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Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate - Business (6) - Nairaland

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FOREX: CBN Introduces New Rules, Naira Closes At 367/$ / Forex: CBN Sanctions 12 Banks For Frustrating Small Businesses / Forex: CBN Pumps Additional $100m Into Market (2) (3) (4)

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Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by sigmundfreud(m): 10:20am On May 25, 2016
"He, however, said the apex bank would retain a special window to fund critical transactions in foreign exchange, which would likely attract a concessionary rate."
Therein, lies our problem!
REMOVE THE SPECIAL NONSENSE.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by awesomet1(m): 10:33am On May 25, 2016
Pangea:
How to destroy your country's economy in a year!
The Buhari Tragedy!




You just spoke my mind

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by nellyelitz(m): 10:33am On May 25, 2016
Una don tire Abi... clueless govt. U don't take time analysing policies before implementing...bunch of incompetent crooks

1 Like 1 Share

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by mickey45: 10:54am On May 25, 2016
Perhaps we'd be fine in the long run. Provided the banks will also refund any dollar inflows to customers' dorm accounts at parallel rates too.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by JuanDeDios: 10:57am On May 25, 2016
Lordtrillion:
Isn't this same thing as devaluation ?
Technically, yes. But there are differences.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by chiteny(m): 10:58am On May 25, 2016
One thing i am noticing is that when ever government want to tell big lies and make moves that will cause more hardship to the common Nigerian, the post here on NL is usually very long.

I guess its in a bid to confuse every one which they have succeeded in doing here on NL.

grin grin grin grin grin grin

3 Likes

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by vRendoh(m): 11:17am On May 25, 2016
Lordtrillion:
Isn't this same thing as devaluation ?

Worse tongue

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by LastSurvivor: 11:19am On May 25, 2016
Icemany:
cheesy cheesy cheesy cheesy
Thanks for making me laugh!





Bros no b laughing matter..
*smiles
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by sekem: 11:47am On May 25, 2016
tunergy:


Sekem Sekem Sekem Sekem Sekem Sekem Sekem Sekem Sekem

Ahn, ahn, which kain thing be dis na?

Pesin no fit sleep again abi?

How pesin go dey call my name like dis?

Okay, I don hear.

I don show.

Wetin be dat? Why you dey call me?
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by LastSurvivor: 11:48am On May 25, 2016
segalex:
I support PMB most times but I honestly think he needs to gather Nigerians who are versed in economic matters and constitute a real economy team which will give this administration the necessary directives on how to run the economy.
The issue of making Osinbajo who is a lawyer the leader of your economy team doesn't make sense, if there's one area that this administration is seriously struggling, I think it's the area of economy and this needs to be corrected before it gets out of hand

Wake up man!
It's already outta hand, can't u see..

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Montaque(m): 11:54am On May 25, 2016
ijija:

If gej were in charge, emefiele will have been one memeber of an economic team of experts. And gej will not have been so adamant on devaluation defying all advice from notable financial institutions. That singular act of defiance by buhari scared foreign investors out of the country resulting in USD scarcity. Whatever happened to the shadow chasing buhari went to do in china

People are forcasting doom for nigeria if gej were the president still.
They forgot that he, like his predeceSsor allowed every minister to handle his ministry professionally without politics. Its different now. Pmb is not professional wit his ministers. They are his minions rather than his collegues

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Barcholder: 12:24pm On May 25, 2016
As requested by many on this thread, I'll provide a very simple explanation of the new FX regime we have entered into.

1. The Naira will no longer be "Fixed" against the Dollar, but will now be determined by the forces of supply and demand.

Please note that even in a fixed FX regime, the rate is still determined by supply and demand. CBN spends our valuable FX to buy Naira in order to help stabilise the rate at their chosen rate. When the true underlying weakness of the currency becomes too great, the CBN simply can no longer supporting the currency or they will run out of money.

That's where we are now, and have no choice but to abandon the fixed rate policy. Even Saudi Arabia, with reserves of almost $1 trillion, is under pressure to abandon their fixed rate policy before it bankrupts them, never mind Nigeria with barely $25 billion left.

