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Nairaland Forum / Nairaland / General / Business / Devaluation: IMF Versus Buhari - Henry Boyo (19583 Views)
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Re: Devaluation: IMF Versus Buhari - Henry Boyo by PassingShot(m): 2:49pm On Feb 29, 2016 |
grandstar:The emboldened is not true. If the naira is devalued to 240-250, expect black market rate to skyrocket to above 450. It's the prayer of currency hoarders and speculators. PMB is 100% correct on this. 3 Likes |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Bevista: 2:49pm On Feb 29, 2016 |
bellyjean:It's so easy to demonize or criminalize banks, but things are usually more complex than it seems. --- If the banks do not buy up government bonds and bills, then it would be extremely difficult for the FG and state governments to implement their budgets, especially as it concerns Capital projects. So, while they earn "easy" money that way, they also provide a strategic economic service. --- As regards support of banks to the real sector, you need to work in the credit analysis department of a Nigerian bank to have an idea of the quality of proposals and business plans that come in there. From experience, I can tell you that over 90% of those proposals are never bankable. They never get to address the issues a lender wants, starting from proper presentation, accounting records, management experience, risk management, collateral, etc. The banks, therefore, consider these loans as high risk and so decline them. Also, from banking experience, these category have an astronomically high default rate. The fact is that our education needs to be revamped especially as it concerns entrepreneurship. There is also a need for a robust national identity management database to help bank track down defaulters. It's so easy to run and hide in Nigeria. So many issues need to be addressed that will significantly bring down the risk to enable banks give loans at much lower interest rate. --- The productive sector is so small, so that when there is extra liquidity, it ends up chasing few items driving up inflation. This then forces the CBN to raise rates. Countries like Japan, US, etc are looking for inflation yet they cant find it even with record Quantitative Easing. 2 Likes 1 Share |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Sunnycliff(m): 2:52pm On Feb 29, 2016 |
Firefire: And what is that antidote? PMB needs sound economic team that should include private investors and not forming ITK and yet no solution is anticipated in the medium to long term! |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Bevista: 2:55pm On Feb 29, 2016 |
AZeD1:I disagree with giving state governors dollars. Most of the dollars will be looted and wired out with no value to the Nigerian economy. Also, that will leave very little dollars left in the Federation Account, with a lot of negative consequences too many to discuss here. --- However, he's spot on as regards this writeup. First time I have to agree with his analysis. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by 19naia(m): 3:21pm On Feb 29, 2016 |
Its an impressive list of all the things that could go wrong with a devaluation. But there is a list of equally detrimental things playing out as a result of the Current CBN schemes to resist the real value of the Naira. Those things did add up to a slow of growth in Nigeria and CBN enforced dollar scarcity may be to protect it's own shortage but it made it harder for general flow of dollars among non oil dollar generating business in Nigeria. Speculation driven currency devaluation on the black market was not the only issue, but investors speculated about the risks of investing in an economy that is admistered to punish the dollar for the Nairas coruption and overvaluation. That slowed investment growth. The issue that the Naira is overpriced has an equal and opposite effect pressuring to play out. Capping it in one area only brings it out in another. The concerns about what will go wrong should the naira go into devaluation, have equal concerns faced in the situation that the naira is prevented from going into natural devaluation. The ghana Cedi was allowed to go into extreme devaluation and was eventually redenominated to avert domestic crisis such as life savings, pensions and foriegn currency loan payments from becoming bottomless pits. Inflation is still an issue in Ghana just as it is in Nigeria. Benin republic benefits much from a low currency value. Domestic product growth is the key. Dont forget that an overly plentiful supply of naira is making the naira very cheap next to the dollar, and in the same way, an overly plentiful supply of domestic products will make the price very cheap. So, if the Naira devalues, productivity can also devalue the price of goods and balance out the effects of a naira devaluation. And it can eventually make the devaluation a blessing for domestic product by attracting customers abroad due to the low price. That will grow the economy until the economy griws the naira value. Keeping the naira value inflated will do no good and even with increased domestic production, it will work against foriegn export sales. Remember, China keeps it's currency value low to help keep it's massive stock of products at a low price for foriegn customers. It may be the sad truth that when Nigerians are allowed to feel the real value of their naira, they will be forced into increased domestic productivity to compensate. The same is happening with the CBN dollar and foriegn spending restrictions, but not in a realistic manner at the grass roots of the country among the majority of people never deal in the dollar or