@Xetima, Amaechi did well and saved over 40 billion for Rivers, I only wonder why he has left save mode to spend mode. He got a loan approval from the state legislators and I think he has made another request for more money. I only hope it is not for 2015 things. He continues to wail over the reduced Federal allowee he is getting as reason for his inability to complete many of his projects

Keluong:
pls, this part is not clear to me


Are you saying that if the CRR is incresed, ie if the lending percentage is increased, there will be increased lending rate? Isn't it when there is reduced amount to be lent, thhat there will ve eventually higher lending rate?
Someone should please explain the MPR also for me. I don't seem to get this explanation.

If the reserve ratio is increased, it means banks have less money to do business with because they now have to reserve a higher amount which is not available for business. Consequently, there is less money to lend out, this increases interest rate and when interest goes up, people don't borrow money thereby reducing the money in circulation.

MPR is like the base rate of lending or simply put, the minimum rate at which banks lend out money. So banks lend out money at MPR plus a certain margin. This means when MPR is increased, interest rate also goes up and like I explained above, when interest rate goes up, people don't like to borrow, hence, there is less money in circulation and less money for people to spend. Hope this helps!

Just a piece of Macro-Economics and Monetary Economics ECN213

Btw non Homo-economicus will *myopically* think economists are Stingy, not knowing that without them there would be no Economy.

Op abeg dont bring forth Econometrics for them o, b4 u scatter thier dada

Kimoni:



If the reserve ratio is increased, it means banks have less money to do business with because they now have to reserve a higher amount which is not available for business. Consequently, there is less money to lend out, this increases interest rate and when interest goes up, people don't borrow money thereby reducing the money in circulation.

MPR is like the base rate of lending or simply put, the minimum rate at which banks lend out money. So banks lend out money at MPR plus a certain margin. This means when MPR is increased, interest rate also goes up and like I explained above, when interest rate goes up, people don't like to borrow, hence, there is less money in circulation and less money for people to spend. Hope this helps!

Yes it does.
Thanks

Any person in the house that can give me a bricklayer's explanation on why petrol pump price has refused to come down even with the drastic reduction in the price of crude oil. And it is very likely the FG is still subsidizing petroleum products.

I am kind of confused cos the prices of petroleum products have gone done in the US, China etc expect in Nigeria

webgenius:
@Sureguy02 ans Franciskaine. I agree with you guys line of thought. I think the Op's post has many inaccuracies despite some applause it has received here. There is a grand plan of deception going on in our country. Oil prices remained high for many years, we accumulated reserves and blew same away. During this period we were made to pay more for petrol rather ironically,if the crude price rises we pay more, as the crude price drops we are told to brace ourselves to pay more again despite what should be less subsidy. The naira to dollar exchange rate fell from 1 to 85 to 1 to 120/130. and worsened again to 1 in 155, all despite more income to Nigeria. People are always ready to provide some explanation or the other to us. Simply stated, we are being played for fools. The masses are being ripped off in so many ways. We have some of the best economists and technocrats but our economy still lies prostate before others. Within a few days/weeks of this drop in prices, we are being subjected to austerity measures to further emasculate us. The speed with which these are being proposed is very alarming.

Imagine IMF even commending us on these measures, those harbingers of evil who never wish us well.They cannot recommend some of their pills to the USA,UK, Japan etc, but readily coerce lesser economies to accept their evil prescriptions.Please NOI, what is happening? I am begininig to reconsider my reverred high esteem for you. We paid $12 billion less than 10 years ago, got debt pardon for $18 billion and now our debts are going northwards again at supersonic speeds. I have always hoped that under your watch our exchange rate will get closer to 1 USD to 100 Naira, but my dreams seem so impossible to become reality.
Please God help our country, help our unborn generations, may we know the end to poverty and self-inflicted sorrow and deprivation.

Please NOI and the so called gurus, invite lesleba and other genuine and selfless Nigerians to help.

Not sure where or what exactly the OP did wrong. OP has only broken down some of the technical jargons and avoided a lot of politics in his explanation. It is more of an academic paper not in any way deceptive. On the other hand, you have written a critique as to why we shouldn't even be in this mess and how we have been deceived all along. This is a very different objective from what the OP has done.

Hmmm.... very nice...even more simplified than I expected! The FG should use this to educate the nation on the present position and its effects but on second thought...they would at the same time be confessing to poor management of the reserves and economy.

vanndubi:
Any person in the house that can give me a bricklayer's explanation on why petrol pump price has refused to come down even with the drastic reduction in the price of crude oil. And it is very likely the FG is still subsidizing petroleum products.

