Blue3k:
These accusations are serious. It would lead to future inflation down the road if the money lend gets onto general money supply. Anyway the crowding out is most concerning thing. If private sector can't get credit we are biting time for oil recovery.



This is really odd. QE doesn't cause high inflation as seen on USA and Japan that both did it. The interest rates were kept steady since they essentially played with yield curve by buying treasuries. Is Nigeria really doing QE?

QE ordinarily ought to lead to higher inflation. But when monetary policy authorities focus more on outright buying of corporate securities so as to give life to failed institutions,it leads to asset price bubbles like it's happening with US equity markets rather than growth in the real sector. So QE is only making the rich richer in as much as it's operations are fixated on corporate bond buying instead of real money supply to the private sector that should lead to higher profit returns to corporations and then higher wages for employees,leading to higher spending growth which then should lead to higher inflation. Something is seriously wrong with QE operations worldwide

omohayek:

But thanks to this cowardice Nigeria has now suffered the worst of both worlds, high inflation and the first recession in 25 years. Russia did most of the right things, and despite also having to deal with Western sanctions (because of the Crimean invasion) Russia has neither suffered Nigerian levels of inflation nor Nigeria's radical economic slowdown.

As for the privatization thing, I know I sound like a broken record on this, but Buhari's refusal to do anything about it can't be understood without thinking about the ethnic angle. There's a reason why the only other Northerner to rule since 1999 was also strongly opposed to privatization: Nigeria's bloated public sector, with its "federal character" obligations and whatnot, provides a huge source of patronage to northern politicians, and privatization would mean all these northerners would be forced to compete with their southern counterparts purely on the basis of merit - and there's no question what that would mean in terms of who gets employed and at what levels. The degree to which the Nigerian state is rigged to favor Northern interests is easy to underestimate if one just looks at federal allocations.

One of the consequences of the northern inability to compete on the private sector's level playing field is that northern elites aren't all that bothered about losing out on the opportunities a stronger private sector would provide. After all, it's not as if most of them would be in any position to take advantage of said opportunities, so why should they care?

u be real man. An elder and a well studied professional..keep making sense please.

huntila:
It is amazing that topics like this do not get enough Educative, Insightful and robust contribution for and against on Nairaland. This is the Economy we are talking about with insightful revelations.If it is entertainment or silly topics, people will hopelessly play out their ignorance and begin the Tribe card. I have listened to Prof Garba who is a member of this CBN Mpc. I believe he would not cry foul where there is none.

that is to show u the level of intelligence people on this forum have. Most people here and to a large extent Nigerians do not like the term "Brain storming" it scares the shit out of them. They are comfortable with skewed linear reasonings and mind fantasy events like u listed. Our poor educational system and nature of the country is to blame too. They stay away from such topics because they just don't understand what is being discussed. so they have absolutely nothing to contribute

seniwellsFX:
QE ordinarily ought to lead to higher inflation. But when monetary policy authorities focus more on outright buying of corporate securities so as to give life to failed institutions,it leads to asset price bubbles like it's happening with US equity markets rather than growth in the real sector. So QE is only making the rich richer in as much as it's operations are fixated on corporate bond buying instead of real money supply to the private sector that should lead to higher profit returns to corporations and then higher wages for employees,leading to higher spending growth which then should lead to higher inflation. Something is seriously wrong with QE operations worldwide

Typically it doesn't though which why I cite Japan and US. They have been doing doing QE and inflation stayed at 2%. The Federal Reserve bought Mortgage backed securities, treasuries other securities. Keep it mind the federal Reserve exchange the toxic asset for cash to keep it reserves. That why we don't see the massive inflation you might expect after billions have been spent.

Yes it does make rich richer. They banks can make money in stock market but they also win during riding rate environment like they are currently doing. They remind me to buy doesn't go up too much since they're not loaning most money they get. They corporations don't want to increase wages yet.

[quote author=chloride6 p

[/quote] u think so?

[quote author=chloride6 post= that's the problem with some of us. We always think rational observation is always a way of attack the current govt. U think they are perfect?

[/quote]

chloride6:


Don't you feel that this could be attributable to the enormous increase in the national accounts?

from the graph attached you can see that broad money supply in the economy has been on the steady rise adding nearly 2 trillion in the short interval of 2 months between october and december 2016. It only began to drop this year around when the high interest t-bills sale began.