international banking. Remember that Dangote cement has dropoed in price again and again all along the way of inflation and the devaluation of the Naira since it was listing at 150 to a $. Dangote is very much expanding export of cement and increasing the production at home and abroad. The lines of dangote cement trucks exiting Nigeria's western borders is continuous to the point now that a dedicated railway would be cheaper (that catapulted industry and growth in USA, Europe and China) . The key is that Dangote product is getting cheaper and growing despite the fall of the naira and rise of inflation at home. His industry infact bolsters nigerias GDP. How is it that the most successful business man is thriving in all these so called problems and bringing down prices at the same time? He is not decieving himself nor playing games. He is attuned to the concept of real international equity and real valuation. That is the integrity that makes dangote a viable economic factor in Nigeria. Nigerias economic model and market culture needs to take a lesson and evolve. If cement were a living, Dangote proves that cost of living can go down despite rise in value of naira and inflation all around. The truth is that oil production has gone up and thus oil prices have gone down. So, petrol at the pump prices should go down. Why are they not down? I know gasoline is mostly imported but the foriegn sellers are selling cheaper now too. Somewhere in Nigeria is a corupt black hole sucking the life and value away. Cement prices are down, oil prices are down, and all other sectors rely on these staples to survive. Oil fuels transport which delivers electricity, carries goods along roads. Cement builds infrastructure to house all that we value. In fact, everything should be seeing a bit of a price drop. None productive black holes, parasitic entities are surely to blame. People with no grasp on the importance of true equity and international equity in a global market. I bet dangote would thrive as well as china did, if the Naira were allowed to naturally devalue with minimal controls. Dangote would sell more exports just like china, and just like china, that boosted their economy to the top of the world until the almighty dollar itself was knocking on their door, begging them to raise the value of their currency to be equal to the dollar (International equity). China refused to increase the value of their currency. Only someone invested in a black hole of non productivity will struggle to keep a currency skewed against international equity so as not to bear the brunt of its own consumption of what it has not earned. Nigerias favorite coruption practice, to chop what it has not earned and to chop it again and again and again. Its not surprising that CBN and many other sectors of Nigeria work to keep the naira in false value. Dangote is a glaring case and point for a viable solution, but most Nigerians are all about the flare of show of themselves and what they have aquired with ease despite no productivity to show for it, no eqitability. Same thing with all the surplus naira, lots of Naira with no equitability to show for it. It then becomes cheap, devalued, everyone has more of it than there is product to spend it on, so they are forced to buy imports. Meanwhile, Dangote is lined up to make oil refinery happen reliably in Nigeria. There is so much that can be done to grow Nigerias productivity and the least of it has to do with worrying about the superficial currency. Oil with refineries will be a huge boom industry to supply into west Africa and beyond. Cement to build strudy riads and buildings, agriculture, auto (innoson and others) industry, steel and raw materials, electricity supply to power such growth and industry. China will be cheap and challenge even the economic growth of USA. It would have been better for Nigeria to place steep tariffs on strategically select imports rather than a broad sweeping restriction on the entire market via currency restrictions. Steep tarrifs on select impirts would firce domestic production up. I guess the insidious corruption is once again the poison in the water that drove the National currency restriction policies. It may have been contrived out of desperation to get a handle on embezzeled Naira being converted to dollars and then funnelled out to foreign bank accounts. Its always sad to see the victims punished to weed out a theif or the victim imprisoned to keep him safe from theives. 3 Likes |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by AZeD1(m): 3:40pm On Feb 29, 2016 |
Bevista:Not dollars but dollar certificates. The dollar is kept by the CBN. If the governors need Naira, the sell the dollar certificate to a bank. That way, we can avoid round tripping because no body ever gets the physical dollars. 2 Likes |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by theV0ice: 3:41pm On Feb 29, 2016 |
grandstar: Do you know how much Soludo used to defend the naira then? Do you know how much our foreign reserves plummeted by to keep the naira that 'stable'? As at July 2008, we had above $61B and it dropped to less than $41B by June 2009. If Nigeria had reserves of $30B in 2008 when the global crises started, no magic wand would have prevented the Naira from going mad. What is happening now would have happened as well. Even the oil price fall of that time lasted less than a year and never fell below $30/barrel. This one is going on 2 years now and fell to $27/barrel at a point!!! While Henry Boyo's solutions look and sound 'weird', i'm not buying the IMF idea totally too. IBB devalued the currency in 1986, i don't know how much help it did for us in terms of real investments 1 Like 1 Share |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by saniby: 3:42pm On Feb 29, 2016 |