2. Contrary to popular belief the scarcity of FX has been caused by an unprecedented flight of capital out of the country since May last year, as investors were spooked by the 6 months delay in naming the ministers. Markets hate uncertainty, and that's exactly what we had.

3. The foreign investors will only reenter the market if they see value in the currency. Nobody is going to buy Naira at 197 when they believe the true value to be 300. Question, if you had $1 million in cash, would you agree to change it at 200?

The only way to solve the liquidity crisis that was created by this very same regime through very stupid policies (such as the imposition of Capital Controls), is to allow liquidity back into the country by allowing the currency to float.

4. The net effect of this should be that foreign money returns to Nigeria to help build the economy into growth. However, our ridiculous and almost absolute dependence on foreign exports means that we are likely to see a further spike in inflation in the short term, as the official Naira rate will likely be 300 to $1.

This provides a tremendous opportunity for local production to take off in a big way, creating millions of jobs in the process. The weak currency is effectively a 50% tax against importation, meaning that we can now manufacture cheaper than imports.

If we are smart, we will seize this opportunity.

Regards

Uvie

3 Likes

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by udysweet(f): 1:24pm On May 25, 2016
Name caught my attention o,lol! Songh idem ayin eka\namesake. Post too lengthy,couldnt read through,mind summarising mbok?
Uduak2019:
Nairaland economists should come and interpret this voluminous, esoteric article/press release for us! The writer of this article intentionally made sure that ordinary Nigerians don't understand the new monetary policy
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Nobody: 1:56pm On May 25, 2016
hmuhammad:
This article too long na, meanwhile CBN governor and PMB are;

Go to school u no go , and yet you cant read. Stop watching tv it makes u dull.

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by stockbull(m): 2:34pm On May 25, 2016
You don't deny facts when it comes to the Nation's economy.As long as we are import dependent and heavy consumer,This will not help a common man in anyway.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by mikolo80: 3:20pm On May 25, 2016
jodeci:
1$ will eventually exchange for 700 NGN before year end ssince the rate will be determined by market forces.

The most confused clueless CBN governor ever there is.
i hate the guy cos he is jonathan man but exchange rate not his fault.demand and lack of supply is.unless he can enforce loans to manufacturers and farmers.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by 989900B: 3:36pm On May 25, 2016
N197 to $1 is not yet nullified.

The currency is not freely floating in the true sense of it.

The CBN is trying to find a middle ground between devaluation or not ('hoping' with refineries, higher crude prices, inflow of Forex, and other monetary and fiscal policies being considered, the Naira could come back strong again).

It is not an easy decision to make considering the tons of unpredictability associated with either decision.

It is still a developing situation . . . fingers crossed.

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by hmuhammad(m): 4:54pm On May 25, 2016
[s]
kaeforum:


Go to school u no go , and yet you cant read. Stop watching tv it makes u dull.
[/s]go and die
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Aura2(f): 5:09pm On May 25, 2016
sigmundfreud:
"He, however, said the apex bank would retain a special window to fund critical transactions in foreign exchange, which would likely attract a concessionary rate."
Therein, lies our problem!
REMOVE THE SPECIAL NONSENSE.

even raw materials?

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by fem88(m): 5:10pm On May 25, 2016
Barcholder:
As requested by many on this thread, I'll provide a very simple explanation of the new FX regime we have entered into.

1. The Naira will no longer be "Fixed" against the Dollar, but will now be determined by the forces of supply and demand.

Please note that even in a fixed FX regime, the rate is still determined by supply and demand. CBN spends our valuable FX to buy Naira in order to help stabilise the rate at their chosen rate. When the true underlying weakness of the currency becomes too great, the CBN simply can no longer supporting the currency or they will run out of money.

That's where we are now, and have no choice but to abandon the fixed rate policy. Even Saudi Arabia, with reserves of almost $1 trillion, is under pressure to abandon their fixed rate policy before it bankrupts them, never mind Nigeria with barely $25

2. Contrary to popular belief the scarcity of FX has been caused by an unprecedented flight of capital out of the country since May last year, as investors were spooked by the 6 months delay in naming the ministers. Markets hate uncertainty, and that's exactly what we had.

