₦airaland Forum

On the subject of reserves, here is a post I made in July 2015 in a thread celebrating the rise of the reserves to $32bn which I think is is somewhat apt:

4Play:
If the CBN outrightly refuses to supply foreign exchange to many importers, reserves will go up but the downside is that the Naira's value will plummet. That is essentially what we have seen as US dollars become scarce.
The persistent decline of the naira in the parallel market followed the introduction of new measures by the central bank last month, restricting access to hard currency at the interbank in a bid to conserve dwindling foreign exchange reserves
http://www.punchng.com/business/money/cbn-adjusts-rate-as-naira-falls-to-244/

The accumulation of foreign reserves at the expense of the Naira's value is not new. Here is a quote from Wikipedia in respect of the Sani Abacha era

Despite the international shun his government endured, he oversaw an increase in the country's foreign exchange reserves from $494 million dollars in 1993 to $9.6 billion by the middle of 1997

https://en.wikipedia.org/wiki/Sani_Abacha. Was this because the Abacha regime was not corrupt? No. What happened to the Naira whilst all these reserves were accumulated? Naira went from 22 Naira to a $1 in 1993 to 84 Naira to $1 in 1998. https://www.nairaland.com/498412/nigeria-exchange-rates-dollar-history.

The true test of whether Buhari's anti-corruption measures are working will be a repatriation of stolen wealth to nation's coffers. We won't have to read between the lines as any refunded loot should be made public.

https://www.nairaland.com/2476038/buharis-corruption-watch-begins-yield/1#36253175

PS: The Abacha wikipedia link may have been modified since my July 2015 post. I have posted an up to date extract from his Wikipedia profile though which highlights the increase in reserves:

The Abacha administration became the first to record unprecedented economic achievements:[7] he oversaw an increase in the country's foreign exchange reserves from $494 million in 1993 to $9.6 billion by the middle of 1997, reduced the external debt of Nigeria from $36 billion in 1993 to $27 billion by 1997, brought all the controversial privatization programs of the Babangida administration to halt, reduced an inflation rate of 54% inherited from Ibrahim Badamasi Babangida to 8.5% between 1993 and 1998, all while the nation's primary commodity, oil was at an average of $15 per barrel.[7]

https://en.wikipedia.org/wiki/Sani_Abacha

Here is the World Economics link and a couple of indices below which sets out the acceleration in business weakness from circa December 2015. The first image is the Sales Growth Index and the second the Staffing Levels Index (below 50 is contraction, above 50 growth):

Source: http://www.worldeconomics.com/SMI/Nigeria-SalesManagersIndex.efp

DropShot:
Some of you think there is magic to make Naira strong against the dollar. Perhaps you think PMB could print some dollars to replenish our foreign reserves that was looted by GEJ and his cronies.

Or maybe hired propagandists like you should stop cheerleading policies that make dollar inflow worse, like a fixed exchange rate regime.

You need to stop pretending you have principles other than religious/ethnic and pecuniary considerations for defending the indefensible.

Damasak was taken back from Boko Haram in March 2015. This was covered in the news at the time.

Between March 13 and 15, 2015, soldiers from neighboring Chad and Niger advanced on Damasak as part of a cross-border military operation against the insurgents. As the troops approached, Boko Haram fled from Damasak, taking with them the 300 children and an estimated 100 more women and children they had been holding captive there.

https://www.hrw.org/news/2016/03/29/nigeria-year-no-word-300-abducted-children

If you guys cared about your country enough, you will know these things and would have heard about Damasak and the kidnapping of school children there.

PentiumPro:
Who is saddles with monetary policy? Banning 41 items from the official forex window was outrightly the CBN decision
The CBN governor. If the items were completely banned and remove from the tariff list, then they are fiscal policy that happens to be Adeosun and Buhari's blame.
Emefiele is the one to blame for the mess in the management of this forex problem
He was too eager to fix the demand side

CBN's forex policy is aimed at pegging the Naira's rate to stop it from collapsing. This is a view consistent with Buhari's view of exchange rate policy (same fixed exchange rate regime applied during Buhari's first tenure in 1983-85). Buhari's stance on this matter was noted in this article:

The CBN policy, it would be recalled, came as an economic and market strategy to systematically devalue the Naira, following its free fall recently. It was one decision that didn’t come so easy as president Buhari never wanted to further devalue the currency. He had on several occasions in many international fora in Egypt and Kenya said that further devaluation of Niara would mean “killing it”, and challenged Nigerian economists and financial analysts to convince him.

http://www.vanguardngr.com/2016/06/economy-buhari-angry-cbn-naira-devaluation-says-policy-not-helpful/

Emefiele is culpable for being a spineless political lackey - a person who sacrifices sound economic principles to be on good terms with the president. However, those who try to spin the narrative that Buhari is blameless and helpless on the forex issue and is at the mercy of a powerful and untouchable CBN governor are being incredibly disingenuous. The truth is that the CBN's hamfisted approach to the forex issue, particularly the refusal to allow the Naira to float, reflects an attempt to align with the president's policy stance.