We Nigerians say NO to voodoo economic theories. We refuse to devalue our Naira to help those foreigners at the expense of our people. ... and development. We refuse to subscribe to the IMF pill that could not save Greece. We Nigerians are saying our Forex at official rate is not for luxury items. We are ready to subsidise (if that is what u call it) for the products we need for national development. Industries, Government projects etc. Just imagine the tsunami that would have followed official devaluation of the Naira -- Petrol would have reached N200-300/liter, Workers Nko? ...... they will start agitation for improve salary. Goods and service will drive to the west if you need devalued Naira why go to CBN, pls go to BDC as usual. Because the ones u brought in you didnt take them to CBN in the first place. My recommendation for those canvassing for Devaluation: If you wish, make your money abroad and take it to BDC and sell for N200/dollar. ..... and lets see how long that will last. By God's Grace the Dollar will stabilize. Especially if you can reason well. 1 Like |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by femmysin(m): 3:46pm On Feb 29, 2016 |
seunmsg: GBAM... |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by theV0ice: 3:49pm On Feb 29, 2016 |
AZeD1: When i first heard him say that, i wondered where that idea came from. I still don't know how it will work out if implemented but i guess there's no harm in trying. I wager that the solution to our problem lies in finding a middle ground between what IMF recommended and what Buhari/Emefiele/Adeosun are currently doing. The problem is finding that perfect point of sensible convergence. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 3:51pm On Feb 29, 2016 |
Bevista: The naira equivalent is from the banks' (customers) who need the dollars for importation. It's a cycle. It's pretty much like what happens to the dollars from other export proceeds. The treatment of the one from crude oil is not different. Cbn does not print naira to give to exporters of cocoa or cassava. In this instance, it's easier when you assume that the states and FG are exporters of crude. If the naira equivalent collected from importers is less than the export proceeds/crude oil usd, it's favourable for the foreign reserves. It's inconceivable to assume that the cbn has been printing the naira equivalent of crude oil sales for distribution to the FG and states all these years. And it's for this reason that Boyo is wrong. Dead wrong. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by JuanDeDios: 3:52pm On Feb 29, 2016 |
seunmsg:But he doesn't tell us what those antidotes to excess liquidity are. And hasn't the naira devalued itself already irrespective of what government does? I wish he also offered perspectives on the solutions to the CBN monopoly on dollar supply in a monoeconomy. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Bevista: 3:54pm On Feb 29, 2016 |
AZeD1:Can you please enlighten me on how dollar certificates work? |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Bevista: 3:56pm On Feb 29, 2016 |
Activa:Well understood. Seems pretty much obvious now. My bad! |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 3:57pm On Feb 29, 2016 |
AZeD1: You can't FORCE banks to lend to anybody. They're private businesses. The govt should address the reasons why banks don't want to lend to the real sector. 1 Like |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 4:01pm On Feb 29, 2016 |
Bevista: OK bro. It's always enlightening sparring with you. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 4:04pm On Feb 29, 2016 |
AZeD1: The cbn does not print naira for the states. I've explained that above. Boyo didn't get that right at all. Saying that cbn should give dollar certificates to states is akin to telling cbn to issue dollar certificates to other exporters. One thing that Boyo is saying though, albeit in a complex manner, is that the determination of the exchange rate should be more flexible. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 4:08pm On Feb 29, 2016 |
AZeD1: The main gist here is that those who earn dollars (exporters or whoever) should be free to access the market and agree a rate with interested buyers. In a way, this is flexibility and breaking of cbn's monopoly. I don't think we need dollar certificates to achieve this. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by AZeD1(m): 4:12pm On Feb 29, 2016 |
theV0ice:I wholly agree with you. 1 Like |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by AZeD1(m): 4:15pm On Feb 29, 2016 |
Activa:When I said force, I didn't it literally, I meant we should find a way in which funding the real sector is very attractive to the private sector. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 4:32pm On Feb 29, 2016 |
AZeD1: OK, I see. The way to achieve the attractiveness is with the government, and not the banks. A lot of people lambast banks for nothing. It takes courage to operate in this clime. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Bevista: 4:37pm On Feb 29, 2016 |
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Re: Devaluation: IMF Versus Buhari - Henry Boyo by seunmsg(m): 4:41pm On Feb 29, 2016 |
JuanDeDios: He did. He has been suggesting over the years that instead of CBN collecting the country's dollar earnings and printing and distributing the naira equivalents, they can issue dollar certificates instead and the beneficiaries will change it to naira in any DMB. With this system, we will have dollars chasing the naira instead of the current system where Naira is chasing the dollars and CBN won't have to mop up excess liquidity at high interest rate. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by AZeD1(m): 4:43pm On Feb 29, 2016 |