Anyway, alarmist views like this will do our country no good. It will only dampen investor confidence in our economy.

we won't be seen as being serious if we keep using magical economic and financial markets operations. U talked about national account,i guess u mean current account. A current account is an account that entails the aggregate income of a Nation. A nation Can only have a current account surplus if the balance of trade is in the positive of which we don't have and can't seem to have in the nearest future since we are still heavily import dependent. That chart of yours has absolutely nothing to do with the Treasury bills market operations. If a government will engage in its own t-bills operations all in the name of having a robust liquid market,then we shouldn't be complaining about speculators spoking asset prices in the shot term just to make profit. It's just like a company engaging in a shear buy back operation. U only end up inviting short timers and not long timers. Such operations also shows that something is wrong with the underlying fundamental macro economic factors of the economy. Long-term,large money investors want to see longer term confidence for them to come in. And this can only be achieved with serious fiscal and monetary policy implementations of which we can't clearly see for now. The drop in broad money supply I think is as a result of the fear of the CBN in reducing the excess liquidity injected into the economy so as to reduce real naira supply.

[/quote]

Blue3k:


Typically it doesn't though which why I cite Japan and US. They have been doing doing QE and inflation stayed at 2%. The Federal Reserve bought Mortgage backed securities, treasuries other securities. Keep it mind the federal Reserve exchange the toxic asset for cash to keep it reserves. That why we don't see the massive inflation you might expect after billions have been spent.

Yes it does make rich richer. They banks can make money in stock market but they also win during riding rate environment like they are currently doing. They remind me to buy doesn't go up too much since they're not loaning most money they get. They corporations don't want to increase wages yet.

we are both saying the same thing to a large extent Mr. That was why I said something is seriously wrong with QE. It's either there is a major distortion at the extreme point of the operation that is supposed to yield the desired result which is corporate profit,higher wage growth,higher consumer spending and higher inflation. I don't agree that current weak inflationary pressures in the US is all as a result of the Fed exchanging the bad debt instruments to cash so as to keep its reserve. Of course that is part of QE operation. The Fed is expected to swap it's asset holdings when the yields of those securities begin to notch higher in the long run. So to me,the infectiveness of QE has a lot to do with corporate institutions rather than the operation itself. On the aspect of Japan.its problem is more of a demographic imbalance rather than the effectiveness of QE to yield higher inflation. About sixty percent of the Japanese population is above 50 if am not mistaken. So there is a problem with the labour force in the country. That is why international financial and economic agencies like the IMF and world Bank are calling for a soft landing of the enclosed traditional society settings of Japan so skillef foreigners can flood the domestic labour market and help boost its work force and help push up consumer inflation too.

The money was used to prospect for oil in the north
Part of it was stolen to pay for London hospital bill and the balance will be hidden to fund campaign for 2019.... Dont bother to quote me!

TheKingIsHere:


But when you all insulted GEJ then, you wanted to be taken seriously right?

Buhari is a disgrace and a monumental failure

Ok. I know it makes u feel good. But your insults have no impact either on buhari himself or his supporters. It only shows childisness

Some of you typing as if you're machinery in economics with explanations that is not applicable of solving the situation Nigeria faced then, mind you all those who are working with the PMB were more fast in experience than most amongst you that explaining state's economics as if is public liability companies

I don't care calling me names simply because I expressed my opinion on issue that we all has collective right to speak.

Some of you typing as if you're machinery in economics with explanations that is not applicable on solving the situation Nigeria faced then, mind you all those who are working with the PMB were more fast in experience than most amongst you that explaining state's economics as if is public liability companies

I don't care calling me names simply because I expressed my opinion on issue that we all has collective right to speak.

Mccullum:
Some of you typing as if you're machinery in economics with explanations that is not applicable of solving the situation Nigeria faced then, mind you all those who are working with the PMB were more fast in experience than most amongst you that explaining state's economics as if is public liability companies

I don't care calling me names simply because I expressed my opinion on issue that we all has collective right to speak.

The fact that people in the government are more learned and experienced does not mean that they are making right economic moves.

Even more interesting, if the people commenting on this thread were in government, would they be able to apply their recommendations?

Time shall tell.We are watching as things unfold

My honourable sycophant Mr salam1......