Richie0974:
Reorganizing to defeat an already "technically defeated" group. Kwontinue.

A "technically defeated" and "finally crushed" group.

omohayek:
That is the most painful thing of all about the current recession. Despite all the excuses proffered by Buhari and his cabinet, it is manifestly clear that his nonsensical policies have seriously worsened a situation that could easily have been ameliorated by a more sensible policy platform. Let the Naira float freely, sell off all non-performing or neglected state "assets" like the refineries and airports, deregulate the petroleum refining business, amend the Land Use Act to strengthen private property rights, start serious work on abolishing as many barriers to business as possible ... None of this stuff is rocket science, yet the Buhari administration has yet to take a single concrete step in the right direction.

I suspect an explanation for the intransigence of the administration lies in vested interests who exploit the lucrative opportunities the present policy regime provides.

Keeping the refineries in state hands provides an opportunity for NNPC officials to milk the country: same goes for airports/seaports. The disparity between the parallel and official exchange rates allows the highly connected to arbitrage, e.t.c.

To be fair, this is a long running problem that predates the Buhari regime. The present government simply made matters worse, particularly in its handling of the currency rate.

But you are right, the impoverishment of Nigerians is needless. It's downright malevolent and is aided and abbeted by the masochism of Nigerians who are blissfully oblivious of policy alternatives.

fmlala:
Nigerians hate to hear the bitter truth, Nigeria will surely come out of
recession, its just a matter of time.

Like saying Somalia will eventually come out of war (every human-induced phenomena has an end point). The question is: why subject ourselves to unnecessary suffering through ineffectual economic policies?

dingbang:
Same youths will stupidly go and vote Atiku... They will wail again until 2023, then they will vote in IBB

To God be the Glory

I see people adopting the attitude that anybody else is better than Buhari not realising that this attitude is what brought Buhari to power in the first place. We need to make sure any potential replacement we lend our support to is not worse than the current president.

Nigerian political elections are about choosing the lesser of 2 evils: there are no good candidates and as much as I detest Buhari, most of the other presidential candidates being mooted are probably worse.

If people like Sanusi - the ex-CBN governor - or Ribadu ran for president, these would be more preferable candidates. The likes of Atiku and Okorocha on the other hand should only attract the support of the feeble-minded.

The parallel market exists because the CBN is meddling with the price discovery mechanism by restricting access to forex at the official rate. Remove the CBN's restrictions and its other dodgy market manipulation and the parallel market dies a natural death.

Aburi001:
Truth be told, this is one area Buhari Government has really impressed me....Loots recovery.

Still wondering what would have happened if Jonathan and his looter-team were still in power till today since "Stealing is not Corruption"

The gullibility of Nigerians: that imperviousness to evidence never ceases to amaze me.

If loot recovery was substantial, you will see it accounted for by the finance minister as state governments demand their share via the FAAC allocations or the like.

The reality is that for all the talk of loot recovery in the media, the actual amounts recovered are underwhelming. No one today talks about Sanusi's $20bn, even the $2.1bn arms loot is unreflected in the details of the prosecution's case against Dasuki and his accomplices.

Another element that escapes our discussion of this issue is that if we assume looting was astronomical during GEJ's era, then today's "honest" government would have ensured that the effects of the oil price collapse on government's finances would be muted. This is a common sense proposition. Instead, an examination of the government's revenue stats shows not much difference between today's revenue and government revenue during GEJ's era.

It is unfortunate that they are still wedded to the idea that fiscal stimulus is a panacea to what ails the economy.

The existence of all these different rates allows the well connected to make a shed load of money by buying forex at the cheap rate to sell at the higher rate. This is another way in which poor policies create an enabling environment for corruption to thrive.

