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What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? - Business - Nairaland

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What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 6:19pm On Feb 19, 2016
I am not in anyway an economist but i have been reading a bit, especially Henry Boyo ( truth be told, i get an anytime i do).
I believe we earn our oil revenue in dollars, what if the federal government pay states their allocation in dollars and the state simple exchange their dollars for naira at the bank or BDC.
With this system there will be surplus dollar in the system that will drive the exchange rate down. A good example of this was during the last election when dollar was raining all over the place (thanks to Dasuki) the dollar fell to 170 naira despite official rate at 197 naira.

The naira which made a ‘surprise comeback’ last week after the polls result yesterday continued its buoyant status as it exchanged for N170 against a dollar at the parallel market.In Abuja yesterday dealers at the black market exchanged the naira to a dollar at between N170 and N180


www.dailytrust.com.ng/daily/business/51434-naira-gains-against-dollar-at-black-market


So I ask again what will go wrong if we flood the economy with dollars?

22 Likes 3 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Last2comment(m): 6:21pm On Feb 19, 2016
What

4 Likes 4 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by TruthHurts1(m): 6:26pm On Feb 19, 2016
Obiagelli:
I am not in anyway an economist but i have been reading a bit, especially Henry Boyo ( truth be told, i get an anytime i do).
I believe we earn our oil revenue in dollars, what if the federal government pay states their allocation in dollars and the state simple exchange their dollars for naira at the bank or BDC.
With this system there will be surplus dollar in the system that will drive the exchange rate down. A good example of this was during the last election when dollar was raining all over the place (thanks to Dasuki) the dollar fell to 170 naira despite official rate at 197 naira.



www.dailytrust.com.ng/daily/business/51434-naira-gains-against-dollar-at-black-market


So I ask again what will go wrong if we flood the economy with dollars?

Actually nothing wrong. But the example you gave was when oil still traded at a relatively high price. Can't see how they can do that now.

16 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by DropShot: 6:28pm On Feb 19, 2016
But from where will the govt get the dollars from?

Obiagelli:

Do we earn oil money in naira?
What we earn now is a tiny fraction of what it used to be. The fact is, we don't earn anything close to what we need now.

88 Likes 6 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by wordbank(m): 6:28pm On Feb 19, 2016
I really dunno, but I think it's a bad idea.
Capitalism is the solution.

5 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 6:30pm On Feb 19, 2016
My problems with devaluing the naira:
Stock Exchange will loose its value by half
Landing cost of petrol will increase
Inflation! Inflation!! Inflation!!!
It will not in anyway improve export
Black market prices will continue to rise.

51 Likes 6 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 6:31pm On Feb 19, 2016
TruthHurts1:


Actually nothing wrong. But the example you gave was when oil still traded at a relatively high price. Can't see how they can do that now.

Yes i think oil was selling for around $60 then, shouldn't be much of a factor

3 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 6:32pm On Feb 19, 2016
DropShot:
But from where will the govt get the dollars from?
Do we earn oil money in naira?

17 Likes 2 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by LRNZH(m): 6:33pm On Feb 19, 2016
CBN does not have enough Dollars to 'flood' the markets. One of the reasons for the restriction on forex sales to certain importers.
Problem with over reliance on a commodity. Once the commodity price tanks, forex earnings plummet.

This is the short of it.

That is why economies are diversified in times of plenty and surplus earnings saved. This obviously did not happen when oil price was in excess of 80 USD/barrel under GEJ. Sorry I had to bring up Jonathan. It is what it is.

152 Likes 11 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by cckris: 6:33pm On Feb 19, 2016
Buhari's mismanagement will SOON shoot the naira above 1000 to the dollar, which is economically PRAGMATIC, but a political SUICIDE for APC.
PDP is a LUCKY political party. Nigerians will soon begin to scream & curse the day Luggard joined Daura to this nation.

75 Likes 3 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 6:37pm On Feb 19, 2016
LRNZH:
CBN does not have enough Dollars to 'flood' the markets. One of the reasons for the restriction on forex sales to certain importers.
Problem with over reliance on a commodity. Once the commodity price tanks, forex earnings plummet.

This is the short of it.

That is why economies are diversifies in times of plenty and surplus earnings saved. This obviously did not happen when oil price was i excess of 80 USD under GEJ. Sorry i had to bring up Jonathan. It is what it is.
But the CBN still manage to pay state governments in naira, do they just print naira or equivalent of our earnings

10 Likes 3 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by 989900: 6:37pm On Feb 19, 2016
LRNZH:
CBN does not have enough Dollars to 'flood' the markets. One of the reasons for the restriction on forex sales to certain importers.
Problem with over reliance on a commodity. Once the commodity price tanks, forex earnings plummet.

This is the short of it.

That is why economies are diversifies in times of plenty and surplus earnings saved. This obviously did not happen when oil price was i excess of 80 USD under GEJ. Sorry i had to bring up Jonathan. It is what it is.