Please come and clear the air fr the president.

kenostika:
Some of you typing as if you're machinery in economics with explanations that is not applicable on solving the situation Nigeria faced then, mind you all those who are working with the PMB were more fast in experience than most amongst you that explaining state's economics as if is public liability companies

I don't care calling me names simply because I expressed my opinion on issue that we all has collective right to speak.

mtcheeeew....."were more fast in experience"
Well,it is your opinion and it doesn't count.

omohayek:

QE was required in the industrialized countries because they were facing demand-side recessions, and had already cut interest rates to about as low as they could go. Nigeria's inflation is supply-side driven, and as such any attempt at Keynesian "pump priming" will only lead to runaway inflation. The smart thing to do in a situation like the one Nigeria was facing would have been to move the Naira to a clean float (i.e. a single rate with no government intervention whatsoever) while hiking interest rates, slashing public expenditures, and embarking on a rapid, large-scale privatization program to draw lots of forex into the economy and fund the government's revenue gap. Radical privatization would also have moved all the privatized "assets" [sic] off the government balance sheet, freeing up funds for the capital investment Buhari claims to want.

Unfortunately Buhari is a total economic illiterate whose ideas don't seem to extend beyond Soviet-style command economics, and the northern clique he trusts stands to lose out big time if the Nigerian state is ever downsized and opened up to competition. It's therefore unsurprising that none of the sensible things to do have actually been carried out, with the partial exception of when Buhari first went on his medical vacation in London, and Osinbajo tried to loosen things up a bit. The best thing for Nigeria would have been for Buhari to resign to face his medical issues full time, but he and his close associates clearly love the trappings of office too much for that.

True, liberalization, commercialization and privatization are the only things that can save the government, it is pulling a lot of dead weights. There is no reason why the likes of NTA, VON, DPR should depend on government for funding. A lot of MDAs are saddled with carrying out activities that the private sector would have done more efficiently

efighter:

You will just die of hypertension.

u will die of hyperfOOlishness. My broda, tell ur people to tek u to the nearest prophet, tomorrow may be late.

efighter:

You will just die of hypertension.

u will die of hyperfOOlishness. My broda, tell ur people to tek u to the nearest prophet, tomorrow may be late.

omohayek:

QE was required in the industrialized countries because they were facing demand-side recessions, and had already cut interest rates to about as low as they could go. Nigeria's inflation is supply-side driven, and as such any attempt at Keynesian "pump priming" will only lead to runaway inflation. The smart thing to do in a situation like the one Nigeria was facing would have been to move the Naira to a clean float (i.e. a single rate with no government intervention whatsoever) while hiking interest rates, slashing public expenditures, and embarking on a rapid, large-scale privatization program to draw lots of forex into the economy and fund the government's revenue gap. Radical privatization would also have moved all the privatized "assets" [sic] off the government balance sheet, freeing up funds for the capital investment Buhari claims to want.

Unfortunately Buhari is a total economic illiterate whose ideas don't seem to extend beyond Soviet-style command economics, and the northern clique he trusts stands to lose out big time if the Nigerian state is ever downsized and opened up to competition. It's therefore unsurprising that none of the sensible things to do have actually been carried out, with the partial exception of when Buhari first went on his medical vacation in London, and Osinbajo tried to loosen things up a bit. The best thing for Nigeria would have been for Buhari to resign to face his medical issues full time, but he and his close associates clearly love the trappings of office too much for that.

Hiking interest rates ? Nigeria's interest rates are already one of the highest in the world.That theory won't work.
The article is about the CBN funding the government illegally and you go off at a tangent talking about floating naira. As desirable as that may be it is not relevant to this fiscal illegatilty. Radical Privatization? I laugh . Once again not relevant to the CBN misbehaviour but a naive solution. We have privatized before with mixed results. The culture in Nigeria is that these assets are sold to cronies and envelope companies that do not have the capacity to manage them. Besides privatization can never be "radical" as you suggest when you have laws . We are not a military government. Legislation has to pass and citizens can and will challenge decisions. The Aluminium company sold to Russians is one example. Privatizing PHCN has not achieved anything.
You mix emotion with economics in a very funny rant. Buhari is an economic illiterate? Let us agree . Which Head of State have we had that was an economic literate. You say government is too big I agree is that Buhari's doing? How is that relevant to the CBN
Government needs to downsize ,I agree that will mean a loss of thousands of jobs , are Nigerians willing to accept the pain?

Truth is that you do not know what you are talking about and seek to bamboozle the ignorant with your ignorant use of bombastic economic language .