I am kind of confused cos the prices of petroleum products have gone done in the US, China etc expect in Nigeria

That's the point. How come we are still buying fuel at the rate of N97? The price of petroleum products has come down in other countries, but it is still the same in Nigeria. Logically, there shouldn't be anything like subsidy in this period because there's nothing to subsidise as the price is down already.
So, something is wrong somewhere.

Everything about Nigeria defies logic

Danjuro1:


These major OPEC members you mentioned actually love this price slump because it seriously affects their American competitors who largely depend on high oil prices to make profit. Most of US oil producers can not profit when oil sells below $80 a barrel.

They also have a lot of money saved up, saudi has about $700B, so they can play the waiting game. The fall in oil price affects countries like Nigeria more (seriously wondering why we didn't save enough)

If u did not understand this watered down explanation,then u need to book a slot at the prayer line in synagoge

denkyw:
nd u expect me. to. read. all. that?

this kind of person cant make it far.

Zane2point4:


this kind of person cant make it far.

sh-t up

englishmart:
I'm okay. Provided it doesn't affect the price of origin and garri.

my brother believe me it will surely affect them on a long run.

sureguy02:

That's the point. How come we are still buying fuel at the rate of N97? The price of petroleum products has come down in other countries, but it is still the same in Nigeria. Logically, there shouldn't be anything like subsidy in this period because there's nothing to subsidise as the price is down already.
So, something is wrong somewhere.
Everything about Nigeria defies logic

Thank you.

What is interesting is silence surrounding the large amount of money devoted to 'subsidy payment'.

'Nigeria is the most reactive and least proactive nation you could’ve been born into.'

This is what I have been telling my colleagues since forever. Aunty Ngozi must have not anticipated or largely ignored this.

RedBenson:


Seriously at the bolded?

it's intentional!!

terrimatix:
Chai, daris God oo....Our problems are multidimensional

mumumugu:
I am a bricklayer but i still dont understand

How can u understand when your name is mumu and mugu put together? Mtcheeew some people sef

The piece is great. Good explanation and on point analogy. But you use 'Bricklayer..' in the title? You almost misled me there!

webgenius:
@Sureguy02 ans Franciskaine. I agree with you guys line of thought. I think the Op's post has many inaccuracies despite some applause it has received here. There is a grand plan of deception going on in our country. Oil prices remained high for many years, we accumulated reserves and blew same away. During this period we were made to pay more for petrol rather ironically,if the crude price rises we pay more, as the crude price drops we are told to brace ourselves to pay more again despite what should be less subsidy. The naira to dollar exchange rate fell from 1 to 85 to 1 to 120/130. and worsened again to 1 in 155, all despite more income to Nigeria. People are always ready to provide some explanation or the other to us. Simply stated, we are being played for fools. The masses are being ripped off in so many ways. We have some of the best economists and technocrats but our economy still lies prostate before others. Within a few days/weeks of this drop in prices, we are being subjected to austerity measures to further emasculate us. The speed with which these are being proposed is very alarming.

Imagine IMF even commending us on these measures, those harbingers of evil who never wish us well.They cannot recommend some of their pills to the USA,UK, Japan etc, but readily coerce lesser economies to accept their evil prescriptions.Please NOI, what is happening? I am begininig to reconsider my reverred high esteem for you. We paid $12 billion less than 10 years ago, got debt pardon for $18 billion and now our debts are going northwards again at supersonic speeds. I have always hoped that under your watch our exchange rate will get closer to 1 USD to 100 Naira, but my dreams seem so impossible to become reality.
Please God help our country, help our unborn generations, may we know the end to poverty and self-inflicted sorrow and deprivation.

Please NOI and the so called gurus, invite lesleba and other genuine and selfless Nigerians to help.

Just curious, how did you expect her to achieve that within her tenure? Would be great to hear your thoughts

Very simplistic but nice and meaningful.

Nice write up

Very insightful & clearly expressed.Thanks OP for this invaluable topic.

Op you will pass for a good lecturer.very instructive in a layman language

vanndubi:
Any person in the house that can give me a bricklayer's explanation on why petrol pump price has refused to come down even with the drastic reduction in the price of crude oil. And it is very likely the FG is still subsidizing petroleum products.

I am kind of confused cos the prices of petroleum products have gone done in the US, China etc expect in Nigeria

sureguy02

You two have asked good questions, was debating this with an oil analyst in London couple of days ago.

Let me begin by prompting

1) Isn't it a possibility that the fuel being sold is the one in stock that was already purchased at previous price levels, thus making current movement in crude oil prices to have no impact on prices of refined products in Nigeria?

2) How long do players in Nigeria store refined products before they order new stock?

3) Perhaps the subsidy is on existing/already purchased fuel and things might change if crude prices remain low?

