₦airaland Forum

DrayZee:
I hope you know the people in APC were mostly all in PDP. It's like someone changing shirt. The shirts are different but the individual is the same.
So in reality, you are planning to give the same set of individuals who wasted the country for 16 years, another 16 years. 32 wasted years?

#WeWillNotStandForIt

These people are benighted buffoons. According to their logic, APC should be given 16 years because PDP had 16 years (as if APC is that distinct from PDP). Presumably, the next party that succeeds APC and PDP should be given 32 years.

saintdennis:
She is getting 'less' criticism because she agrees she embezzled...not the other one that is running everywhere preaching gospel

You an internet poster knows for certain that Iwealla is a thief and your anti-corruption fighter par excellence who is in power, Buhari, has not deemed it fit to detain her when she visits Nigeria?

DisGuy:
Same way Sanusi gets more criticism than Emiefele...

Is Sanusi the intellectual or moral equivalent of Iwealla? Has Iwealla penned articles claiming Yorubas are the problem with Nigeria, a bizarre and bigoted argument, or made assertions of facts which could not conceivably be true (claiming that $50bn went missing which he calculated by multiplying the volume of crude oil produced in Nigeria by the price of crude).

Sanusi and Emefiele are in the same league, Usman and Iwealla are not. Sanusi and Emefiele were and are grotesquely incompetent and made grave policy errors: forex reserves should have been accumulated by the CBN when oil prices were circa $100 even if that meant allowing the Naira to depreciate as that would have curtailed the current currency crisis we are experiencing. There were no legal obstacles to accumulating reserves, merely a misinformed inclination to fix exchange rates at a price level irrespective of the costs (long or short-term).

Sanusi's claim to fame is the $20bn, a retreat from the even more crass claim about the missing $50bn, purportedly pilfered in an 18 month period. Is it not funny how such a gargantuan sum - 4 trillion Naira or 2/3 of the 2016 budget - is barely mentioned anymore?

This story is probably inaccurate but the glaring irony is that this ex-Finance minister, Usman, who is actually corrupt gets less criticism than another ex-Finance minister, Iwealla, who is actually not corrupt.

jollymizzle:
I'm afraid you are not thinking of the bigger picture which is if we deregulate inflation comes in and nothing you have been buying will stay the same,workers will go and strike and the government will have to increase the pay.come in inflation round two and the fearful thing is the cycle can continue until we become another Zimbabwe God forbid.if you stayed in Nigeria when people who didn't even have a thing to do with the dollar were hiking prices some at 100% what will happen should the government do that to us

But you are already experiencing inflation so you are trying to avoid a scenario that is already happening. What you fail to realise is that inflation and currency depreciation cannot be curbed by government diktats. I have a Samsung phone today produced by a newly industrialised country called South Korea whose currency, the South Korean Won, exchanges for around 1150 to the US dollar. If a government can simply fix exchange rates, the South Korean Won would never, nor would any currency, experience substantial currency depreciation.

As for labour unions demanding and getting payrises, you fail to realise that the federal and state governments in Nigeria are struggling to pay workers at current wages and you think they can increase wages.

DropShot:
Whatever hardship Nigerians are going through now will become a child's play if sourcing for forex is completely left in the hands of parallel marketers.

In fact, I don't know of any country that does that successfully. If you know, I'll appreciate a few examples.

There are numerous examples of countries with floating exchange rate regimes which a cursory search of the internet can reveal. Countries are more likely to maintain a floating regime, intervening only if there is a temporary crisis and if there is sufficient forex reserves. Here is one example in our continent:

South Africa has a floating exchange rate system. This means that the rand exchange rate is basically determined by the forces of demand and supply in the foreign exchange market. The South African Reserve Bank can, however, participate in this market by buying or selling other currencies. At present the policy is generally to stay out of the market and to allow market forces to determine the exchange rate.

http://www2.resbank.co.za/internet/Glossary.nsf/0/6e77f482c063ea5742256b430031f732?OpenDocument

What you need to show is one single example of a country that ran a fixed exchange regime successfully with insufficient forex reserves. I will be glad to enlightened by you on this topic.

chinchum:
I did not ask for gradual devaluation, i only said gradual exposure to such market forces, a govt that can not refine its crude oil and throws the naira to market forces is wicked. We are not ready for competition, the naira would be outclassed. If you throw Naira open to market forces and it gets to say 500/usd, are you aware that litre can cost as much 300-350 /litre . Do you know the reverberating effect that would have on the economy of the nation? Lets fix the basics like local refining and power supply improvement before thinking of market forces determining exchange rate of naira. One has to to be wicked or naive to suggest that.