OZAOEKPE:
During Jonathans' era, they condemned him as an incompetent leader, but now they want me to mourn with bu ha ri

KARMA IS SWEET

What you are is a heartless beast. A fecal-brained verminous existence rejoicing at the loss of human lives because your beloved Jonathan is no longer in power.

Who would have thought that the 2016 budget made no sense? The reason I did this thread in December 2015 was that the budget struck me as an audacious exercise of wishful thinking.

Many criticised the 2016 budget on the basis that the oil price benchmark - $38 per barrel - may prove too high. But as I noted then, the problem was that the revenue estimates overall was built on fantasy. This budget, with its bold faced amateurity, made me realise Nigeria was in serious trouble.

tuale4u:
How can you increase supply more than demand in the period of dollar scarcity?? We are in d period of lowest dollar revenue and you are saying increase dollar supply b4 reducing d demand? Bros!

I am saying you cannot increase dollar supply and reduce dollar demand - an increase in the former will lead to an increase in the latter.

I guess the point of all this is to show us the government has a plan. But this is a list of objectives and we also had similar lists in the past. Some of the objectives strike me as naive. See for the instance the aim of increasing dollar supply and reducing dollar demand. It seems like a mercantilist conception of forex management: the appropriate plan should be to increase supply faster than demand.

I wish this were true but GDP forecasts are notoriously difficult. For instance, look at Moody's forecasts in December 2015 for the 2016 year:

Thus, while we expect real GDP growth to drop to 3.5% in 2015, we forecast a rebound to 4.9% in 2016.

https://www.moodys.com/research/Moodys-affirms-Nigerias-Ba3-Federal-Government-issuer-rating-with-stable--PR_340099

As this report notes, 2016 GDP is now estimated at -1.5%.

tuale4u:
Great and smart solution from Kemi.

We must not 4get that this 2.2 trillion debt is d debt left behind by past govt at high oil price!!

To me Kemi is better than Ngozi. Ngozi was never tested. Ngozi was a minister when oil price was high and she could not use her office to create a long lasting economic security for the country. All they did was to spend bulk of the money on consumption and luxury.

The so called economic growth under ngozi was simply spending of oil money. Nothing more and nothing less.

However i commend Ngozi and Sanusi former CBN governor for ideas like bvn, TSA and IPPIS. But we must realise that these are just monetary monitoring tools and are not economic strategy.

Even if Goat, Monkey or Sheep was the minister of finance under GEJ, the growth in oil price which has nothing to do with Nigeria contribution or input would have resulted in the same "Short Term Prosperity" we experienced under GEJ.

The audacity of you people: was Kemi not finance commissioner for Ogun state at a time of high oil prices? What she accomplished - unlike her Anambra state equivalent for instance - was to help load up the Govt balance sheet with debt which required an FG-led bailout for Ogun state to meet its basic obligations like paying workers. This is a state that via its proximity to Nigeria's economic capital, Lagos, should be in robust financial shape.

You keep repeating this line that NOI failed to secure the future. It conveys the impression that the FG had fiscal space to make big savings during NOI's tenure. Once the decision had been made to spend our oil bounty on increasing public sector wages - with the minimum wage going from 5k to 18k - it meant that the FG's expenses was loaded with recurrent expenditure which could not be cut. The FG was already running +1trillion Naira deficit when NOI took over 2011.

The reason why I draw the parallel with Adeosun's management of finances at state level is that both NOI and Adeosun and NOI faced similar challenges: managing finances largely dependent on oil revenues (Ogun state via the FAAC monthly allocations). Kemi dealt with the challenge via a debt binge - making borrowing projections that didn't accommodate for a slump in oil prices. Had NOI encouraged such borrowing, particularly external borrowing as the current finance team with their $29bn debt plan intend to, the FG today would face escalating debt obligations due to currency depreciation.

The reality is that policy choices made by Kemi as Ogun finance commissioner reveal an imprudence which left her state in a precarious position. At the FG level, she was part and parcel of the 2016 budget formulation - a budget I noted ab initio was unimplementable: https://www.nairaland.com/2827820/why-implementation-2016-budget-unlikely. If I could see that that budget was based on fantasy, why couldn't Kemi and Udoma? Quite frankly, the common variable for Kemi defenders on this forum is ethnic kinship: Ogun pensioners and workers be damned for all they care.

What is the point of enlarging a Ghanaian woman's butt? They are already amply blessed in that regard.

I see Stella Oduah listed as one of the PHD holders. . A country run by mediocrities.