CBN's faulty monetary policies are worse than fall in oil prices.
Read my last 3 topics and follow the links, Boyo explained it better.

The CBN is a criminal enterprise!

http://www.opinionnigeria.com/sensible-path-to-stronger-naira-and-economic-prosperity-by-henry-boyo/#sthash.hyWWsaT0.eJNNE8Wx.dpbs
Go to youtube, watch Boyo rip apart one of CBN's deputy governor on Channels.

11 Likes 2 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by babadee1(m): 6:38pm On Feb 19, 2016
Even if that could work, you don't really expect it to work in a country where greed and corruption rule the day. Even in naira the money is being massively diverted, the dollars will certainly also be diverted. The CBN will not have any control over foreign exchange or access to it. Banks and legitimate business people like importers and exporters will rely on governors for the forex they need instead of legitimate financial institutions.
I think it would be a terrible idea, unless you're suggesting that the naira should be phased out and Nigeria should start using dollars as our currency instead. That's the only way it might work.

Obiagelli:
I am not in anyway an economist but i have been reading a bit, especially Henry Boyo ( truth be told, i get an anytime i do).
I believe we earn our oil revenue in dollars, what if the federal government pay states their allocation in dollars and the state simple exchange their dollars for naira at the bank or BDC.
With this system there will be surplus dollar in the system that will drive the exchange rate down. A good example of this was during the last election when dollar was raining all over the place (thanks to Dasuki) the dollar fell to 170 naira despite official rate at 197 naira.



www.dailytrust.com.ng/daily/business/51434-naira-gains-against-dollar-at-black-market


So I ask again what will go wrong if we flood the economy with dollars?

Lalasticlala obinoscopy please help push this to the front page for broader contributions

15 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 6:39pm On Feb 19, 2016
Obiagelli:

Do we earn oil money in naira?


As mentioned by LRNZH, Nigeria Govt. currently have a negative balance of trade.

17 Likes 3 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by cckris: 6:43pm On Feb 19, 2016
Obiagelli:
My problems with devaluing the naira:

Stock Exchange will loose its value by half

Landing cost of petrol will increase

Inflation! Inflation!! Inflation!!!

It will not in anyway improve export

Black market prices will continue to rise.
Every National Political/Economic Policy in Nigeria since Udoji naturally led to what you observe above, except it's in fact worse, for a nation without ECONOMIC FOUNDATION, not even a useable Census Figure.
The tomorrow we complained about has come.

11 Likes 1 Share

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by 989900: 6:44pm On Feb 19, 2016
babadee1:
Even if that could work, you don't really expect it to work in a country where greed and corruption rule the day. Even in naira the money is being massively diverted, the dollars will certainly also be diverted. The CBN will not have any control over foreign exchange or access to it. Banks and legitimate business people like importers and exporters will rely on governors for the forex they need instead of legitimate financial institutions.
I think it would be a terrible idea, unless you're suggesting that the naira should be phased out and Nigeria should start using dollars as our currency instead. That's the only way it might work.


You pay them in dollar certificates; not currency.

2 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 6:45pm On Feb 19, 2016
Obiagelli:

But the CBN still manage to pay state governments in naira, do they just print naira or equivalent of our earnings


CBN currently have enough Naira liquidity, meaning banks now have more naira waiting for FX conversion.

4 Likes 1 Share

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by 989900: 6:46pm On Feb 19, 2016
Firefire:



As mentioned by LRNZH, Nigeria Govt. currently have a negative balance of trade.

So, we print Naira? Or where do we get the funds to fund the economy?

So you create further excess liquidity?

http://www.opinionnigeria.com/sensible-path-to-stronger-naira-and-economic-prosperity-by-henry-boyo/#sthash.hyWWsaT0.eJNNE8Wx.dpbs
Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by LRNZH(m): 6:47pm On Feb 19, 2016
Obiagelli:

But the CBN still manage to pay state governments in naira, do they just print naira or equivalent of our earnings

[b]Even when FG's forex earnings drop, their overhead usually does not. FG has to pay salaries and keep all arms of government functional. This is a reason why governments devalue their local currencies.

Say FG was earning 100B USD and it drops to 50B USD, by devaluing the local currency the 50B USD will have more local value and probably meet the local demands that the 100B USD was satisfying.

The problem is that for an import-based economy, if you devalue so much to satisfy government spending, it reduces how much can be imported. This can lead to a food crisis for example. This, I believe, is part of what PMB's government is seeking to avoid.

Devaluation is more beneficial to export based economies because the price of their commodity becomes cheaper internationally thereby stifling competitors. This is part of the Chinese strategy and it worked for them. They pegged the Remnibi at a lower than appropriate floating rate to fuel exports. That is partly why Chinese goods are relatively cheaper than goods from other countries.

I suspect the PMB government is hoping oil prices will recover sooner than later and reduce the pressure on Naira, since CBN will have more USD to spread around while his government diversifies the economy by increasing power supply, loan accessibility, reducing imports by fixing refineries. Another drain on our Forex is the war in the NE. We keep spending forex to 'buy' weapons to fight the insurgency.

