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Nairaland Forum / Nairaland / General / Business / Egypt Devaluation To Test CBN Resolve On Naira (25461 Views)
Analysts Predict Naira Devaluation To N400/$ / Analysts Foretells Naira Devaluation To N400/$ / IMF Hints At Fresh Devaluation, Says Naira Is Overvalued (2) (3) (4)
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Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 1:31pm On Nov 06, 2016 |
grandstar: We already had a fixed/pegged exchange rate. That was not Buhari's doing. What Buhari refused to do was agree to devaluing our currency as a solution to fixing our economic woes. Time and the reaction to the floating of the naira proved that there is no quick fix. The solution to our economic woes is boosting our local production. Unfortunately, we can not boost our local production with limited reserves. So first banning of the imported Items was a move to slow the fast depletion of our reserves. Things are difficult but our local production is growing. With time, things will look better as local production looks attractive now, unlike before. I believe in the floating of the naira was right. Pegging is an old model. Devaluing will not help. Let the market determine it price. I also think a full float is ideal and the money we spent/ will spend in defending the naira is best used in boosting medium and small scale businesses. Businesses like modular refineries will go a long way in reducing the demand for foreign exchange. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Ugosample(m): 1:32pm On Nov 06, 2016 |
sekundosekundo: Are you serious God loves you o |
Re: Egypt Devaluation To Test CBN Resolve On Naira by sekundosekundo: 1:39pm On Nov 06, 2016 |
Ugosample:Thanks and remain blessed. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Krucifax(m): 2:47pm On Nov 06, 2016 |
LorDBolton: You are one of the few on here to make a 100% accurate analysis.Firstly Incoming foreign investors want your currency weaker because it makes their foreign currency do more when brought into the country. Secondly a floatation has ALREADY been done. Thirdly the floating didn't work as it led to inflation which amongst other things led to recession. FOURTH and most importantly the Nigerian Factor. CBN is fighting a necessary battle by intervening through selling dollars at a predetermined rate, if not!!!!!!! Profiteers,Currency racketeering, politicians trying to hide stolen money, etc will cause the Naira to crash to nightmare levels. This battle is forever and CBN should continue to fight it or else the many evil people in Nigeria will destroy the currency till it has no more value! |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:00pm On Nov 06, 2016 |
Krucifax: First of all, there was no way an inflation will not occur. That was the forecast. Same happened in every Nation that floated the currency. First the price of the currency to the dollar will rise. As the economy picks up, the home currency will rose against the dollar. Saying that we should not float because of the dollar hike is a wrong reason for objecting a full float. Where we have problem is, defending the naira will not help the economy grow. Just like in the past, moves like this mask the true state of the economy. We use our reserves to defend the naira. Why not do a full float and invest the money in things that will bring down the price of the naira. I think we spent over $4 Billion in the partial float. That money could build, 20 Modular refineries at $200 million each. Which in some months will take of and solve some of our financial challenges. Boost employment, attract foreign investment, raise our local production. We need to pump money into small and medium scale businesses to turn the current situation around, instead of defending the naira to no avail. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:03pm On Nov 06, 2016 |
Krucifax: Just as we held on to a fixed exchange rate until we saw it was not working, like the Egyptians, we will still do a full float. Unfortunately, that is after wasting Billions of dollars defending the naira. The earlier we do a full float, the better. Pump these billions of dollars into small and medium scale innovative businesses. From Agriculture, to power to Crude refining. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by grandstar(m): 3:06pm On Nov 06, 2016 |
TheGoodJoe: What you are saying is baseless and wrong. India in 1991 had less than 1 months import cover . It was compelled to liberalise it's exchange rate and introduce other reforms. Within a year billions of dollars of foreign exchange was flowing into the market. I dont think you're an economist. Intuition and economics do not mix. 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:17pm On Nov 06, 2016 |
grandstar: I am not an economist but I doubt you understand what you posted. Please explain to me what you mean by LIBERALISE it's EXCHANGE RATE and INTRODUCE REFORMS. Mr Economist. Then tell me how that is different from what I am saying. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:18pm On Nov 06, 2016 |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:23pm On Nov 06, 2016 |
grandstar: From Wiki: The economic liberalisation in India refers to the economic liberalisation, initiated in 1991, of the country's economic policies, with the goal of making the economy more market-oriented and expanding the role of private and foreign investment. This is what FLOATING does to the exchange rate. It makes the exchange rate more market-oriented and rate determined by market forces. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by pulsa(m): 3:43pm On Nov 06, 2016 |
sekundosekundo:omo na wa oh God saved your life oh. 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by grandstar(m): 3:45pm On Nov 06, 2016 |