I pointed out in an earlier post that the likelihood of obtaining a loan for the stated amount is remote:

4Play:
I do not think the FG will be able to secure the external loans it is asking for unless it embarks on deep structural reforms (the sort of structural adjustment programmes demanded by the IMF). This was touched upon in the following FT article:

https://www.ft.com/content/4ed37f18-8885-11e6-8cb7-e7ada1d123b1

PS: The FG failed to secure the external financing it sought for the 2016 budget which was a "mere" $4.5bn. The likelihood it will be able to secure circa $30bn as planned seem remote.

One of the strange things about this government is that things that are obvious to a lay observer seem to elude them. Think of the 2016 budget for instance, with its fantastical revenue projections, which was an exercise in wishful thinking. It's a case of incompetence on a grand scale.

AZeD1

Your point is superficial given the absence of the publication by the NCC of a document detailing how they calculated that the pricing adopted by the Big 4 amounts to some form of unfair market practice. (I may have missed such publication so I would be obliged if you can point me in the right direction).

Notably, the examples you give are individual companies with inordinate market share being singled out for punishment, e.g Amazon. To tell the 4 leading companies to increase their prices to accommodate new entrants smacks of influence peddling, i.e., politically connected new firms seeking to use govt leverage to expand market access.

Further, without a clear and transparent process - as we would have in the West - with open and public hearings/consultations involving affected firms which allows the public to critique how this decision was arrived at, any such meddling by the government provides further cause for the loss of investor confidence and capital flight (one of the main reasons why Nigeria is mired in recession).

Any intelligent person can concoct an argument as to why an increase in prices is necessary for the masses. In response, I say: show me the maths. Even more importantly, why the lack of transparency?

phantom:
Failed in what way?? So in effect you didn't think a country whose treasury has been looted on a massive scale and whose economy depends on a resource that is fast loosing value would go into a recession? ??
Come on..Let's call a spade a spade.
GEJ being in power today,this country would be the same.
It is obvious that 90% of Nigerians don't know what a recession is and its PRACTICAL & REALISTIC solutions. You want this govt to clean up the rot in one year

This line of argument - that GEJ's govt which ended in May 2015 looted all the money - is incredibly crass as a way of explaining why Nigeria went into recession in 2016. As a propaganda tool, it is terribly unimaginative (I predicted its emergence as the main go-to excuse to explain Buhari's imminent failure prior to his taking office).

There are several defects to the argument but I would highlight one as follows:

If you think it through, it masks a contradiction that hints at the profound idiocy of the argument. If GEJ's govt looted on a massive scale, then the Nigerian economy performed on the basis of the "leftovers" during GEJ's reign. In effect, Nigerians could not have benefited then from high oil prices as the oil revenues were being looted: a Buhari fanboy once told me GEJ's govt was looting at least 40% of oil revenues (at $100 p/b, that meant Nigerians subsisted on circa $60 p/b).

The logical consequence of the "GEJ stole all the money" argument is that a fall in oil prices under a new "super-honest" regime such as Buhari's would not have a dramatic adverse impact on Nigerians as Nigerians didn't benefit from the initial high oil prices under GEJ as GEJ was stealing all the money.

What we often forget is that the fall in oil prices started in the second half of 2014. By December 2014, oil prices were in the low 50s (sub-50 depending on the benchmark). Yet, the precipitous fall in living standards was more notable in 2016, long after the decline in oil prices began. The reality is that the moronic decision to fix the exchange rate, which is still going on though in a less overt fashion, precipitated a loss of confidence and intensified capital flight. Added to this was Buhari's trademark snail-pace governance (no sense of urgency in making crucial appointments or in unveiling policy). This has added to the perception of a hapless govt totally incapable of meeting the economic challenges it faces.

For most still making excuses for Buhari, it is about saving face as many people were emotionally invested in the idea that Buhari would improve the economy by merely tackling corruption. Faced with the opprobrium and mockery of people who were sceptical at the outset, Buhari fanboys double down on the denial.

ValerianSteel:
http://www.theguardian.com/commentisfree/2016/nov/19/brexit-trump-left-crucial-flaw-leavers-alt-right-ruthlessness

I think this is really clutching at straws. No doubt Trump is a major league hypocrite who, had the outcome been the reverse re the EC/PV split, would have been screaming blue murder. However, in practice, it would not serve Clinton or the Democrats well to embark on histrionics regarding this.

