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CBN New Forex Rate Policy Announced - Business (5) - Nairaland

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Understanding CBN New Policy Actions In Forex Market / Benefits Of CBN's New FOREX Policy / CBN New Policy On Seized ATM Cards (2) (3) (4)

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Re: CBN New Forex Rate Policy Announced by chachanga: 4:26am On Jun 16, 2016
agarawu23:
you know nothing about currency so fvck off before i send Ogun for u.

HAHAHAHAHA....Ogun wey don disappear for abroad Hotel room where hin go watch Euro2016?

Ogun don fade leave boys dey suffer heat for Naija o
Re: CBN New Forex Rate Policy Announced by Twinflakez(m): 4:43am On Jun 16, 2016
Boss13:
What is the essence of introducing over the counter FX futures, when there is over the counter forwards?

It is good that non-oil exporters are allowed into the FX market to increase the supply side chain of FX. This will allow inflow of FX currency especially the dollar to come into the country. However, the CBN must finalize arrangement for yuan trade.

Allowing market forces to determine the exchange rate is good. We hope these measures enable the naira to gain considerable strength, but I doubt that given our trade deficits and huge import dependency. However, this may assist to reduce round tripping frequently perpetrated by Banks and politicians who have unrestricted access to the dollar.

Now the CBN should make effort to streamline our interest rate to reflect the economic recession we are facing as they have done for the FX. Once this is done, we may begin to see short-long term economic boom
why do I have the feeling that this whole tin was done intentionally by this APC government to make money for themselves. Now they've made enough and they have come back to do the same thing they didn't want to do before.
Re: CBN New Forex Rate Policy Announced by DropShot: 5:10am On Jun 16, 2016
iykedare:


I know where you work. Guy,please be quiet.
Please tell the forum and the type of work I do.
Nonsense!
Re: CBN New Forex Rate Policy Announced by Snwokenk: 5:16am On Jun 16, 2016
Boss13:
What is the essence of introducing over the counter FX futures, when there is over the counter forwards?

It is good that non-oil exporters are allowed into the FX market to increase the supply side chain of FX. This will allow inflow of FX currency especially the dollar to come into the country. However, the CBN must finalize arrangement for yuan trade.

Allowing market forces to determine the exchange rate is good. We hope these measures enable the naira to gain considerable strength, but I doubt that given our trade deficits and huge import dependency. However, this may assist to reduce round tripping frequently perpetrated by Banks and politicians who have unrestricted access to the dollar.

Now the CBN should make effort to streamline our interest rate to reflect the economic recession we are facing as they have done for the FX. Once this is done, we may begin to see short-long term economic boom

Forwards and Futures, while they seem similar, are completely different. Forwards often require delivery at end of contract. Futures often do not. Rather futures are used for hedging (financial risk) and speculation( which is not necessarily bad because it adds liquidity)

If i enter into a forward contract with you to buy 1000 cattles in 3 months time. I'm obligated to receive and pay for the cattles on the price we agreed on.

On the other hand, with a futures contract I can either receive delivery or settle the financial difference of the price we agreed versus the spot price at the end of the three months.
Re: CBN New Forex Rate Policy Announced by onatisi(m): 5:32am On Jun 16, 2016
Our economy is importation dependent,there will never be a demand shortfall for dollars rather it will always increase until we start producing. Except the banks have dollars in their vaults,there is no way this new CBn policy will ease the pressure on the naira,the questions ppl should be asking is where will the dollars be coming from? When investors thrown in their dollars into the market,what use Is the naira to them since there isn't much to export from Nigeria?

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Re: CBN New Forex Rate Policy Announced by Answerbank: 6:26am On Jun 16, 2016
As you may already be aware, CBN released new FX guidelines yesterday that floated the FX rate. The Naira is now left to fight for its own life and dignity in the community of those colorful papers that are used for trade, account-keeping and store-of-value. Like tubers of yam taken to Nkwagu market by a hard-working Ikwo farmer, every Naira taken to the forex market will fetch what the market confers on it, and not necessarily what it's owner thinks of it. Welcome to right-hand economics which is not new, by the way. I have some rambles and thought on this otherwise ordinary policy:

The implication of this policy for the sensible execution of 2016 Federal budget is huge. First, it has reset the exchange rate base of the budget in such a way that expected revenue will shoot up even if production quantity of our crude oil remains as projected.