3. The foreign investors will only reenter the market if they see value in the currency. Nobody is going to buy Naira at 197 when they believe the true value to be 300. Question, if you had $1 million in cash, would you agree to change it at 200?

The only way to solve the liquidity crisis that was created by this very same regime through very stupid policies (such as the imposition of Capital Controls), is to allow liquidity back into the country by allowing the currency to float.

4. The net effect of this should be that foreign money returns to Nigeria to help build the economy into growth. However, our ridiculous and almost absolute dependence on foreign exports means that we are likely to see a further spike in inflation in the short term, as the official Naira rate will likely be 300 to $1.

This provides a tremendous opportunity for local production to take off in a big way, creating millions of jobs in the process. The weak currency is effectively a 50% tax against importation, meaning that we can now manufacture cheaper than imports.

If we are smart, we will seize this opportunity.

Regards

Uvie


...Thanks for your explanation.I was actually confused with the whole grammar by the CBN and some Nairalander didn't help but to confuse me the more...
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Aura2(f): 5:58pm On May 25, 2016
[quote author=Barcholder post=45954070]As requested by many on this thread, I'll provide a very simple explanation of the new FX regime we have entered into.

1. The Naira will no longer be "Fixed" against the Dollar, but will now be determined by the forces of supply and demand.

Some essential products (i suspect raw materials) will be given concessionary rates.



Please note that even in a fixed FX regime, the rate is still determined by supply and demand. CBN spends our valuable FX to buy Naira in order to help stabilise the rate at their chosen rate. When the true underlying weakness of the currency becomes too great, the CBN simply can no longer supporting the currency or they will run out of money.


Absolutely


That's where we are now, and have no choice but to abandon the fixed rate policy. Even Saudi Arabia, with reserves of almost $1 trillion, is under pressure to abandon their fixed rate policy before it bankrupts them, never mind Nigeria with barely $25 billion left.


Saudi Arabia's forex reserve few months ago was $609b, their decision to float the Ryal is connected directly with sustained lower crude prices.



2. Contrary to popular belief the scarcity of FX has been caused by an unprecedented flight of capital out of the country since May last year, as investors were spooked by the 6 months delay in naming the ministers. Markets hate uncertainty, and that's exactly what we had.


You have no idea, capital fight is a chain reactionary effect of low crude prices (that has lost nearly 70% of its value since August 2014)
The crisis in the Niger delta has led to production cut of over 800,000bbls of oil recently, that is almost the production capacity of the United kingdom is lost to vandalism. The rest issues are secondary these are the real reasons for your forex shortage.


3. The foreign investors will only reenter the market if they see value in the currency. Nobody is going to buy Naira at 197 when they believe the true value to be 300. Question, if you had $1 million in cash, would you agree to change it at 200?


Foreign investors will consider security first before thinking of your currency, most oil producing countries are either heading towards recession or shrinking in GDP world over not just Nigeria, hence financial analysts worldwide have marked those investment destinations as red, if you like, redenominate the naira to equal $1, you will still not see any serious foreign investment except crude prices wake up and security is tackled in the Niger delta and North east.


The only way to solve the liquidity crisis that was created by this very same regime through very stupid policies (such as the imposition of Capital Controls), is to allow liquidity back into the country by allowing the currency to float.


How can you get liquidity back into our economy at low crude price? fixed or floating currency regulate or manage your reserves, it has no business with inflow. if you want Nigeria to get back on her feet, pray crude price wakes up, there is no magic to that natural phenomenon, else you continue managing the little you have by either import restrictions, relaxing your currency benchmark (devaluation), divesting your reserves, borrowing for capital projects etc all of these Nigeria have done to no avail, don't think the guys at the CBN are stup!d!!



4. The net effect of this should be that foreign money returns to Nigeria to help build the economy into growth. However, our ridiculous and almost absolute dependence on foreign exports means that we are likely to see a further spike in inflation in the short term, as the official Naira rate will likely be 300 to $1.


This is the reason our economy managers never wanted to devalue, devaluation does not add Forex to your Forex box, it adds misery, obviously, they have run out of options to consider it in part.
It is funny how you think this move will give you a 300-$1, the interbank rate is just coming to compete with BDC, the demand is already at cut throat levels, both will be swallowed by demand, we should be expecting an increase not decrease, again, cost of imported commodities will skyrocket, those are all the dangers of devaluation

This provides a tremendous opportunity for local production to take off in a big way, creating millions of jobs in the process. The weak currency is effectively a 50% tax against importation, meaning that we can now manufacture cheaper than imports.

