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Financial Times calls Nigeria's economic approach the height of foolishness - Politics - Nairaland

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Financial Times calls Nigeria's economic approach the height of foolishness by NavierStokes(m): 9:21pm On Jan 22, 2016
Naira devaluation talk grows stronger as Nigeria also adopts Chinese-type circuit breaker

Nigeria plans to create a $25 billion fund with public and private financing to modernize infrastructure and avoid a recession.

Copying Venezuela’s exchange rate policy and China’s failed equity market strategy might seen the height of foolishness.


But, at least in the opinion of John Ashbourne, Africa economist at Capital Economics, that is precisely what Nigeria, the continent’s largest economy, has just done.

“Low oil prices are battering Nigeria’s export-dependent economy, but it’s the government’s market-distorting response that risks pushing the country into a Venezuela-style crisis,” Mr Ashbourne says.
“Nigeria is sliding towards a Venezuela-style FX regime and adopting a Chinese-style stock market circuit breaker. Neither will reassure foreign investors, many of whom seem to be eyeing the exits.”
Both measures were announced after markets closed on Friday, January 15.
The circuit breaker on the Nigerian stock exchange, one of the worst performing in the world this year with a fall of 17.7 per cent, will pause trading for 30 minutes if stock prices fall 5 per cent. Trading will cease for the day if it is triggered twice in a session, or after 1.45pm.
This month, Beijing abandoned a similar policy after just four days, concluding that in a falling market the existence of the circuit breaker encouraged more selling as traders rushed to exit while they could.
“The effect is akin to calling last orders at a crowded bar,” Mr Ashbourne says. “It is hardly confidence-inspiring that Nigeria is copying a Chinese policy that is widely seen to have failed.”
He accepts that Nigeria’s circuit breaker may not be as badly designed as the Chinese version. Whereas the NSE All Share index rarely falls by 5 per cent a day, the Shanghai Composite did so a dozen times in 2015. The NSE’s version has not yet been called into action.
Nevertheless, Mr Ashbourne says that using a circuit breaker to shore up the market, rather than to avoid volatility, is “deeply flawed”.
Simultaneously, the central bank has said it will stop selling US dollars into the interbank FX market.

Nigeria has operated a de facto twin currency system for the naira since February 2015, when the bank held the official interbank rate at N199 to the dollar to avoid a spike in inflation. The unofficial rate, available at bureaux de change, has plunged to N300/$, as the first chart shows.
However Mr Ashbourne argues the latest move takes Nigeria a step along the road to a Venezuela-style scenario, where the dollar now buys 913 bolívars on the black market, according to dolartoday.com, compared with an unofficial rate of 6.28/$.
“Suspending US dollar sales to the interbank market will force consumers and firms to source dollars at bureaux de change,” he says, while providing an implicit subsidy for companies and individuals with the connections needed to access the official rate.
As the second chart shows, Nigeria’s reluctance to let the naira’s official exchange rate weaken means it has borne the brunt of the sharp fall in oil prices since the middle of 2014.
In naira terms, the oil price has fallen from $115 a barrel to around $35, with the modicum of weakening permitted so far doing little to take the edge off the fall in oil prices to $28 in dollar terms.

In contrast, Russia, which has allowed the rouble to fall sharply, is still seeing oil prices of around $65 in local currency terms, with many other oil exporters such as Brazil and Azerbaijan also seeing more cushioning of the blow than Nigeria.
Charles Robertson, chief global economist at Renaissance Capital, who drew up the second chart, expects Nigeria to bow to the seemingly inevitable and devalue the naira, given that his calculation of fair value is N305/$, very close to the current black market rate.
He notes that frontier market funds are now underweight Nigerian equities, and believes that international investors “are likely to remain on the sidelines,” barring an obvious catalyst for change.
Nevertheless he believes a devaluation to N250/$, “while no longer sufficient to ease all dollar shortages ... would be good enough to warrant investors taking a fresh look at Nigeria, especially if they expect a rebound in the oil price”.
Daniel Salter, global equity strategist at RenCap, has been busy analysing just when equity market investors should consider returning to a freshly devalued Nigeria, if history is anything to go by.
Mr Salter analysed 13 emerging market currency devaluations since 1994 in countries ranging from Mexico and Turkey to Egypt and South Korea.
His conclusions are that it is rarely worth buying in anticipation of a currency devaluation and that, on average, equity markets do not hit their low point (in dollar terms) until 99 days after the start of the currency devaluation.