My expectation is that Government fiduciary revenue will so increase that Fed Govt will probably afford an attempt at a wage review for its workers, it may also more assuredly afford other social safety net programs such as the N5k conditional transfer. But because of something economists call MONEY ILLUSION, it's doubtful if Govt can eventually afford the school feeding program as well. Inflation will see to that.

Money illusion, by the way, means having additional money without truly having additional value which the additional money was meant to confer. At 15% inflation rate released by nbs recently, a 14% increase in wages, for instance, leaves the wage earner 1% worse-off. But you rather see him celebrate the 15% absolute increase, instead of mourning the 1% relative loss. It's an illusion of having money and we are all guilty of. Well, at least, I am.

Now back to the fx policy. I know that people like Rewane and Pat Utomi have openly canvassed for this since March 2016 and they were called uncomplimentary names in certain quarters. Hey, those 2 are not necessarily our best economists - Pat is not even an economist - but they are some of our most vocal economic thinkers. Inflation was still single digit at the time they were asking for market-driven FX rates. With our eyes open, we have paid the price of market-detrrmination of FX without enjoying, at the very least, the intellectual respect of employing it as a solution earlier in the day. In holding onto the erstwhile 2-part FX policy in the manner it was structured and operated, we got the whole world of economic thinkers wondering if Maduro of Venezuela wrote us the script.

If you ask if this floating one is the best FX policy under the circumstance, my answer will be, "what circumstance?". If your 2016 budget is highly pressured from the revenue side & you can literally double your revenue by simply heeding advice by multilateral friends and domestic businessmen to surrender more control of a key variable (FX rate) to market forces, will you be smart or not to kill the 2 birds with one stone? If your problem is money to fund your budget, this is the magic Psalm. I don't know a politician Head of State that won't hug and kiss this policy, other things being equal.

Incidentally, there is no one-handed economist " on one hand ...., and on the other hand ...". The two hands will surely come to play in the case of this new CBN FX guidelines. We say in my village that he that eats the genitals of a ram is indebted to the elephantiasis of the scrotum. Meaning: Inflation rate will surely spike consequent upon this policy. Considering that this is the famine season when plants have gone into the ground and harvests are still some distance away, rural suffering and urban lamentations will rise. The roundabout effect of FX price on pump price of fuel may be further unsavory because the market-determination rate may be higher than the rate used in PPPRC's template for petroleum products pricing.

Implication? Fuel importers may halt imports while they pressure govt for review of the template. Another round of fuel scarcity and, perhaps, fuel price increase.

But it shall come to pass as it always comes to pass that stability may return to the forex market after about 6 weeks, farm harvests will begin to stroll to market, supply rigidities in the Niger Delta will ease-off and a new dawn will break. Then there shall still be a heaven and a new earth (new Nigeria?).

After all the grammar, the LCM is: Those that call upon the name of the Lord shall be saved.

1 Like

Re: CBN New Forex Rate Policy Announced by bilazego(m): 6:52am On Jun 16, 2016
Integrityfarms:
In as much as not deriding the intelligence of this forum but this issue discussed today has revealed how much knowledge an average nairalander have in economics.

To sum it up,
There will be no more parallel forex rate differentials; Round tripping of the dollar is aborted; the naira to dollar exchange rate been market controlled with less state intervention will trade in the range of #340-#400+ per dollar until there is an improvement in our economy.

Finally, this is a case of naira been devalued but technically hidden from the average man on the street. Thus, the merits and demerits of devaluation we are bound to see from now!
Thanks friends!