If we are smart, we will seize this opportunity.


Funny, production requires investment in critical infrastructure, if you dare bypass it, your end product will never be competitive, how can a broke country invest at this time?
Investments and savings are made in the time of plenty not the other way round. People who export en masse profit from devaluation, on your part, you have not even made the investments neither have you built your infrastructure and here you are thinking of profiting, bros, are you a pastor? grin grin

Regards

Uvie

My professional regards to you too

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Lighthouseman: 6:24pm On May 25, 2016
Quakertellicus1:


Not exactly....it would make things easier for a while....but as long as oil prices stay low...it would just be a temporary indian summer.

Yes... That's y I added the avengers contributed to this. Oil price may be high but output low well below the threshold which doesn't make sense on the long term.

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by slavemerchant: 7:25pm On May 25, 2016
LastSurvivor:
But I warned u guys about this very dullard that failed Economics and Mathematics even in a forged waec result..
I warned u all..

We didn't listen to you cos you also failed economics and mathematics woefully, which means you are equally a dullard
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Barcholder: 7:46pm On May 25, 2016
[quote author=Aura2 post=45963218][/quote]

Thanks for your response, it's well written, though I do disagree with some of your points.

Firstly, regarding investment in infrastructure, I've already done that and will be starting manufacturing of a key product that's currently 100% supplied by importation. We will be the only local manufacturer in the country, and can significantly undercut the price of foreign imported product.

To your point about liquidity, you are plain wrong. The reason for the move to floating FX rates is to encourage foreign investment into the country again. That's exactly how you increase liquidity. Crude oil accounts for 91% of our foreign earnings, way too high. One of the ways to change that is to attract foreign investment into new industries in the country. These new factories will not only meet local demand, and thereby reduce foreign importation, but can also be exported to other countries, thereby bringing in more FX, as exports are typically priced in USD.

Capital flight has absolutely nothing to do with crude oil prices. Why would a foreign investor sell up their shares in a highly profitable local company because the crude pricesare low? No, they sold up because of the huge uncertainty around Nigeria'seconomic policies, one of which being FX. When you are seeing Capital Controls being put in place, you are going to scramble to get your money out before it's trapped in Nigeria. That's exactly what they did, that's what hot money does.

I agree that short term we will see a spike in prices locally because there are fewlocal alternatives. However, that will change as local manufacturing increases. Trust me, it's already happening. By the end of the year, you will see a lot of products currently imported exclusively, being locally produced.

Regards

Uvie
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by mindtricks: 9:02pm On May 25, 2016
jodeci:
1$ will eventually exchange for 700 NGN before year end ssince the rate will be determined by market forces.

The most confused clueless CBN governor ever there is.

Not necessarily him but PMB government.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by tiwiex(m): 11:44pm On May 25, 2016
proeast:
Trial & error government. I hope it benefits the economy immensely but having a special window is another avenue for round tripping & corruption because those with connections would always abuse it. Diaspora remmitances will also increase since banks will no longer cheat Nigerians recieving hard currencies by giving them naira at 197 when the true value is 350.

Diaspora remittance really suffered. We get about $20b a year. More than the CBN stash. Dunno why these guys thought oil was funding the black market. Sad really.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by tiwiex(m): 11:46pm On May 25, 2016
segalex:
I support PMB most times but I honestly think he needs to gather Nigerians who are versed in economic matters and constitute a real economy team which will give this administration the necessary directives on how to run the economy.
The issue of making Osinbajo who is a lawyer the leader of your economy team doesn't make sense, if there's one area that this administration is seriously struggling, I think it's the area of economy and this needs to be corrected before it gets out of hand

The economy is everything bro. If u get economu wrong, wetin remain?

1 Like

Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Aura2(f): 10:27am On May 26, 2016
[quote author=Barcholder post=45966061]


Firstly, regarding investment in infrastructure, I've already done that and will be starting manufacturing of a key product that's currently 100% supplied by importation. We will be the only local manufacturer in the country, and can significantly undercut the price of foreign imported product.