Ijaya123: A devaluation is a depreciation that is dictated by the authorities while a depreciation is a natural reduction in the value of the currency dictated by market forces. Let's say for instance, the exchange rate was pegged at 150 to a $1 by the CBN .. If it's 250 at the black market, Sanusi said the difference should not be more than 3%. The CBN may then devalue the currency to about 240 bridging the gap to a good ectent. You ask what does the country gain from devaluation? It's like asking what does anyone gain from 1+1=2?.Whether anyone gains or not, will it not remain 2?.Refusing to accept this reality will lead to dreadful consequences. Same with devaluations. Whether we feel it helps us or not, it is a fact of economics. If your currency is stronger than its true value, demand will be higher than supply leading to a depletion of the foreign reserves. Forex is always entering and leaving the reserves . It is when more money enter than leaves the reserves, the reserves grow. That's how it was created in the first place. Saudi is burning it's reserves fast because it has refused to devalue despite the steep decline in oil revenues. Economic law states you must have enough forex to match your exchange rate. When you don't, supply will outstrip demand as it's happening today in Nigeria. If the CBN does not supply enough forex to satisfy the market, those not given will turn to the black market straining it and leading to a depreciation of the rate there. Already a "devaluation" is takino place. This what played out in Nigeria. Buhari pegged the official rate to 197 in May 2015. It collapsed at the black market from around 210 to 310 or worse by May 210 despite being pegged at 197. Now the exchange rate is 470 and there is chronic shortage of forex everywhere because Buhari does not want the naira to officially find its true value. You can't cheat nature 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:55pm On Nov 06, 2016 |
People should get that devaluation is different from Floating. That is a total misinterpretation of the system. In a fixed/pegged Exchange rate, the Central Bank keeps the exchange rate at a particular value, irrespective of what happens in the market. When we talk about devaluing, it means the Central bank will reduce the value of a fixed exchange rate. In a full Floated exchange rate system, the Central bank has very limited role in the exchange rate and can not devalue or raise the value of the home currency. This lies on the market forces. Mostly private and foreign investment. What the Egyptians did is not devaluation but a full float. If the inflow of dollars increase, the value of the Egyptian currency will rise to the dollar. If the amount of dollars in circulation is low, the Egyptian currency will fall. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 3:57pm On Nov 06, 2016 |
So what the author of the article tried to pass is that, the Central Bank of Nigeria should take their hands off the exchange rate and do a full float. When the full float takes place, the naira will keep falling to the dollar. When foreign investment picks up and private Enterprises yield results, the naira will become stronger. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Ijaya123: 4:13pm On Nov 06, 2016 |
grandstar: You still did not state categorically what the country gains by devaluing the naira. Only if you know the consequence of devaluation on the economy, you won't even go near it, at this present time. On the alternative, finding ways and means to increase the reserve is what the govt should think about. 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by onatisi(m): 5:00pm On Nov 06, 2016 |
Ijaya123:We are not talking about devaluation but floating. Let the currency find its proper value without government interference. That is the only way to conserve the foreign reserve,increase local production of goods and services ,encourage fdi and save the economy all these governments interventions Is just a waste of time and money. Nigeria simply doesnt have the financial capability to defend the naira. You can only defend ur currency if you have more than enough reserve and a very good local production economy 1 Like 1 Share |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 5:12pm On Nov 06, 2016 |
Ijaya123: We cannot increase our reserves without finding a way of boosting the economy. Our major, only source of income is the Crude Oil sales. With vandalisation high and Crude Oil price low, we can not maintain our exchange rate. Keeping our exchange rate low cost us the limited reserves we have. We spend due to heavy importation. 2ruTalk1 on a Nairaland thread explains this: When a country's currency is devalued, foreign goods (imports) become so expensive because the value of the country's currency has been reduced making the value of the currency of her trading partner to go up. In this case, the foreign country will be enticed to import from Nigeria (for instance) and our hitherto importers will equally buy Nigerian made products because of high cost of foreign goods. This makes our balance of payment to become favourable. However, I see the floated exchange rate as a better option because it becomes a true indicator of the state of the economy. If we boost our local production, we will have a stronger naira without the whole devalue or not to devalue debates. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 5:16pm On Nov 06, 2016 |