If this policy could save the naira, why wait this long to introduce it? Now, they introduce a policy after much damage to the economy. Why Nigeria? why
Can't we be proactive for once. is this stubbornness or lack of understanding of what to do?
Re: CBN New Forex Rate Policy Announced by crosbydave: 7:35am On Jun 16, 2016
The CBN Governor announced a new FX Policy for Nigeria yesterday. If you are not aware of it, just view it here.
Now what those this mean? What is the Implication for the FX Market? What does this mean for you and i? I will try to explain this point. With the policy announced yesterday, the CBN has FULLY FLOATED THE NAIRA. We can conclude based on 2 things.
The CBN Governor said
- Market will operate as single market through the interbank and
- FX Rate will be purely market-driven.
Effectively what this means is that the "Inter-Bank" market will be the determinant of the official rate of the USD/NGN.This means that every FX dealer can effectively come into this market & sell their FX at a rate that is market driven and market determined.
The time-line is that this new floating market will kick off officially on Monday the 20th June while guidelines has be released already. The question everybody wants to ask is - "What will be the new rate of d USD/NGN"? Well sorry but u'll have to wait until Monday d 20th June. By the close of the Inter-Bank FX Market on Monday the 20th June, we will have a very good idea of the new and official rate of the NGN.
The other question people are asking is - IS THIS A DEVALUATION? Well until the FX mkt closes on Monday with a rate higher than 199, we can't say it is. But implicitly, its as good a devaluation as u'll get as d general expectation as I think the mkt will close on Monday in d N300-N350 range closer to the parallel market price.
One other question people are asking is - What will be the role of the CBN in the inter-bank? Simple! The CBN will also be a dealer in d mkt. Bear in mind that even in d short-term, d CBN will probably still be the biggest supplier of FX in the mkt. So the price it sells is key. Will the CBN still sell its FX at N199, N285 or N350? It will be interesting to see what rate the CBN sells its dollars. Its significant. What the CBN has done is to float the naira and let the market determine its true price. It did not announce any new rate which for me is key. This is a step that should have been taken some 8 months back, once investors are assured that inflows and outflows is stabilized they would be glad to do biz with us again. Tho I guess the FX market will be volatile in the early stages but it should stabilize later.
#copied
Re: CBN New Forex Rate Policy Announced by Mftivi: 7:52am On Jun 16, 2016
Doyin2:


And you are tactically wrong!

Devaluation is a deliberate reduction in the value of Naira to a fixed and specific rate.E.g N300 to 1 Dollar.

But what CBN has done is to allow market forces to determine the real value of the Naira which is unknown yet,to he determined by the forces of demand and supply.

Thus the Naira could either appreciate or depreciate,determined by supply and demand.
Hence tactically devalued
Re: CBN New Forex Rate Policy Announced by oojehshez(f): 8:00am On Jun 16, 2016
can sum1 summarize dis for me in simple language?
Re: CBN New Forex Rate Policy Announced by RepentOperish: 8:10am On Jun 16, 2016
All those seeking clearification. What it simply means is that federal govt has remove subsidy on forex. Brace up.
Re: CBN New Forex Rate Policy Announced by Nobody: 8:16am On Jun 16, 2016
deji15:
Without too many dogo turenchi, with this press statement, the Naira has been liberalised, which could mean appreciation or devaluation of the Naira depending on our trade deficit, export, import and forex earnings.

Currently, our imports outweigh exports; Naira may drop to N400.
Re: CBN New Forex Rate Policy Announced by Nobody: 8:26am On Jun 16, 2016
ekay39:
I have a question to ask though.

In a bid for the FG to meet demands for the dollar, can the FG print enough Naira and then exchange it for the dollar on other Markets.
If govt does that, that is DEVALUATION of Naira. This happens when a currency is too strong whereby it affects exports negatively.

In our case now, we can only do REVALUATION because we are not export-oriented.
Re: CBN New Forex Rate Policy Announced by PatcomAutos: 8:39am On Jun 16, 2016
If you can read through the lines below as seen on Reuters news, for those who think the autonomous/black market will just get out of the way like that, then we are still learning because if you read through the lines you will understand exactly what i am trying to say.




