Nigeria’s foreign exchange crisis and the insistence of President Muhammadu Buhari to conduct an inflexible exchange rate policy now better define the struggle for survival in Africa’s largest economy where economic activities have slowed considerably with resultant job losses as investors watch in despair.

Nigeria failed to take advantage of the goodwill and momentum generated by the successful elections last year by releasing its peg on the naira and sending the right signal to attract foreign investors, and today the opaqueness and fragmentation of the FX market means that investors are confused and intrigued, according to analysts.

Investors do not have to look far to know that things are not right with the Nigerian economy and its management.

Inflation at 12.8% is rising far above asset yields, including T. bills at 7%, interbank overnight rates at 4% is far below the Central Bank’s MPR of 12%; crimping credit creation, banks are reporting lower earnings and non-performing loans look set to continue to rise, as harsh market conditions weigh down on the performance of businesses operating in Nigeria.

With foreign investors said to be avoiding the country until the FX controls are removed, Nigeria’s local bonds are the only ones to have made losses this year among 31 emerging markets tracked by Bloomberg. Nigerian average yields have risen 161 basis points to 12.31 percent since the end of 2015, whereas Russia’s have fallen 26 basis points to 9.29 percent and Colombia’s 28 basis points to 7.77 percent.

The market has waited nervously for the outcome of the review of the FX market Nigeria’s Central Bank says it is conducting.

After the January MPC meeting, the Central Bank said, “in the medium term within which monetary policy is cast, the need to allow policy to produce the desired outcomes becomes a key consideration in the policy mix. Consequently, the bank is fine-tuning the framework for foreign exchange management with a view to ensuring a more effective and liquid foreign exchange market. ”

After the March meeting of the MPC, the apex bank issued a statement in which it said, “however, the Committee (MPC) charged the bank (CBN) to speed up reforms of the foreign exchange market to improve certainty and eliminate noise and opportunities for arbitrage…”

One month after, there is no word on the said review despite the urgency in the MPC statement of March.

Senior lawyers and bankers told BusinessDay they still believe the apex bank will respect relevant provisions of the foreign exchange act of 2004 that established the autonomous foreign exchange market and the rules governing its operation.

The FEA 2004 by virtue of the provision of its section 9 specifically states that “the rate at which each transaction in the Market are to be executed shall be at the rate MUTUALLY AGREED between the APPLICANT PURCHASER and the AUTHORISED DEALER or AUTHORISED BUYER concerned”.

Surprisingly, this market was frozen by a change to Order based 2-way quote market and the effective closure of CBN’s RDAS window on February 19, 2015.

The lawyers say the question of devaluation can become an issue if Nigeria operated a fixed, single exchange rate regime.

This should not apply to Nigeria where the law provides that rates on the autonomous market should be determined by the principle of a willing buyer and a willing seller.

It’s not the first time Buhari has resisted market driven policies. When he last ruled Nigeria from 1983 to 1985, a time when, like today, oil prices had just crashed, he ignored advice to adjust the naira and refused financial assistance from the Washington-based lender, the IMF.

Buhari says adjusting the value of the local currency will amount to killing the naira.

However, for investors today, such thinking makes little economic sense. Most businesses are already trading at the black-market rate since the government’s policies are choking off dollars in the official market, according to Exotix Partners LLP, a London-based investment bank focusing on frontier markets.

PZ Cussons Plc, the Manchester, U.K.-based soap maker, said last week its Nigerian unit is forced to pay a 50-70 percent premium on the official rate to source foreign-exchange.

Nigeria’s government “just doesn’t get it,” Kato Mukuru, the London-based head of equity research at Exotix Partners LLP, said in an interview. “There comes a point where you need to understand that the whole country has already devalued.”

Source: https://businessdayonline.com/2016/04/nigerias-economy-choking-under-pangs-of-politics/

Ok

more wailing as usual

Mods please do the needful.

Although it isn't Rukky Sanda news

I will state again and again, penultimate administration did two devaluations back to back and the effect was not felt by the populace. Prices of things remained roughly the same, the inflation rate was single digit. Obviously someone was doing something well.

Today we have refused to do an official but apparent devaluation ( despite the real devaluation taking place) and inflation is double digit.

Obviously someone isn't doing something well.

Mods are now doing their work...

Zombies should come and take a dish of their unsavory meal been dished out by their Dullard in Chief! We are in auto reverse since this year!

No good news so far in this economy since this year!

#proudly5% and Wailer Rep 042!!

Eyah... Buharinomics in action!

I AV said it from day 1 there is a good heart but a clueless head.it will still amount to zero.