PMB came at the most unfortunate time. But tough times bring out tough leaders.[/b]

176 Likes 16 Shares

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by SirShymexx: 6:49pm On Feb 19, 2016
Loool. This is very funny. grin

Why would a CBN that implemented a restrictive forex policy decide to flood the country with dollars? grin

3 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 6:50pm On Feb 19, 2016
989900:


So, we print Naira? Or where do we get the funds to fund the economy?

So you create further excess liquidity?

http://www.opinionnigeria.com/sensible-path-to-stronger-naira-and-economic-prosperity-by-henry-boyo/#sthash.hyWWsaT0.eJNNE8Wx.dpbs

Printing more Naira is not the solution to meeting FX demand based on the OP's question.

1 Like

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by 989900: 6:50pm On Feb 19, 2016
The below explains the concept.
https://www.nairaland.com/844884/solution-fuel-subsidy-wahala-look

If you read Boyo's articles, and watch his videos on youtube from 2012, you'd think he is a prophet -- as far back as 2013, he predicted exactly where we are now if the CBN's policies are not changed.

2 Likes

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 6:51pm On Feb 19, 2016
SirShymexx:
Loool. This is very funny. grin

Why would a CBN that implemented a restrictive forex policy decide to flood the country with dollars? grin



You imagine, the same CBN policy earlier placed an embargo on $ deposit.

1 Like

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by 989900: 6:53pm On Feb 19, 2016
Firefire:


Printing more Naira is not the solution to meeting FX demand based on the OP's question.

Pls. Go thru those links I posted it helps.

You can go thru my previous topics.

This helps too: https://www.nairaland.com/844884/solution-fuel-subsidy-wahala-look
Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 6:55pm On Feb 19, 2016
989900:


Pls. Go thru those links I posted it helps.

You can go thru my previous topics.

This helps too: https://www.nairaland.com/844884/solution-fuel-subsidy-wahala-look

I already bookmarked the link, it would be instructive. Thank you.

1 Like

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by LRNZH(m): 6:57pm On Feb 19, 2016
989900:


CBN's faulty monetary policies are worse than fall in oil prices.
Read my last 3 topics and follow the links, Boyo explained it better.

The CBN is a criminal enterprise!

http://www.opinionnigeria.com/sensible-path-to-stronger-naira-and-economic-prosperity-by-henry-boyo/#sthash.hyWWsaT0.eJNNE8Wx.dpbs
Go to youtube, watch Boyo rip apart one of CBN's deputy governor on Channels.



You cannot ignore the impact of oil price crash on an economy like Nigeria's. Russia, Venezuela, Iran, Saudi Arabia are all going through economic times as a result of this.
I understand your point.
Whatever CBN has been doing good or bad, Nigeria could get away with it under GEJ because of unprecedented oil prices. Now, we can't

13 Likes 1 Share

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 6:58pm On Feb 19, 2016
Firefire:



CBN currently have enough Naira liquidity, meaning banks now have more naira waiting for FX conversion.
The more reason to inject dollars

1 Like 1 Share

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 7:01pm On Feb 19, 2016
989900, let us simplify this discussion.

1. Do you expect CBN to print more Naira to meet it local obligations, in the face of dwindling income ?

2. How can CBN flood Nigerian market with USD, as asked by Obiagelli?

3 Likes 1 Share

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 7:01pm On Feb 19, 2016
SirShymexx:
Loool. This is very funny. grin

Why would a CBN that implemented a restrictive forex policy decide to flood the country with dollars? grin

The restrictions obviously isn't working
Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Nobody: 7:04pm On Feb 19, 2016
Firefire:
989900, let us simplify this discussion.

1. Do you expect CBN to print more Naira to meet it local obligations, in the face of dwindling income ?

2. How can CBN flood Nigerian market with USD, as asked by Obiagelli?
Calm down, the government still earn money in dollars for sale of oil (however small) but still pays state government in naira. That should stop

1 Like

Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by 989900: 7:04pm On Feb 19, 2016
Firefire:
989900, let us simplify this discussion.

1. Do you expect CBN to print more Naira to meet it local obligations, in the face of dwindling income ?

2. How can CBN flood Nigerian market with USD, as asked by Obiagelli?

1. No, not at all!

2. Read my topics, most of them are about this issues, go thru the links -- they very useful. These are not things you can explain with few lines (I do hope you agree).

Try this for starters:https://www.nairaland.com/844884/solution-fuel-subsidy-wahala-look

http://www.opinionnigeria.com/sensible-path-to-stronger-naira-and-economic-prosperity-by-henry-boyo/#sthash.hyWWsaT0.eJNNE8Wx.dpbs

https://www.nairaland.com/2944479/fastest-way-get-out-economic
Re: What Exactly Will Go Wrong If The CBN Floods The Economy With Dollars? by Firefire(m): 7:05pm On Feb 19, 2016
Obiagelli:

The more reason to inject dollars


Please where do you expect the dollars to come from ?

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