989900:
The new CBN policy to float the Naira 'sort of', 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 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 by 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 transparent, 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.

The Cons:

Just flip the 'pros' on its head, and you'll have anarchy: demise of the Naira.

jamesibor:


Have you considered the fact that oil production is almost halved which will drastically affect availability?

jmichlins:
I just wish you are right cause for we have heard and read many economic theories about this country yet everything keep going south

989900:


Look at the cons -- I have fears too . . . and we will be in serious sh!t if we DO NOT back up our monetary policies with honesty and smart fiscal policies.

aloeman15:
These are some of the realities-
The most immediate effect is a run on the naira as everyone tries to buy cheap and sell dear.
We forget that we can now import ANYTHING so long as you can buy forex.
What's the point of banning the 41 items when you no longer control access to forex?! Utter stupidity.
The cbn will not use dollar certificates now, when they didn't do so when they controlled the price.
No govt runs on honesty. Systemic checks and balances are the answer.
Now is the ABSOLUTE WORST TIME to do this. I was all for devaluation till henry boyo schooled me in a newspaper article.
The presence of 'Super agents' renders the whole process moot. It's simply putting marketers in place who will inevitably copy the monopoly of oil marketers.
As long as we remain oil dependent, all hopes of a strong currency remain a foolish pipe dream. The greater your exports, the stronger your currency- because the more dollars you have (in relation to your curreny), the cheaper it is.
The only way this policy works is if the govt begins immediate, MASSIVE industrialisation- with SOLE FOCUS ON POWER GENERATION to drive diversification.
The alternative is to have more than one forex trading currency- like the yuan- to reduce dependence and focus on the dollar, but that plan seems to be dead in the water.
The only hope for our infrastructural development is that govt will give tax breaks, import waivers, startup grants, loan moratoriums, etc.
But that's the job of the economic team, not the cbn...

aloeman15:
I forgot to add-
If the govt truly plans to spend N500billion on welfare programs, prepare for a zimbabwe situation.
You don't stimulate an economy by spending on consumption. This is just basic economics.
Left to me, scrap the npower teaching plan and convert all applicants into entrepreneurs.
Split the money in 5 places-
2 parts for power sector- split between local renewables and non-renewables like coal and gas. 1 for transportation networks. 1 for farming- split between cash and catch crops. Last part for construction projects- split between low cost housing and rural development.
Form clusters in each state for real sector job creation- housing, mechanised farming, agro-allied industries, etc.
Support all the above with govt policies, eg- if we import your cars, you must set up parts manufacturing within 3 years and an assembly plant in 5 years. Full production within 10 years. All with skills acquisition and transfer to full local staff within 3-5 years.
This way in one year graduates become real, embedded stakeholders in a revived economy with REAL SECTOR EXPORTS and an expanding ripple effect on ancillary services- food, repairs, hospitality, machine tooling, factory setup, local manufacturing, etc.

989900:


The '41 items' part needs proper explanation, are they going to be contraband? Or they simply can't be sold Forex at the banks for such items . . . they will find a way around that; might not be easy, but they can.

The "appointed primary dealers" part though . . . all I can smell is another cesspool of corruption -- I don't know what rules will guide those though . . . it is all still in the air.

The Yuan deal thing would have offered a lift.


By and large, the fiscal policies that back this up, will go a long way in either sinking the Naira, or letting it stay afloat.

989900:


Well said, but the Npower plan is a good program bar the feeding part (even that will provide jobs and stimulate the economy . . . through ripple effect . . . some companies will be making those supplies). OTOH, the Npower plan caters to artisans, budding entrepreneurs, and other folks too. The teachers will earn money, hence, buy stuffs, -- stimulate the economy while learning and passing on knowledge to others . . . unemployment is one of the major signs of an ailing economy

aloeman15:
I think we need to be clear on the difference between an economic stimulus and funding job creation.
If the jobs you create don't BRING IN FOREX, then you're operating in a valve system- people will work, earn their wages and- import!
Net effect- loss of forex, weaker naira, economic downturn.
You want to grow your economy, meaning your reserve? You must stimulate FOREX EARNING CAPACITY of the country. Teaching jobs, artisans, even ict at our level- none of these will do that.
Not without massive investment in power generation. Or without Massive industrial growth through food processing factories and manufacturing plants, etc.