Activa:I know. Lots of fundamental things are really wrong in this country but we have to find a way. Nobody ever turns down the opportunity to make easy money so I wouldn't blame the banks. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by Nobody: 4:58pm On Feb 29, 2016 |
AZeD1: I agree with you. Power. Education. Health. Security. Id system. Justice system. Transport system. The issues are many. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by AZeD1(m): 5:05pm On Feb 29, 2016 |
Activa:So many problems, limited funds and looters in leadership positions. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by islandmoon: 5:08pm On Feb 29, 2016 |
IMF want to enslave Nigeria by force. They can not do without selling to 170millions people If only Nigerians can look inward |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by JuanDeDios: 5:13pm On Feb 29, 2016 |
seunmsg:Oh, OK. Brilliant. This is the first time I'm reading him. |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by sam90s(m): 5:15pm On Feb 29, 2016 |
The last two paragraphs is a situation we have experienced before makes on wonder if that's the purpose of th advice in the first place, economic sabotage, scam everywhere! Hiss! |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by sam90s(m): 5:20pm On Feb 29, 2016 |
islandmoon: Only if trading was the sole purpose how about creaming off your profit even when you trade? |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by jayloms: 5:27pm On Feb 29, 2016 |
Activa: I have read quite a number of Boyo's write up and in each of them he never fails to mention that the naira equivalent of our dollar earnings is printed to fund the federation's account. Now Sir, are you absolutely sure the Cbn doesn't print the naira equivalent to fund the fed's acct cause I'm wondering why he(Boyo) would make such a grave mistake which is pivotal to his suggestion. I'm interested in your views cause the last thing I want, is to be backing a suggestion based on a faulty premise. Many thanks as you illuminate my understanding. 1 Like |
Re: Devaluation: IMF Versus Buhari - Henry Boyo by 989900: 5:28pm On Feb 29, 2016 |
Boyo is 'dead-right'. I have personally watched tens of his interviews, and spat with other economic not-so-gurus after all, no one has been able to fault his ideas. Likewise I have read most of his materials, including stuffs from 'lesleba.com' -- they are all so on point. It is actually easy for me to relate to most of his solutions, probably because we share a homogeneous background sorta. I have brainstormed with a few industrial, economic, and finance intellectuals both in and outside the country, and the truth is just the truth -- they all agree! I see some people asking some intelligent questions about his solutions/ideas, some positive, some negative, but it seems most people who criticize his ideas do not fully understand it. 1. The bottom line is, the banks have been bleeding everybody dry -- like banks do. 2. Nigerian banks, are nothing but glorified 'kolos' (kids-money-safes) -- you get nothing from them literally. 3. The CBN is basically a criminal enterprise, and largely a cockamamie company -- bereft of any beyond brilliant policies (I've listened to 3-4 CBN deputy governors and PR staff, and 'gosh', 'face-palm') [b]4. Their can be no progress, no industrialization, no diversification, no exportation (the kind that propels a country into the 'A-league'), no reduction in massive unemployment, no prosperity, in a country where the lending rates from the banks are north of 25% -- that is the bottom-line in Boyo's sermons. The CBN governor was summoned by the senate to explain how it utilized N1B, and he said most of it went into checking 'excess liquidity' -- can you imagine that -- ungodly profit for the banks while industries are there needing funds. For example, I borrow from my banks outside the country between 4% - 8%. Car loans at 2% (spread over 4-5 years)! In my own country: Nigeria, where I have invested over 75% of my sweat, I am asked to come and borrow at over 20% (with my 'blood sample' -- pun intended); just cause the CBN/gov't 'technically' borrows back its own money from the banks in the name of mopping up 'excess liquidity' (money it DOES NOT NEED . . . which can largely be avoided) @ 13-16%, and because some oil subsidy fraudsters in conjunction with the banks and other gov't cronies can borrow @ over 20%. The TSA though, is expected to reduce excess liquidity.[/b] 5. If the Naira is devalued, and the necessary checks are not implemented, the same insane divergence between BM and bank rates will still re-occur either now, or later; so why not implement those checks now, while doing the needful to make the Naira appreciate. Devaluation if not checked (especially) in our case, is a a case of once you go that route, you keep on sliding south (basically impoverishment). 6. Devaluation means pump prices go north of N130/litre. 7. Devaluation means external debts/bills of both government and private entities increases proportionally -- a big dent on our stock market!. 8. Devaluation means inflation! 9. Devaluation automatically means industrial strikes and 'downtime'/reduced productivity, because workers will definitely have to lay down tools until wages go up to match -- the last thing we need now -- some states can't even pay their wages ATM! Did I mention 'brain-drain'? 10. Devaluation is taking paracetamol as a curative for stage 4 cancer. 3 Likes 1 Share |
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