This delay can vary significantly, though, as the final chart shows. In the case of South Korea in 1997 the stock market troughed the day before the won started to fall. In Nigeria itself, in 2009, this point was reached after 35 days.
However in the cases of Thailand (1997), the Philippines (1998) and Egypt (2001), it would have paid equity market investors to stay out for at least six months.
Mr Salter believes the lag is due to two factors: the initial devaluation is often insufficient to stabilise the currency; and that devaluations frequently coincide with banking crises.
Unfortunately, this analysis probably tells us little about how Nigeria’s equity market is likely to behave in the year after any devaluation.
In the 13 previous episodes, the stock market typically fell 3 per cent in dollar terms in the three months after the start of the devaluation. However, as the above chart shows, there has been huge variability in this figure, from -56 per cent in Mexico in 1994-1995 to +100 per cent in South Korea in 1997-98.
Likewise, on average the typical stock market gained 4 per cent in dollar terms in the year after the devaluation, but once again this is the average of a widely dispersed data set, with the returns ranging from -86 per cent (Indonesia, 1997-98) to +172 per cent (South Korea).
The sector breakdown perhaps delivers a clearer message. RenCap found that consumer staples stocks have tended to outperform in the 12 months after the start of a devaluation, while consumer discretionary companies and industrials tend to pick up once the currency has bottomed.
Financial stocks, in contrast, tend to be the worst sector in the year after a devaluation, probably due to declining credit quality.

http://www.ft.com/cms/s/3/5b13549a-bf74-11e5-846f-79b0e3d20eaf.html#axzz3y3yTTPfZ

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by kernel504(m): 9:34pm On Jan 22, 2016
APC A PARTY WITHOUT CLEAR ECONOMIC POLICY.

174 Likes 12 Shares

Re: Financial Times calls Nigeria's economic approach the height of foolishness by Nobody: 9:39pm On Jan 22, 2016
That Kemi Adeseoun of a woman is the true depiction of cluelessness!!

162 Likes 11 Shares

Re: Financial Times calls Nigeria's economic approach the height of foolishness by tempest01(m): 9:44pm On Jan 22, 2016
We need to encourage local products....identify the substitute products and encourage it.

PMB needs to find good economists who will proffer solutions to this our current crises.

GEJ Will be smiling that he isn't at the helm at this critical time.

Sometimes defeat can be good

147 Likes 7 Shares

Re: Financial Times calls Nigeria's economic approach the height of foolishness by Nobody: 9:47pm On Jan 22, 2016
ok
Re: Financial Times calls Nigeria's economic approach the height of foolishness by PRYCE(m): 9:48pm On Jan 22, 2016
Cluelessness!

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by sdindan: 9:48pm On Jan 22, 2016
hmmmmm! I wish Buhari can read or understand English well. Everybody is wailing even foreign media.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by SamJed(m): 9:49pm On Jan 22, 2016
APC has no good economic plan

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by talktimi(m): 9:50pm On Jan 22, 2016
There are some situations where I don't like to say I told you so especially if they affect me negatively too. This is one of them

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Nobody: 9:50pm On Jan 22, 2016
Lalasticlala come and do the needful!!

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Trut(m): 9:51pm On Jan 22, 2016
grin

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by omohayek: 9:52pm On Jan 22, 2016
chukwudi44:
That Kemi Adeseoun of a woman is the true depiction of cluelessness!!

The true mark of cluelessness is blaming Kemi Adeosun for two areas of policy over which she has no control. It takes real ignorance to blame the finance minister for an FX policy which is actually set by Godwin Emefiele, the head of the CBN; she also had no hand in the NSE's difficulties, as the CEO of the Nigerian Stock Exchange is a man named Oscar N. Onyema.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by NavierStokes(m): 9:52pm On Jan 22, 2016
chukwudi44:
That Kemi Adeseoun of a woman is the true depiction of cluelessness!!

My brother, i have been very vocal about these "venezuela styled" policies on here, i have seen first hand its effect on her people.
It baffles me how someone can see a failed policy and still go ahead to implememt same expecting a different result.