The issue here is the CBN losing its independence and acting illegally not raising interest rates which are already too high

There is God.

Atk1nson:

True, liberalization, commercialization and privatization are the only things that can save the government, it is pulling a lot of dead weights. There is no reason why the likes of NTA, VON, DPR should depend on government for funding. A lot of MDAs are saddled with carrying out activities that the private sector would have done more efficiently

You have a point but much of that will happen naturally with devolution and restructuring. If the FG has 50% of its budget taken away then new realities would set it and a lot of rationalization will occur. To that extent it is a political problem and that is why the restructuring debate is so important. The FG is set up to fail no matter who is in charge
As we speak they are debating setting up a body to monitor NGOs in the National Assembly and no one asks the questions.What will it cost and where will the money come from. In one day GEJ announce the creation of several universities I wonder whether it was costed. There is so much that needs rationalization and university education is one .How do we pay for that going forward etc .Yes there is much to be said about all these issues but I believe they are tangential to the issue here which is the CBN behaviour

0m0nnakoda:

Hiking interest rates ? Nigeria's interest rates are already one of the highest in the world.That theory won't work.
The article is about the CBN funding the government illegally and you go off at a tangent talking about floating naira. As desirable as that may be it is not relevant to this fiscal illegatilty.

Your response displays both an ignorance of basic economics and serious shortcomings in your reading comprehension. Just because nominal interest rates were high doesn't mean real interest rates were even high enough to keep up with galloping inflation. An interest rate of 17% when inflation is running at 19% actually means real rates are negative by -2%. As for the relevance of my policy prescriptions, I would think they'd be obvious to anyone who actually understood what I wrote: these measures would have made it unnecessary for the CBN to fund the government through such underhanded means.

Radical Privatization? I laugh . Once again not relevant to the CBN misbehaviour but a naive solution. We have privatized before with mixed results. The culture in Nigeria is that these assets are sold to cronies and envelope companies that do not have the capacity to manage them. Besides privatization can never be "radical" as you suggest when you have laws . We are not a military government. Legislation has to pass and citizens can and will challenge decisions. The Aluminium company sold to Russians is one example. Privatizing PHCN has not achieved anything.
You mix emotion with economics in a very funny rant. Buhari is an economic illiterate? Let us agree . Which Head of State have we had that was an economic literate. You say government is too big I agree is that Buhari's doing? How is that relevant to the CBN
Government needs to downsize ,I agree that will mean a loss of thousands of jobs , are Nigerians willing to accept the pain?

Truth is that you do not know what you are talking about and seek to bamboozle the ignorant with your ignorant use of bombastic economic language .

The issue here is the CBN losing its independence and acting illegally not raising interest rates which are already too high

I won't waste any more of my time responding to your meandering rant except to say that it shows your own understanding of even basic economic concepts is as lacking as Buhari's. You talk about privatization having "mixed results", even though you probably dashed out your rant over a privately-run mobile line; do you remember what telephony was like during the NITEL years, or are you too young to even know what I'm talking about?

blackpanda:


Ok. I know it makes u feel good. But your insults have no impact either on buhari himself or his supporters. It only shows childisness

That means u were childish all the times you have been insulting those from the other side instead of just criticising themwhat a good exposé!

omohayek:

Your response displays both an ignorance of basic economics and serious shortcomings in your reading comprehension. Just because nominal interest rates were high doesn't mean real interest rates were even high enough to keep up with galloping inflation. An interest rate of 17% when inflation is running at 19% actually means real rates are negative by -2%. As for the relevance of my policy prescriptions, I would think they'd be obvious to anyone who actually understood what I wrote: these measures would have made it unnecessary for the CBN to fund the government through such underhanded means.


I won't waste any more of my time responding to your meandering rant except to say that it shows your own understanding of even basic economic concepts is as lacking as Buhari's. You talk about privatization having "mixed results", even though you probably dashed out your rant over a privately-run mobile line; do you remember what telephony was like during the NITEL years, or are you too young to even know what I'm talking about?

You were right in your first post and you are still correct on this one. The issue I personally have is that you blame buhari for this mess.
Do you think it is easy to fire workers in Nigeria?
Do you think it is easy to increase taxes in Nigeria? When a person tries his best and yet fails, is it fair to keep rubbing it in?
Buhari is flying a plane that is crashing and you are blaming him.
What about GEJ that was told about the bad weather ahead yet decided all was rosy and took off with the plane?
Please leave my Buhari this morning for me.

