nairaland is that they take serious issues for granted. Instead of analyzing issues objectively and in depth. They engage in vague criticism and character assassination. Even though, overspending wasn't mentioned in the article, it is one of the factors that affects the subject matter in the article.


There is a fundamental problem with our economy. Nigeria gets her foreign exchange mostly by selling oil in the international markets and remittance from Nigerians in Diaspora and to some extent Yahoo!Yahoo! boys(unjustifiable). It is very apparent that variations in supply and demand of crude products,which is the major source flow of foreign exchange into the country affects the national income. We import almost everything into this country. Importers and other international travelers scramble for the limited flow of hard currencies in circulation and that contributes to the fall of the naira and increase the prices of imported products.

Furthermore, Inflation increases, the value of your savings diminishes, wages remain stagnant, the common man suffers. CBN prints more money, thereby prompting the Government to overspend(which is what they know how to do best) without putting into consideration that inflation will hurt the lower strata of the society.

Does GED understand how the economy works? That is a question that needs to be addressed. I think he is under the control of people who are manipulating the economy.

This is day light robbery by our politicians. They do not need to point guns to our head to steal from us. All they need is initiate bad policies and milk us dry. The worst part is that a large segment of the Nigeria population don't understand basic economics and finance or are too cowardice to challenge the status quo.

Therefore, the suffering and smiling continues------Fela.

Correct analysis. This has been the nigerian modus operandi over the last 40 years.
You have broken it down to layman's language.

why do we blame GEJ for every of our Bleep up?if persn sh*t for road dem go blame am,very soon una go blame am because sey una no fit perform for b*d wif ur wi*es.i hate every hater of GEJ.go fry stone if you no get wetin to do.

Ijogz K:

Who art thou? There is somfin suspicious about this person. You make use of two ID's, You must be Evil Brain

I am not Evil Brain. Could I ask you what is suspiciuos about me?

dagboss:

I have always warned people to stop expecting any logical conversation with BEAF. Watch him! People start thought-provoking threads about ills in our national lives; he jumps on the thread “pretending” to be God-assigned GEJ Angel Gabriel.
He does everything to derail such threads, swaying discuss away from the main issue. He incites insults and strives to make everyone loose focus.
If you love GEJ, and you wish our people well under his regime IGNORE BEAF and discuss issues dispassionately.
You give him too much attention; his ratings with the ‘fools’ soar and he smiles to bank for doing the dirty job and you and I pay for allowing him to derail intelligent discussions

BEWARE!!! There are GEJ men on Nairaland and [b]Beaf is their pointsman. Wont be suprised one day when Nairalanders will start being guests to SSS. You are warned [/b]

I am aware of GEJ men on NL; both self-appointed and paid. There is nothing new or bad about GEJ men noseing-around popular internet fora like NL; as long as they make positive use of the abundant opportunities and information therein.
It is to their benefits when people freely discuss burning national issues in a forum like this. All they have to do is watch, take notes, compare notes and take actions. Many people are unrepentant cynics and will never see anything right in any Govt. policies while some are intelligent problem-solvers always proffering possible solutions to myriad of national ills currently plaguing the nation.

My point is BEAF should not be encouraged (by giving him unnecessary attention) to derail all threads that question govt. economic/social/political policies that affect peoples life.

From Businessweek.com

Quote
Nigeria’s naira fell to the weakest on record in the interbank market after the currency declined at a central-bank dollar auction and Governor Lamido Sanusi said the naira won’t be defended “at all costs.”

The currency of sub-Saharan Africa’s second-biggest economy lost as much as 1.8 percent to 164.425 per dollar and traded down 1.1 percent to 163.15 by 12:18 p.m. in Lagos, the commercial capital, the weakest since at least 1994, when Bloomberg began compiling the data.

The marginal rate at yesterday’s auction, which is also used as the prevailing exchange rate, weakened to 155.40 naira, the lowest on record. Sanusi made the comment on the currency in an interview on CNBC Africa television yesterday.

“Sanusi’s latest views somewhat represent a break with previous comments surrounding the naira and point to the increased possibility that the central bank is effectively starting to consider a controlled currency devaluation,” Matthew Pearson, the head of African equity products at Standard Bank Plc, wrote in an e-mailed research note today.

The central bank has been using foreign-currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its twice-weekly auctions. It broke that band the first time on Sept. 26.

The West African nation will estimate its revenue using a crude-oil price of $75 a barrel and an exchange rate of 153 naira per dollar, weaker than the current 150 naira, according to the government’s budget proposal submitted to lawmakers on Oct. 4. If the 3 percent range is applied to the new 153 target rate, the upper band rises to 157.6, which is still above the present auction rate, Pearson wrote.

To prevent the dollar-naira rate becoming “a one-way and disorderly bet higher, the central bank will have to further tighten liquidity conditions and still provide ample foreign- currency supply at the auctions,” he said.

The central bank sold $400 million at yesterday’s auction, compared with $685.4 million demanded by lenders.

CBN GOVERNOR, SANUSI WELL DONE! DIVIDENDS OF POOR MONETARY POLICIES.

Evil Brain:

Those of you who are accusing me of unfairly targetting GEJ should go through my previous posts and point out any inacuracies you find. The link between exchange rate and government spending is secondary school economics. I don't see why we should be arguing about it or who else you expect me to blame other than the president.

@Beaf
You spoke about diversifying the economy. That is a perfectly valid point. But the truth is that the government has made zero progress is doing that and apart from a few flowery speeches, there's little evidence that they are even trying. Please correct me if I'm wrong.

If I may, I would like to correct some misconceptions you posted; first, exchange rate and government spending isn't secondary school economics, that's more of Macro economics you do after Micro Economics 101. This course is done in college and though it explains the basic, it isn't enough the in-depth of exchange rate and Government Spending (GS). Second, unlike Inflation trend, trade balances, economic growth, production (GDP), GS isn't directly relational to ER in that GS is part of several fiscal fiscal policies which controls a minute % of ER. While I understand your point about overspending (Domestic / International debt) which is a minute factor, but comparing our debt to GDP ratio, we are way below than some country averages. The core of the problems is majorly on the Montetary policies of the CBN rather than the Fiscal policies of the government.

Gej is working.

Evil brain, What a name who inspired you to take it