I was referring to Nigeria not individuals, about your plan, without a developed infrastructure in Nigeria, its not gonna be easy for you to penetrate the market due to overhead costs. Do a proper feasibility study before you start, the moment you manage to penetrate the market, some chaps are gonna source for cheaper alternatives where lower cost of production exist, price war ensues and voila! you are out of business.
wish you luck though



To your point about liquidity, you are plain wrong. The reason for the move to floating FX rates is to encourage foreign investment into the country again. That's exactly how you increase liquidity. Crude oil accounts for 91% of our foreign earnings, way too high. One of the ways to change that is to attract foreign investment into new industries in the country. These new factories will not only meet local demand, and thereby reduce foreign importation, but can also be exported to other countries, thereby bringing in more FX, as exports are typically priced in USD.



Capital flight has absolutely nothing to do with crude oil prices. Why would a foreign investor sell up their shares in a highly profitable local company because the crude pricesare low? No, they sold up because of the huge uncertainty around Nigeria'seconomic policies, one of which being FX. When you are seeing Capital Controls being put in place, you are going to scramble to get your money out before it's trapped in Nigeria. That's exactly what they did, that's what hot money does.


Am I wrong because I faulted a fundamental economics principle OR I am simply wrong because you don't agree with me? take your pick.
There are two kinds of investors in your economy, those in the money market and those on the street.
The ones on the street stimulate both the micro and macro economic parameters, while those in the money market stimulate macro in the long run, if you take an instantaneous tab of who the Nigerian people feel more, it is the investor on the street, but reading between the lines in your post I perceive your idea of capital flight is basically foreign investors in the money market, I may be wrong though.

If that is the case in your submission then the investor pulling out his funds has more to do with oil price than you think, now let's get pragmatic, mention one oil producing country whose economy is largely dependent on oil having a robust stock market at the moment?
the money market is fuelled by forecasts and speculations that's why there are ratings that keep tab on players in the money market.
whether you are buying govt debt (whichever instrument you choose), loaning money to the govt etc, the investor considers first his risks, in our case low crude price and production cut has made our risk higher, no matter how attractive our premiums are the investor knows that there is a chance of default occasioned by lower earnings hence the risk determinant for his investment.
Funny enough you disagreed with me then turned around to buttress my point, you mentioned an investor scrambling to pull out his funds due to fx restrictions, well, you just didn't see the big picture which is the fact that lower crude prices have caused lower fx earning hence the need to scramble and tighten if i can borrow your terms.
How do you increase liquidity by attracting foreign investors when the investors are seeing your country as a high risk?
Until crude wakes, the liquidity will come, the economy will be stimulated, our ratings will improve and investor confidence will be guaranteed, until such a time, foreign investors will be on the edge.
The question I want you to ponder over is this; will you tighten and scramble if there was more than enough to go round? If your answer is NO then lower crude price and production cut is empirical to your tightening and scrambling.



I agree that short term we will see a spike in prices locally because there are fewlocal alternatives. However, that will change as local manufacturing increases. Trust me, it's already happening. By the end of the year, you will see a lot of products currently imported exclusively, being locally produced.


It is going to have a stop and push effect, once the naira strengthens, importation will set in, smart importers are sourcing for cheaper fx offshore, before something becomes an alternative to another, it must present similar or better content in cost and value, local manufacture will never displace importation at this point when we lack the infrastructure that will add value to the local goods.
we only ask for strength to accept things we can not change.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by PatcomAutos: 4:23am On May 28, 2016
domainOfficial:
l suggested implementation of market determined exchange rate at the beginning of this year. Finally they accepted my suggestion.

how will it help stabilize the naira against the dollar? with this definition. market force, is a system in which the value of a nation's currency is determined by market forces without intervention by the government.
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Nobody: 8:42am On May 31, 2016
hmuhammad:
[s][/s]go and die

Sorry o, truth hurts. grin
Re: Forex: CBN Throws Naira Into Open Market, Nullifies N197/$ Exchange Rate by Agimor(m): 6:19am On Jul 30, 2016
Okay

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