In all the party has been clueless on the economy as stated by their chairman, where he says they will convey a meeting of policy makers and stakeholders so as to be able to have a clear direction on the way forward, which in other words means they are yet to have a clue on the way forward these past months.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Nobody: 9:53pm On Jan 22, 2016
kernel504:
APC A PARTY WITHOUT CLEAR ECONOMIC POLICY.

PDP , THE PARTY WITH CLEAR ECONOMIC POLICIES RIGHT?

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Pidggin(f): 9:54pm On Jan 22, 2016
During the presidential media chat economist Buhari insisted that he would never devalue the naira. I bet if someone was bold enough to ask him what he understood by devaluation, he would not have been able to answer the question.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by omohayek: 9:55pm On Jan 22, 2016
NavierStokes:


My brother, i have been very vocal about these "venezuela styled" policies on here, i have seen first hand its effect on her people.
It baffles me how someone can see a failed policy and still go ahead to implememt same expecting a different result.

In all the party has been clueless on the economy as stated by their chairman, where he says they will convey a meeting of policy makers and stakeholders so as to be able to have a clear direction on the way forward, which in other words means they are yet to have a clue on the way forward these past months.

You point to an insightful article on Nigeria's economic direction, and then proceed to throw away all your credibility by endorsing a ridiculous attack on Kemi Adeosun, simply because it was made by "your brother". What a waste.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by magicalx(m): 9:56pm On Jan 22, 2016
What Word is worse than clueless give it Bubu and his Saint of a team

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by nobilie: 9:57pm On Jan 22, 2016
Nigerian currency# is failling and may continue to fall as we currently does not export much of anything like oil. Apart from the fact the international crude oil price has gone down, we are struggling to sell the quantity we use to sell. Every country is restrategizing. USA, South Africa are no longer buying as much as they do From us.
The crop of governors we have to not even know how to make money from the resources in their states. May God help us. Farming will not be a bad idea.

If militant activities in the creeks resume, then, there will be more trouble as our refineries will then be useless.

My advise to the govt:
Enforce harsh laws in political criminals.
Take off subsidy completely.
Do much to recover stolen fund's and use them to finance infrastructural projects to boost production.
increase tax. Find a way to tax the rich more.
Encourage research in the universities.
Encourage low cost buildings. US have lots of buildings made of woods. This will help reduce cost of maintaining a family/household.
Nigerian govt should request those that have stollen from us in the past to return part of what they stole.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Tochaigh: 9:58pm On Jan 22, 2016
If emifiele was standing right in front of me, with a loaded beratta in my hand. I will send that motherfucker straight to hell.

AhhAhh! Must buhari be so effing slow. Emifiele should have been sacked like yesterday!!!

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by kernel504(m): 9:59pm On Jan 22, 2016
cosmo84:


PDP , THE PARTY WITH CLEAR ECONOMIC POLICIES RIGHT?

BROTHER, PDP WASN'T BETTER, BUT APC POLICIES AND ACTIONS LEAVES PDP WITH THE TITLE "SAINT". LIES AND BLAME IS NOW THE HALLMARK OF APC.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Chubhie: 10:02pm On Jan 22, 2016
But the zombies told us that Buhari's economic acrobatics is the 8th wonder of this world.

The thunder that will fire all zombies is wearing pant and bra.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by NavierStokes(m): 10:06pm On Jan 22, 2016
omohayek:


You point to an insightful article on Nigeria's economic direction, and then proceed to throw away all your credibility by endorsing a ridiculous attack on Kemi Adeosun, simply because it was made by "your brother". What a waste.

1.Making a reference to him as "my brother" has got nothing to do with ethnic affiliations but rather as one human to another.
2. The economic policies being brandished by this administration has all been synonymous with cluelessness.
3. I am afraid your responses are coming across as bigoted from the way youtried to shift blames to emefiele and onyema and attempting to shield the finance minister from attacks.
4. My brother do not be intransigent and assert that I am incredible because of differing opinions. The message was delivered exactly "as is" from the source.


PS: note that the CBN is inder the ministry of finance, and also the NSE thoigh private is regulated by SEC and under the supervision of the ministry of finance. So his assertion isn't unfounded and you arguing the contrary is an indirect attempt to accuse madam finance minister of laxity in carrying out her duties.