Let's look at this

Before crude drop
Actual cost of fuel per litre - 137 Naira, say
Nigerians paid 97 Naira
So subsidy is 40 Naira

After crude drop
Actual cost of fuel per litre - 100 Naira, say
Nigerians still pay 97 Naira
Subsidy should be 3 Naira

Thus, in this scenario, we should be saving 40 Naira - 3 Naira if Nigerians still pay 97 Naira per litre.

So, whichever way we look at it, if actual cost is 100 (not sure) and Nigerians still pay 97, then subsidy has to drop, unless Nigerians are made to pay considerably less than 97 Naira/litre - an event I believe is very highly unlikely.

Government can however argue that the subsidy is on products already purchased. This prompted my first three questions.

Let's brainstorm and provide counter ideas!

For the proletariat, the sweet subsidy you enjoy when you fuel your car will also get cut. Prepare to pay more for fuel. This is a good thing. Subsidy has to go anyways.

Mr Bricklayer, if Dangote reduces the price of cement, doesn't that mean that blocks will get cheaper? Or will that lead to an increase in the price of blocks? So why shouldn't lower crude prices lead to lower cost of petroleum products? Your argument rather should be that lower crude prices will mean that the government subsidy on petroleum products(petrol and kerosene) will reduce and if the prices fall further, totally eliminate subsidy creating savings for the government.
Maybe you should stick to brick laying... but what do I know ... I'm just a tailor

Xetima:
When NOI introduced Sovereign Wealth Funds (SWF), Amaechi, Fashola and Oshomole opposed her. They were up in arm with FG on the need to always share excess crude funds. Infact Ameachi's governors forum went to court to challenge the veracity of such reserve.

Today, the same individuals who did not see any need to save would turn round and blame the FG.

20 likes

Stylz69:
For the proletariat, the sweet subsidy you enjoy when you fuel your car will also get cut. Prepare to pay more for fuel. This is a good thing. Subsidy has to go anyways.

Mr Bricklayer, if Dangote reduces the price of cement, doesn't that mean that blocks will get cheaper? Or will that lead to an increase in the price of blocks? So why shouldn't lower crude prices lead to lower cost of petroleum products? Your argument rather should be that lower crude prices will mean that the government subsidy on petroleum products(petrol and kerosene) will reduce and if the prices fall further, totally eliminate subsidy creating savings for the government.
Maybe you should stick to brick laying... but what do I know ... I'm just a tailor

My brother, you're right and I like your Dangote example, but the OP is not completely wrong either..It all depends on the Naira value of subsidy government decides to implement and the actual new cost per litre of fuel. Don't know this figure though...

Okay, let's put down some numbers to buttress claims made.

Suppose actual per litre fuel cost falls to 120 from 137 but government drastically reduces subsidy to 10 from 40, say. What happens? Nigerians will pay 120 - 10 = 110 per litre, or a 13.40% increase from 97 Naira .

Fully agree this is an extreme example, but it's not impossible.

T22

Because Saudi Arabia want to keep price down to combat the shale industry in America. If OPEC cut production, oil prices will stabilise or rise meaning America continue to increase shale production.

If prices continue to fall then shale oil is less commercially viable. The problem with this strategy is countries like Saudi Arabia have built large reserves from oil and can easily withstand falling oil prices. Countries like Nigeria who as the poster explained didn't build good reserves during the hay days are facing rapidly falling revenues leading to austerity measures.

By the way it fell to $70 by end of day and general consensus by analysts is oil prices of about $60 which will be the norm for a while. As they say what goes up must come down

podosci:
with the falling oil prices, last i heard it is now down to 78$ per barrel, why has kuwait, Saudi Arabia and other major OPEC MEMBER S done anything to raise the price by cutting bck oil production on all countries?

EMEzzy:
It's a shame we wasn't prudent when we was affluent.

Oyibo!!! Supu!

ENDTIMES:


Oyibo!!! Supu!

supu nwane

tanimola22:


My brother, you're right and I like your Dangote example, but the OP is not completely wrong either..It all depends on the Naira value of subsidy government decides to implement and the actual new cost per litre of fuel. Don't know this figure though...

Okay, let's put down some numbers to buttress claims made.

Suppose actual per litre fuel cost falls to 120 from 137 but government drastically reduces subsidy to 10 from 40, say. What happens? Nigerians will pay 120 - 10 = 110 per litre, or a 13.40% increase from 97 Naira .

Fully agree this is an extreme example, but it's not impossible.

T22

Extreme as it may seem, it is a possibility and I urge you not to give the government any ideas. Crude prices have been falling and the price of diesel which is fully deregulated hasn't even fallen. I only hope that the government through the PPPRA will be honest enough to adjust the pricing template to reflect the current reality and fingers crossed, they don't read your post. Hopefully, they are satisfied with the savings made from the lower prices and don't cut the subsidy deeper than necessary.