Mr Emefiele said that categories of items classified as “not valid for foreign exchange” would continue to be shut out of the official dollar markets, raising the prospect of continued trade on a parallel market.

Chart: Nigerian Naira
Instead, the government rationed foreign currency to so-called strategic industries, bringing other businesses that could not access foreign currency to a standstill or forcing them to a flourishing black market where the naira has regularly traded at above N350 to the dollar.

Razia Khan, chief economist for Africa at Standard Chartered Bank, said that Nigeria had boxed itself in by leaving the devaluation too late. That had left a backlog of $6bn-$9bn of unsatisfied foreign exchange requirements, which would be impossible to fulfil in one go without reducing foreign reserves to dangerous levels.
Re: CBN New Forex Rate Policy Announced by Nobody: 8:49am On Jun 16, 2016
How can a president without WAEC certificate understand all these? grin
Re: CBN New Forex Rate Policy Announced by Horus(m): 9:07am On Jun 16, 2016

https://www.youtube.com/watch?v=AWcKmIiUh6o

[size=14pt]Nigeria deregulates forex, exchange rates to be determined by market[/size]
Re: CBN New Forex Rate Policy Announced by DLuciano: 10:09am On Jun 16, 2016
Davvymavvy:
In short, our currency has been tactically devalued...
are you guessing?
Re: CBN New Forex Rate Policy Announced by Barcholder: 11:08am On Jun 16, 2016
onatisi:
Our economy is importation dependent,there will never be a demand shortfall for dollars rather it will always increase until we start producing. Except the banks have dollars in their vaults,there is no way this new CBn policy will ease the pressure on the naira,the questions ppl should be asking is where will the dollars be coming from? When investors thrown in their dollars into the market,what use Is the naira to them since there isn't much to export from Nigeria?

The dollars will come from the dramatically increased Foreign Direct Investment from foreign investors who now see value in buying into Nigeria and investing their money in the country. It will also come from foreign remittances from diasporans, who have dramatically reduced flows to Nigeria because they were only getting 197 for their dollar when the true price is 370.
Re: CBN New Forex Rate Policy Announced by Barcholder: 11:13am On Jun 16, 2016
walexy30:


Currently, our imports outweigh exports; Naira may drop to N400.

That's correct, that is the true price of our flagrant inability to manufacture our own goods. The laws of economics will prevail, and when the price of foreign imported goods become too high for people to afford, guess what will happen? You will see Nigerians moving into manufacturing in order to meet that demand.

If you don't make a person or country face the direct consequences of their actions, then how can you expect change? It's pointless preaching local manufacturing, when you are still subsidising the price of Naira, thereby making it cheaper to import than to manufacture locally. Far from helping Nigerians, you are in fact destroying them.

By floating the currency, we will now see the true value of Naira, and whilst there's likely to be a short term spike in the value, that will be the making of Nigeria in the long term because you will see an explosion of local manufacturing across numerous sectors. In 5 years, the economy would be much more balanced, with many more jobs created.

Regards

Uvie
Re: CBN New Forex Rate Policy Announced by onatisi(m): 12:36pm On Jun 16, 2016
Barcholder:


The dollars will come from the dramatically increased Foreign Direct Investment from foreign investors who now see value in buying into Nigeria and investing their money in the country. It will also come from foreign remittances from diasporans, who have dramatically reduced flows to Nigeria because they were only getting 197 for their dollar when the true price is 370.
Oga pls tell us which FDI you are talking about
Nigerians aren't fools ,companies have been packing up and leaving Nigeria is droves and over 1 trillion naira has left the economy ,so where precisely is this wonder fdi coming from Just name 2 .
And yes Nigerians in diaspora have drastically reduced using money gram and other bank based money transfer because everyone now uses the parallel money transfer , this policy is just to save pmb face
Re: CBN New Forex Rate Policy Announced by iykedare(m): 4:04pm On Jun 16, 2016
DropShot:

Please tell the forum and the type of work I do.
Nonsense!

Low paying job

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