Yes, a government that cannot successfully provided basic amenities as you admit will somehow successfully suspend the laws of demand and supply. The irony is lost on you. If you maintain a fixed exchange rate regime, the Naira will end up at N500 to the 1USD anyway. We have been fixing currency rates since the inception of the Naira and yet here we are today with the Naira at N320 to the dollar.

musicwriter:
Unfortunately, you people thinks once the Naira is devalued or free-float as you call it, the problem would be solved. This Egyptian example is a lesson to you.

Our fundamental problem is not free float, exchange rate, e.t.c. Our problem is the government is not earning enough dollar at the moment. Our fundamental problem as a whole is we don't export enough to earn dollar inflows.

If you like make it 1 Naira to $1 officially, or N320 to $1 officially. There'll still be black market.

If you make the Naira 320 to $1 today, the black market would skyrocket to 500 to $1 immediately. Forcing us to make a second devaluation of N500 to $1, officially. And so on............. And before you know it we become another Zimbabwe.

That's how Zimbabwe got 1 Trillion single note!!.

I'm sorry, you are not very bright. In a floating exchange rate regime, there can be no black market. The black market exists because the government has sought to fix the price of a tradable product below its market value. What the Egyptian example shows is that a fixed regime is impractical without sufficient reserves - a lesson Nigeria fails to learn.

I have heard a couple of people mention Zimbabwe as offering an example of the dangers of having a floating currency. I wonder what these people are smoking as again, Zimbabwe offered a telling lesson in the dangers of a fixed exchange regime which they eventually had to abandon after hyperfinflation ravaged the economy. See an excerpt from 2007 noting the consequences of Zimbabwe's fixed exchange rate regime - note the point in bold about the double-tripping opportunities it offered:

By Byron Dziva In Harare

12:01AM BST 07 Sep 2007

Zimbabwe injected a partial element of reality into its chaotic economy yesterday, abandoning its fixed official exchange rate of 250 Zimbabwean dollars to the US currency.

It fixed the new rate at Z$30,000 to the US dollar, an official devaluation of more than 99 per cent, but still well above its true value — on the black market US$1 fetches around Z$260,000.

The official rate is used for government transactions, but is also a hugely lucrative opportunity for senior officials in Robert Mugabe's regime, who are entitled to use it exchange the virtually worthless Zimbabwean currency for US dollars.

Mr Mugabe's mismanagement has given Zimbabwe has the highest inflation in the world, officially 7,634 per cent, and its economy has been shrinking for seven years.

http://www.telegraph.co.uk/news/1562485/Zimbabwe-abandons-fixed-official-exchange-rate.html

hmohammed:
So wen you know that our major proem is dat we don't have enough forex, that means a devaluation of the Naira will not solve our problem and that is exactly what the OP iss talking about.

If something (the dollar in this case) is scarce, the best way to manage it is allowing it to become more expensive. Insisting on making it cheap is a convoluted and ineffective way of addressing scarcity.

greenpasture:
What makes you think Nigeria needs a low FX rate?

A low fx rate is not necessarily a bonus when you are trying to restructure your economy away from imports into the real sector.

The problem is that Nigerians want to avoid changing their economic behaviour and dying occupations while maintaining their old life style. There are many imaginative and legal ways of paying for legal fx imports. In fact the increase in dollar rate is more than offset by the margins available in greenfield bottom of the pyramid opportunities.

If you are in services, trading, arbitrage, luxury real estate you will suffer. That's the name of the game.

Nigerians should boot up and get with the program.

It's not a question of me thinking that Nigeria needs a low rate - the market is clearly signalling that the Naira needs to fall as dollar supply is insufficient to meet demand. What better way to curb demand than to allow the dollar reflect its true market value? You seem to have an inordinate faith in your government's ability to suspend the laws of demand and supply.

dicefrost:
If cbn relinquish control of the naira, and allow it float, won't we eventually have hyper inflation? If feul importer buy dollars at 320 what will become of us? We won't automatically cut our dependence on imports in a year. So there ll still be more naira chasing d dollars and it ll keep going up, untill it becomes #1000 to a dollar

You will eventually have hyperinflation as dollar inflow is insufficient to meet demand. Dollar inflow will not materialise, except where there is an oil price rally, in an environment where foreign investors know that the purchasing power of their forex does not reflect its market value due to the fixed currency rate regime.