onatisi: We are not talking about devaluation but floating. Let the currency find its proper value without government interference. That is the only way to conserve the foreign reserve,increase local production of goods and services ,encourage fdi and save the economy all these governments interventions Is just a waste of time and money. Nigeria simply doesnt have the financial capability to defend the naira. You can only defend ur currency if you have more than enough reserve and a very good local production economy Precise. I agree 100%. The CBN and the FG should turn their focus to where we need their attention. Boosting local production. Not defending the naira. 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 5:20pm On Nov 06, 2016 |
Just like Egypt just did, it is time for the FG to hands off the exchange rate and defending the naira. Billions of dollars gone and the naira still falls. It is time to focus on massive investments in medium an small scale businesses. And boost our infrastructure. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Nobody: 6:44pm On Nov 06, 2016 |
mrvitalis: if it is allowed to free float. we are only compounding our problems. CBN is the largest supplier of fx followed by the oil companies. price of goods will soar and people will loose hope in the strength of the Naira and they will held on to dollar to shore up their value. fixed income earner will be swallowed up by the wind of inflation. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 8:33pm On Nov 06, 2016 |
WinningSun: That is how it looks but in a full float, we get the chance to take loans because it is in line with what most investors want. The influx of dollars will drive down the inflation rate. We can boost our local production with the available funds, create jobs and develop our infrastructure. Just like Egypt just did, I see us making a full float. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by grandstar(m): 10:06pm On Nov 06, 2016 |
Ijaya123: |
Re: Egypt Devaluation To Test CBN Resolve On Naira by onatisi(m): 10:13pm On Nov 06, 2016 |
WinningSun:Cbn is the largest supplier of dollars and that is wrong. It shouldn't be like that. The value of the naira will crumble ,but with time things will pick up. There is no 2 ways about it ,the FG is just postponing the inevitable . We need to start producing and once that starts with agriculture ,then exportation will follow. Government control of fx is what is turning many lazy ediots in Nigeria into emergency billionaires 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by 14(m): 10:28pm On Nov 06, 2016 |
onatisi: while burning the foreign reserves to zero, its better to let it float 100% and save the reserves. soon nigeria will be left with Zero reserve if th3y continue like this. 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by onatisi(m): 10:32pm On Nov 06, 2016 |
14:Now they want to borrow another $30 billion and yet continue to defend the naira!!! 1 Like |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Nobody: 8:28am On Nov 07, 2016 |
onatisi: you are right about the billionaires. but I won't qualify them as lazy idiot. they are smart business men. you know if you have bad economy manager, they are blessing to a bloody capitalist. talking about our export, the total sum of our non oil export is less than $5bn. is we draft a pro forma balance sheet the junks that enter our port is more than $20bn. to be conservative Naira will be #900 |
Re: Egypt Devaluation To Test CBN Resolve On Naira by onatisi(m): 8:53am On Nov 07, 2016 |
WinningSun:Agriculture is the key to Nigeria survival and Nigeria doesn't even need a loan to revamp the economy through it . But we have a dullard who still thinks borrowing borrowing borrowing is the answer. There is no single economic policy on ground yet by this government. This recession is really going to stay long because by this time next year ,all politicians plans will be on electioneering and party politics |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Nobody: 9:10am On Nov 07, 2016 |
TheGoodJoe: you need to study the attitude of investors around the world. the US federal reserve put the interest of his bond at 0% . most foreign investors will prefer you devaluate your currency so that they can buy up our stock market shares for junk. and our bond in higher interest rate since its price can't be less than interest rate. you don't free float your currency when the indices are poor. learn from China. |
Re: Egypt Devaluation To Test CBN Resolve On Naira by Nobody: 9:18am On Nov 07, 2016 |
onatisi: I laugh when people talks about agriculture as our saviour. whatever food will produced will be consumed here. I'm not saying it will not yield, the best agriculture can generate is less than $1bn yearly. go and check economies like cotedvoire and Ghana that largely rely on it. they are slave to debtors 1 Like 1 Share |
Re: Egypt Devaluation To Test CBN Resolve On Naira by onatisi(m): 9:56am On Nov 07, 2016 |
WinningSun:Ghana doesn't rely on agric and neither does cotede voir, infact just this morning economists in Ghana have said that the government should revamp agric In order to stabilise the economy because the stability of the Cedis isn't based on the exportation and production level of the Ghana economy but on the influx of fdi, when we talk of agric, we aren't talking about cassava and yam but about everything from livestock to cash crops and others 2 Likes |
Re: Egypt Devaluation To Test CBN Resolve On Naira by TheGoodJoe(m): 11:54am On Nov 07, 2016 |
WinningSun: I prefer we learn from our closest neighbors who are in the same predicament as us. Floating the currency will make the exchange rate the right indicator of the State of our economy. It readjust itself in the right direction without further influences. Devaluation will not help the economy because if the limit is wrong, we find ourselves defending the naira again. Which means pumping in dollars to promote liquidity. Floating to me is the best option and I see us following the Egyptians soon. |
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