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Someone Please Explain The Economics Behind All These Anti Spending CBN Rules - Business - Nairaland

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Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by IleIfe2(m): 12:29pm On Jan 12, 2016
Please anyone/all the economist/business administrators on NL.

What is economics/rationale/objective behind rationing of forex, withdrawal limits for Naira mastercard, ATM withdrawal limits and other anti spending CBN policy.
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by adeememman(m): 12:31pm On Jan 12, 2016
IleIfe2:
Please anyone/all the economist/business administrators on NL.

What is economics/rationale/objective behind rationing of forex, withdrawal limits for Naira mastercard, ATM withdrawal limits and other anti spending CBN policy.

i just hope the CBN and FG themselve know where they are taking us cos am also confused.
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by menix(m): 12:33pm On Jan 12, 2016
If am to use a theory in Economics, it's called Maslow Theory of Uwa Mmebi..

Maslow stated that during the Era of End Time many unfavorable policies will be introduced the suffer the common man into accepting the MARK..
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by IleIfe2(m): 1:39pm On Jan 12, 2016
menix:
If am to use a theory in Economics, it's called Maslow Theory of Uwa Mmebi..

Maslow stated that during the Era of End Time many unfavorable policies will be introduced the suffer the common man into accepting the MARK..

grin grin grin Seriously i need more explanation for fellow students here. They are tired of my low oil price/revenue explanation.

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Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by menix(m): 2:24pm On Jan 12, 2016
IleIfe2:


grin grin grin Seriously i need more explanation for fellow students here. They are tired of my low oil price/revenue explanation.

Them go wait oo cous rutheby don book me ahead.
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by menix(m): 2:25pm On Jan 12, 2016
IleIfe2:


grin grin grin Seriously i need more explanation for fellow students here. They are tired of my low oil price/revenue explanation.

Them go wait oo cous Rutheby don book me ahead.
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by Nobody: 3:43pm On Jan 12, 2016
menix:

Them go wait oo cous Rutheby don book me ahead.
Them don free you grin
I get tori for you
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by menix(m): 4:13pm On Jan 12, 2016
Oyind17:

Them don free you grin

I get tori for you


Hahahahahahahahahahah..
Mynd44 don tire..
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by Manweysabi(m): 5:26pm On Jan 12, 2016
From an Economist point of view, all these policies were geared towards saving our Naira...

Naira is loosing its value in the international market.


In other news, our BDC guys are flying out of the country with hundreds of ATM cards to withdraw dollars... hence the withdrawal limit
Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by Bevista: 5:49pm On Jan 12, 2016
IleIfe2:
grin grin grin Seriously i need more explanation for fellow students here. They are tired of my low oil price/revenue explanation.
As you probably know already, oil accounts for over 90% of Nigeria's FX earnings. This means that when oil price declines, FX receipts into the country's Reserves will also decline.
---
The CBN uses the FX from the Reserves to auction to importers of essential items like fuel, critical raw materials, etc. They also use the FX in the reserves to clear international payments, whether they are LCs by other large importers or your offshore ATM withdrawals or online/POS purchases.
---
As you are also already aware, Nigeria is an import dependent country. Currently, due to declining oil prices, demand for FX by importers (+ MasterCard/VisaCard purchases and withdrawals) is higher than FX receipts into the CBN Reserves. If the CBN continues to meet this demand at its current level, then the Apex Bank will soon run out of Reserves.
---
Once the country runs out of Reserves, there will be cataclysmic consequences. We'll need to borrow FDRs from the IMF with all the attendant conditions. Also, international banks and merchants like Amazon, Ebay, etc will effectively unplug Nigeria from the international payment system.
---
The CBN has chosen to eliminate certain import items from accessing the FX Reserves. They have also restricted the use of MasterCard/VisaCard for POS/online payments as well as international ATM withdrawals. All these are to protect the Reserves so that essential items like fuel, arms, critical raw materials, etc can still be imported into the country.
---
Also, by pushing everyone else to the parallel market, the rate in the parallel market might go over N300/$1. This should make imports expensive, thereby forcing foreign/Nigerian business men to consider setting up local production facilities instead.
---
The mess we are in is not caused by CBN. The Bank is merely trying to prevent a bad situation from getting worse. The blame should go to previous governments for not saving enough in our FX Reserves during the Oil boom and for not diversifying the economy to make us less import dependent.
---
That's already too long. I'll be glad to respond to you again if you have further questions.

1 Like

Re: Someone Please Explain The Economics Behind All These Anti Spending CBN Rules by IleIfe2(m): 7:50am On Jan 13, 2016
Bevista:
As you probably know already, oil accounts for over 90% of Nigeria's FX earnings. This means that when oil price declines, FX receipts into the country's Reserves will also decline.
---
The CBN uses the FX from the Reserves to auction to importers of essential items like fuel, critical raw materials, etc. They also use the FX in the reserves to clear international payments, whether they are LCs by other large importers or your offshore ATM withdrawals or online/POS purchases.
---
As you are also already aware, Nigeria is an import dependent country. Currently, due to declining oil prices, demand for FX by importers (+ MasterCard/VisaCard purchases and withdrawals) is higher than FX receipts into the CBN Reserves. If the CBN continues to meet this demand at its current level, then the Apex Bank will soon run out of Reserves.
---
Once the country runs out of Reserves, there will be cataclysmic consequences. We'll need to borrow FDRs from the IMF with all the attendant conditions. Also, international banks and merchants like Amazon, Ebay, etc will effectively unplug Nigeria from the international payment system.
---
The CBN has chosen to eliminate certain import items from accessing the FX Reserves. They have also restricted the use of MasterCard/VisaCard for POS/online payments as well as international ATM withdrawals. All these are to protect the Reserves so that essential items like fuel, arms, critical raw materials, etc can still be imported into the country.
---
Also, by pushing everyone else to the parallel market, the rate in the parallel market might go over N300/$1. This should make imports expensive, thereby forcing foreign/Nigerian business men to consider setting up local production facilities instead.
---
The mess we are in is not caused by CBN. The Bank is merely trying to prevent a bad situation from getting worse. The blame should go to previous governments for not saving enough in our FX Reserves during the Oil boom and for not diversifying the economy to make us less import dependent.
---
That's already too long. I'll be glad to respond to you again if you have further questions.

thank you very much.

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