As for the genesis of most of these issues, i think this makes an interesting read below:

http://venturesafrica.com/features/president-buhari-just-might-have-reduced-nigerias-finance-minister-kemi-adeosun-to-a-glorified-figurehead/

Positing our current minister of finance might have been setup to be a clueless figurehead. You should have seen it playing out with the issue of our 2016 budget and the "alleged" fiasco in the UAE.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by DelGardo: 10:10pm On Jan 22, 2016
So they advocate that CBN should let Naira go on a free fall, and the wailers seem to like their suggestion. Cool.

I only hope they don't come here tomorrow to scream "Exchange rate is now N3,500/$!".

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by doctokwus: 10:12pm On Jan 22, 2016
Tochaigh:
If emifiele was standing right in front of me, with loaded gun in my hand. I will send that motherfucker straight to hell.

AhhAhh! Must buhari be so effing slow. Emifiele should have been sacked like yesterday!!!
He has a tenured post and there is sth like the senate having to approve his sack,if i am not mistaken.Besides,his ethnic group presents another challenge.
But,pmb is just unnecessarily postponing the inevitable.
Just like the govt seems to be dillydallying with GEJ's arrest,emefiele has several reasons to have been sacked since yesterday:gross incompetence and his involvement in the sleazes under the GEJ govt. If there is one cbn gov that has failed in all aspects of central banking,its Emefiele.Why he remains there is known only to the govt.
To avoid cries of victmization,another Igbo can be appointed and there are countless more competent ones than Emefiele.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by SMARTKOSSY: 10:14pm On Jan 22, 2016
chukwudi44:
That Kemi Adeseoun of a woman is the true depiction of cluelessness!!
Get the spelling ryt first na

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by SMARTKOSSY: 10:15pm On Jan 22, 2016
Chubhie:
But the zombies told us that Buhari's economic acrobatic is the 8th wonder of this world.

The thunder that will fire all zombies is wearing pant and bra.
Sexy thunder?noooo dats too sweet for the zombies

15 Likes

Re: Financial Times calls Nigeria's economic approach the height of foolishness by achiphet(m): 10:16pm On Jan 22, 2016
Am watching in 12D. Mainwhile am moving all my cash outa dis country! Learn how to get 120% return on your investments on MAP USA. Sorry for you if u still have your money in a nigerian bank

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by omonnakoda: 10:17pm On Jan 22, 2016
chukwudi44:
That Kemi Adeseoun of a woman is the true depiction of cluelessness!!
Actually you are s.tupid. Does the government run the Stock Exchange. Or does the government own it? Why not restrict yourself to what you know. It is not mandatory to comment.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Nobody: 10:18pm On Jan 22, 2016
doctokwus:

He has a tenured post and there is sth like the senate having to approve his sack,if i am not mistaken.Besides,his ethnic group presents another challenge.
But,pmb is just unnecessarily postponing the inevitable.
Just like the govt seems to be dillydallying with GEJ's arrest,emefiele has several reasons to have been sacked since yesterday:gross incompetence and his involvement in the sleazes under the GEJ govt. If there is one cbn gov that has failed in all aspects of central banking,its Emefiele.Why he remains there is known only to the govt.
To avoid cries of victmization,another Igbo can be appointed and there are countless more competent ones than Emefiele.

Kemi Adeseoun is the leader of the Buhari's economic team

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by OkutaNla: 10:23pm On Jan 22, 2016
DelGardo:
So they advocate that CBN should let Naira go on a free fall, and the wailers seem to like their suggestion. Cool.

I only hope they don't come here tomorrow to scream "Exchange rate is now N3,500/$!".

Don't mind those hypocrites. If that happens they will be first to remind us how much it was under Okonjo Iweala and Jonathan. They are confused and don't wish this administration well, irrespective of what it does.

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Re: Financial Times calls Nigeria's economic approach the height of foolishness by Chubhie: 10:25pm On Jan 22, 2016
SMARTKOSSY:
Sexy thunder?noooo dats too sweet for the zombies
We all have friends,colleagues,families who for some reasons beyond logic gets enchanted once sai baba is echoed yet face same harsh economic realities with us. maybe a sexy thunder can do the trick?

I know demdem is already getting excited with having a thunder romp.

12 Likes

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