Really

omohayek:

Your response displays both an ignorance of basic economics and serious shortcomings in your reading comprehension. Just because nominal interest rates were high doesn't mean real interest rates were even high enough to keep up with galloping inflation. An interest rate of 17% when inflation is running at 19% actually means real rates are negative by -2%. As for the relevance of my policy prescriptions, I would think they'd be obvious to anyone who actually understood what I wrote: these measures would have made it unnecessary for the CBN to fund the government through such underhanded means.


I won't waste any more of my time responding to your meandering rant except to say that it shows your own understanding of even basic economic concepts is as lacking as Buhari's. You talk about privatization having "mixed results", even though you probably dashed out your rant over a privately-run mobile line; do you remember what telephony was like during the NITEL years, or are you too young to even know what I'm talking about?

u don't need to bother responding to micro and macro economic illiterates that are not rational enough to comprehend and properly analyze monetary policies that are toxic to what a proper economy should work like. Their ways of thought are always we against them,apc against PDP. That had being our major problem as a nation.

0m0nnakoda:
You have a point but much of that will happen naturally with devolution and restructuring. If the FG has 50% of its budget taken away then new realities would set it and a lot of rationalization will occur. To that extent it is a political problem and that is why the restructuring debate is so important. The FG is set up to fail no matter who is in charge
As we speak they are debating setting up a body to monitor NGOs in the National Assembly and no one asks the questions.What will it cost and where will the money come from. In one day GEJ announce the creation of several universities I wonder whether it was costed. There is so much that needs rationalization and university education is one .How do we pay for that going forward etc .Yes there is much to be said about all these issues but I believe they are tangential to the issue here which is the CBN behaviour

While restructuring may help for some states, so many other states are not properly positioned to reap the benefits of restructuring. Many equally run a lot of ministries that should be revenue centres as cost centres. A lot spend over as high as 90% of allocation servicing a decrepit civil service. Many states are a mini-reflection of the situation at the centre, they will fail woefully if they are left to fend for themselves and the centre will probably not be able to help them out unlike the situation now where the FG bailed a lot of states. Those states only thrive due to the multiplier effect of pumping billions of allocation they receive monthly into the economy.

As for the CBN, it lacks the independence it needs to function apolitically. It is willing to breach its laws to promote the political agenda of the party in power. HRH Sanusi mentioned the overreach of the CBN a while back, but he was silenced using the usual gov tactics of blackmail.

trillville:


You were right in your first post and you are still correct on this one. The issue I personally have is that you blame buhari for this mess.
Do you think it is easy to fire workers in Nigeria?
Do you think it is easy to increase taxes in Nigeria? When a person tries his best and yet fails, is it fair to keep rubbing it in?
Buhari is flying a plane that is crashing and you are blaming him.
What about GEJ that was told about the bad weather ahead yet decided all was rosy and took off with the plane?
Please leave my Buhari this morning for me.

BLAME ALL

The present economic and political situation should be everybody's fault as far as the nation is concerned, since the inception of democracy in 1999 we should have charted out a course or path of how things should have to be runned with strict adherence to policies and procedures in improvng the nation rather every aspect of our lives was bring politicized to the extent that we refused to listen to voice of reasonings to avert the current situation we are in

My take s that all these policies being impemented is just to favor some selected few and leave the downtrodden in a more bastardized state that they were before,it's pertinent that we as masses should wake up and smell the coffe and hold all post military administration responsible for the dwindling economic posture of the nation

0m0nnakoda:

Besides privatization can never be "radical" as you suggest when you have laws . We are not a military government. Legislation has to pass and citizens can and will challenge decisions. The Aluminium company sold to Russians is one example. 

ALSCON is a terrible example. The whole the whole debacle was caused by federal government ineptitude. No the company was rightfully sold to an American company BFIG. The supreme court ruled in companies favor twice and government hasn't honored agreement.

onatisi:

if you remember when I made this comment,ppl never thought it will be possible,iI remember vividly well I said this warning about 8 times,everyone insulted me . I told them buhari will destroy the economy . We know him very well and his mental ability but ppl never listend,tthey kept shouting change change

Time to stockpile hard currency ahead of the depression and the inevitable exit rush. Let it please just hold off for about another 18 months or so.