Our man is busy chasing rats while his house is on FIRE.
Who does that except a DullardPoo
Yet the brain dead zombies keep hailing him like flies that will follow deadi bodi enter grave.


www.nairaland.com/attachments/2638335_117378378808222686209331845457370151459142n_jpg21fab79f34191754f3edd356d25b008d

All i'll say is God Help Our Nation

no comment cuz i didn't bother to read it

I don't know why this western sponsored foreign media are hell bent on the devaluation of the naira without them highlighting the benefits of devaluation to us, all what they keep telling us repeatedly is how there will be hike in investment from abroad, without telling the gullible ones among us who have already fell for their cheap blackmail how the devaluation of the naira means that our local banks will need more naira to service their foreign debt mostly euro bond then leave them with little cash reserve, without telling them how our various state will need more naira to service their foreign debts even though before devaluation they struggle to meet their basic needs, they fail to tell the gullible ones how federal government will need extra hundreds of billions of naira to service foreign debts mostly IMF and world bank loans.
Ever since the introduction of SAP over 30 years ago that we have been devaluing our naira from #1=1$ to the current $1=200 how many foreign investors have make our economic self sufficient in single sector of our economic? our local investors have make us self sufficient in many commodities eg cement
instead we export wealth(raw materials that can employ millions) and import unemployment (what the raw material can be source locally and transformed to consumer consumption). how many of you even know that most of this foreign companies export our cocoa then import chocolate then package it here after shortchanging us? and that is what has been happening to other raw materials, just like we export crude oil then import refined petroleum product from them at exorbitant rate?



All these foreign investors they keep shouting about are mere speculators and leeches on our national economic because i don't believe foreign investors who only invest in our stock market and buy government bonds and T bills as real investors we have so many sectors of our economic that we lead real investors like mining and manufacturing industries.

what have Angola benefited from their satanic advice on devaluation?
ans. a very though future.



politics apart, use your brain once and say no to this western cheap blackmails.

copied

The economy is not in the best shape but when
you compared the state of Nigerian economy to
similar nations, generating 90% of their foreign
revenue from oil you will agree with me that
Nigeria is not doing bad at all.
Currently, among such nations, Nigeria is the best
in terms of investment destination. When you look
at emerging-economies, Nigeria is second after
China, the 2nd largest economy in the world.
Mind you, China has lost over $4 trillion this year,
Brazil two years ago was most thriving emerging
economy and currently relegated to junk by credit
rating, same with Venezuela, Argentina, etc.
In Africa, South Africa is regarded as business
powerhouse, but this year alone South Africa has
suffered from global financial slowdown and Rand
lost about 30% against the US dollar, 2016
economic growth forecast was cut to 0.9% from
1.7%.
The same thing happened to Angola, even after
devaluing her currency, Kwanza, slides 40%.
Russia, Kazakhstan, Turkey, Asia-Pacific
(Malaysia, Singapore, Thailand, Indonesia, New
Zealand, etc) are all suffering from global
financial crisis but somehow Nigeria has been
able to manage it better.
Please note that this situation is similar to what
happened in 2008 (recession), with even lower oil
prices but because of 2008 experience, financial
institutions, Central banks, etc. are making
adjustments to their monetary policies just like
this administration is doing. Even at that,
Abenomics developed by Abe, Japan Prime
Minister has failed. So Nigeria situation is not
unique.
This administration is not A Government Of
Failure, Tears And Disappointment but of hope,
determination and strength, even in the face of
global pressure to devalue and succumb to IMF
cabal, We stand and soon we will all reap from
this administration. Stay positive.

SEE. EPISTLE




Abegi who read am finish sud summarises

Our able president is clearing up he mess left by the ineffectual buffoon,

Buhari is the worst thing that has ever happened to Nigeria

The summary of the article can be encapsulated here...

With foreign investors said to be avoiding the country until the FX controls are removed, Nigeria’s local bonds are the only ones to have made losses this year among 31 emerging markets tracked by Bloomberg. Nigerian average yields have risen 161 basis points to 12.31 percent since the end of 2015, whereas Russia’s have fallen 26 basis points to 9.29 percent and Colombia’s 28 basis points to 7.77 percent.

What they don't tell you is that loosening foreign exchange controls works....for a while. If we are not earning enough forex to replace the forex lost by the loosening of the controls.....we could enter a state where our savings account is drained down to zero....and we are left with no option but to take a big fat IMF loan that would take decades to clear off again.

And we should also not forget the massive devaluation of the naira that would result...leading to marked increase in prices....and inflation.

The article is just a big and unnecessary advert for loosening the controls. While at the same time it pretends that there would be no side effects of loosening the controls. Bad economics...bad article.

it is well

Proudly 5% wailer....zombies how far.

Voting Buhari was a grave mistake

Quakertellicus1:
The summary of the article can be encapsulated here...
What they don't tell you is that loosening foreign exchange controls works....for a while. If we are not earning enough forex to replace the forex lost by the loosening of the controls.....we could enter a state where our savings account is drained down to zero....and we are left with no option but to take a big fat IMF loan that would take decades to clear off again.
And we should also not forget the massive devaluation of the naira that would result...leading to marked increase in prices....and inflation.
The article is just a big and unnecessary advert for loosening the controls. While at the same time it pretends that there would be no side effects of loosening the controls. Bad economics...bad article.

GBAM!!!

Pls, who knows if our President is in the country now?


LOL.

Hmmm...

.

When men are cast down, then thou shalt say,There is lifting up (Job 22:29)

While I care less about western media position on our economy. ..... its more painful that I can't justify my position by clearly pointing to Buhari's plan to revitalise the economy.

Its obviously not working. This buhari sef..

APC

anonimi:
Our man is busy chasing rats while his house is on FIRE.
Who does that except a DullardPoo
Yet the brain dead zombies keep hailing him like flies that will follow deadi bodi enter grave.

What would a PDP government, assuming your man won in 2015...have done differently?

I am serious by the way.

All Promises Canceled