989900:


There is no economic law stating we can't or shouldn't do both (this country was paying billions every month to ghost workers!). There is no way government would look away from creating jobs. Power is being addressed, refineries are being addressed, Agric , and other things we've all mentioned are being addressed . . . focus and sustaining the tempo is the only worry.

BTW, our imports are fuel: 30-40%, repatriation of funds: 30-40%, and food: 10%, the rest is negligible and the impact of N23,000/month on that is even far negligible if you get my drift.

Once power supply is increased (like you rightly mentioned), and importation of fuel and especially rice is greatly reduced, there goes almost 40-50% of our import bills erased.

JohnNgene:
If, if, if... So many IFs. Lol.

I'm enjoying the back and forth discussion between the two of you.

Sorry for my interruption. Lol. Please go on.

aloeman15:
Thanks.
I try to avoid making assumptions. I prefer to ask questions or make projections based on current or past events.
Let me summarise-
The first failure is the timing. Use tomatoes as an example- everyone who can will now import and sell based on market forces. No more barriers so long as you can afford it.
All 41 items are back in play. In fact, now their prices will drop due to easier forex access, even if dollar is expensive.
Foreign investors are not coming. Not when govt still has no economic blueprint. WORSE STILL, since buhari can make a drastic u-turn on something he's been adamant about right up to his most recent media chat, then what else can change in govt policy?! This is what Real Sector Investors are thinking.
When dangote needs dollars, he'll place a call to emefiele and get what he wants at N199. He's already been promised whatever he needs to complete his refinery. Many of us don't know that.
The designated agents will become a cabal. This is unavoidable. They'll determine demand and supply.
There isn't a single food item that we're self-sufficient in, not garri, corn or even drinking water (the plastic bags are mostly imported). But govt dollar restrictions curbed imports. No more. Expect the cbn to impose even more bans before end of october.
Again, inevitable. Unless of course, govt has plans to be earning even more non-oil dollars within the next 3 months? Didn't think so.
When you flood a naira-saturated system with N500billion, the value will crash. Simple.
Leading to full-blown hyperinflation. And a depression.
After all, we're already in a full recession.
There's almost a page worth of info to add. No time abeg.
To summarise the summary- chaos is coming.

989900:


1. Foreign investors are already here. The stock market already reacted positively within hours. Same foreign investors (portfolio) told Kemi in the recent roadshow in the UK that this is what they need on the forex front (basically ability to be able to repatriate funds).

2. Nigeria has never had a more inspiring fiscal economic blueprint (monetary policies have been whack no doubt) than what we have now; at least not in the past 30 something years.

3. That is N500b a year; not a one day nor a one month spend.


It's good we see things from different perspectives though -- I am optimistic that if you sincerely couple sound monetary and fiscal policies together, and implement it religiously -- the sky is the limit. Time will tell . . .

aloeman15:
1. It's a wait and see matter. I dare anyone to bring up a single concrete commitment by foreign investors from that meeting. Separate sound bites from actionable reports.
2. If the float is the fiscal policy, sorry. See my past posts above.
3. First, govt says they can't meet their capital framework and have dropped some projects. Then next was that Govt can't find 700billion for their 1st quarter capital projects. They're the ones who used 'budget deficit' o! Not me.
But you'll still spend 500billion on consumption- sweet news to oyibo cos na importation of foodstuff and tabs dem go take chop us one time!
So yes, spend it. They'll collect the money. We'll suffer the repercussions.

989900:


The float or 'dirty float' is the monetary policy. The fiscal will be intelligent management of gov't spendings and generating revenue.