As far as Democrats playing by the rules, there are plenty of Bernie Sanders supporters who will beg to differ.

There is precedence for this in a way: the inflated cement prices the Nigerian government engineered to allow Dangote enjoy fat profit margins at the expense of Nigerians. This was rationalised as a way of supporting local cement manufacturers but protectionism which provides favoured businesses excess profit margins is self-defeating. In practice, the excess profit is exported abroad as naira earnings are converted to dollars defeating the primary benefit of protectionism; the retention of spending in the domestic economy.

This is how crony capitalism operates: the government bends the rules for favoured businesses whilst imposing high prices on Nigerians. The very opposite of what the government ought to be seeking to accomplish.

OPCNAIRALAND:
Agaba,
Buhari has not hidden his intent to diversify revenue stream. It was part of his message during campaign and before election, it was included in his first speech after swearing in. One of the focused areas for revenue stream is FIRS.

Regulations, whether through NCC or any other agents are designed to observe standards, enforce compliance and derive levies through licensing. An agent body will work in tandem with service operators to address needs necessary to maintain standards.

On the subscriber part, social media is not a need. You do not suffer any loss of quality living if your social media tools are taken away. So it is individual preference and choice to use facebook, use tweeter, use nairaland and other multimedia tools. It is in same grade of utility as owning a car. The government has not blocked accessibility to social media. Everyone that wants to use it can if they will afford the price of using it.

Your input is misguided. What you ought to advocate is a close monitoring of the extra income generated from increased pricing and how it translates into improved coverage, quality and delivery for the consumer. Also, if the FIRS is able to report on the increase in taxed income of service providers and benefit to society.

Consumer advocates collect data at the user input level and use it to influence policies that will shape behaviors of providers. Be a good consumer advocate!

I hope they are paying you well for this.

Grundig:
Managing the resources of a small coven like ogun state is a different ball game. Kemi may have excelled as the commissioner for finance in ogun state but minister for finance in Nigeria is a different ball game.

This is not a fault of hers but that of Buhari who put square pegs on round holes.

Excelled in Ogun state! The state that required a bailout due to the unsustainable debt partly accumulated during Adeosun's era.

When people say someone has excelled as finance commissioner, they usually point to increases in IGR. But an increase in IGR accompanied with a borrowing binge - the latter magnitudes bigger than the former - is financial recklessness. This is what she achieved in Ogun state and this alone made her unsuitable for the role.

I suspect that a lot of decisions attributed to her is actually down to political pressure: whether under Amosun or Buhari. But a craven disposition to be a yes woman is not a feature suitable for a finance minister/commissioner.

For those who query why the EFCC only questions personalities linked to GEJ, here you go. Atiku has been questioned by the EFCC:

Atiku made this known in an interview with some officials from the media team of the EFCC, published in the latest edition of the anti-graft agency’s Zero Tolerance Magazine.

Here is my much simplified take on what is going on:

Yoruba/Igbo rivalry here and in its latest manifestation is about elite interests. Under GEJ, not only did Yoruba elite feel marginalised, with PDP's rotation formula (with OBJ having had an 8 year stint), power wasn't going to return to the SW until all the other geopolitical regions had had a go - SE/NC/NW, e.t.c. So "teaming up" with Northern political leaders (who were impatient for a power grab) seemed a logical way of breaking up this inevitable stint in the political wilderness.

Naturally, the ordinary people's interests do not necessarily allign with the elite's interests, but GEJ's gross incompetence (particularly the wanton theft/corruption) made the argument that a vote for Buhari represented a clean of the augean stables more compelling.

What was not reckoned with is that Buhari represented a different kind of incompetence (economic illiteracy on steroids) as damaging, arguably more so, than the anything-goes corruption GEJ enabled.

Of course, this is a simplified narrative: there is no monolithic elite and no monolithic North. But this is my best approximation.

In the last electoral cycle, the SE were inadvertently right. I say inadvertent because Igbo voters were not driven by a finer appreciation of the qualities of the 2 candidates. Had a more competent Northerner like Ribadu or Sanusi run instead of Buhari, Igbos would still have voted the inept GEJ. It is telling that the SE votes were +90% in favour of GEJ whilst the SW vote is more evenly split suggesting a greater propensity towards herd mentality in the former.

They have to service this dollar denominated debt stock with naira denominated revenue: if you owed $1bn in 2014, this would translate to N160bn then and N340bn today.