If you maintain a fixed exchange regime, dollar will become even more scarce as the CBN needs to ration it restricting the ability of importers to access forex. It is the primary reason why you have been experiencing fuel scarcity in the last few months. In other words, your worst fears about currency depreciation are already materialising.

MathsChic:
Seriously? A free-floating exchange rate in Nigeria adjusted by demand and supply when the country hardly produces anything for its own consumption? There is a reason emerging economies don't have a free-floating system. Look into that.

See my comments above.

emorse:
Don't you think we're still too import dependent for this move? We import almost everything we consume even as ridiculous as tooth picks! Allowing the naira to float freely will without doubt lead to the increase in the cost of importation which will transcend into more economic hardship for the average Nigerian.

A more logical move -which I suspect is the intention of Mr President- would be to first improve our local capacity and there after, leave room for competition between local products and their foreign counterparts by allowing the naira to float as you earlier suggested. Of course by then the higher prices of foreign goods would work in favour of local goods thereby reducing the pressure on the dollar.

In all, I think your suggestion is brilliant but it can't be done impulsively. Measures have to be put in place to absorb the inevitable shock that would result from it.

What better way to curb imports than to make them more expensive? If imports are more expensive, that creates incentives for investing in local capacity without the economic distorting effects of a fixed currency regime.

A bit more on this, here is an article I found re 2013 -

Central Bank of Nigeria (CBN) shelled out some $26.6 billion from the nation's external reserves to save the naira from devaluation last year, according to information on the apex bank's website.

CBN consequently sold about $26.6billion to currency dealers in 94 Foreign Exchange Dutch Auctions between January and December 2013.

Read more at: http://www.thenigerianvoice.com/news/133642/cbn-spends-266b-to-defend-the-naira.html

$26.6 billion was just for 2013. I felt at the time that given low reserves, it would make more sense to preserve forex even though that would mean Naira depreciation. Part of the reason for the Naira's sharp collapse is that it was artificially held up in the first place by Sanusi and Emefiele's rather generous and short-sighted use of forex when oil prices were higher. Once dollar inflow reduced due to lower oil prices, with no forex from the CBN to support the inflated Naira value, a sharp correction in price was inevitable.

It is important to revisit some of the things we did wrong before to avoid repetition in the future. Sadly, policy missteps are not studied objectively in Nigeria as ethno-religious politics clouds judgement.

I hope the OP is not one of those PDP warriors but the role Sanusi played in laying the foundation for the present currency problems is under-appreciated. I have been trying to find some of my old Nairaland posts at the time.

The CBN, off the top of my head and I stand to be corrected, spent $110bn over in currency management over 4 years.

That was a crazy amount of money as it left our forex reserves dangerously low in the evening of an oil price crash which, unfortunately, has now happened. Emefiele continued on the same path and has proven to be even more inept.

When people say OBJ left $60bn in reserves they fail to realise that most of that was CBN forex reserves and not OBJ's rainy day fund.

989900B:
I can't stop laughing . . .

What if I told you most countries manipulate their currencies? From Japan to China to Switzerland to the US (till sometime back), many others . . . Russia, Brazil. . . .

Dude, you are a bit thick. You need to read my post that you quoted for a rebuttal of your outstanding "insight". Here is an extract from post - "By narrowly focusing on devaluation, the OP misses the forest for the trees. The CBN's policy misstep is not a failure to devalue but a failure to allow market forces dictate the Naira's value given the CBN's lack of ammunition (i.e., forex reserves)."

If you have substantial forex reserves, you can manipulate all you want. If you don't, you have to allow market forces determines prices. No point in comparing us to China who have $3 trillion in forex reserves.

2 or 3 years ago on Nairaland I questioned why people thought Sanusi, the CBN governor, did a good job when he failed to accummulate forex reserves at a time oil prices were high. It seemed bizarre then and has left us short of forex to defend the Naira now that oil prices are low. Now that we are were we are, we need to bear the consequences and learn our lessons to avoid a repeat in the future. No amount of sloganeering and wishful thinking will dig us out of the hole we dug ourselves into.

chinchum:
No, it must be gradual, throwing the naira /usd to market forces at one go is not advisable, the policy on forex restrictions to certain goods that can be locally sourced immediately is better, as the outputs of efforts to produce some goods locally begins to increase, those goods can be added to forex restrictions e.g Rice.

A gradual devaluation is the worst of all possible worlds. If the government gradually devalues the currency, that will feed a speculation frenzy as each devaluation is taken as a signal that more is in the pipeline. If investors know for certain that the Naira is going to be devalued, they will speculate accordingly excacerbating the Naira's fall. Each devaluation will push the black market rate further away from the official rate.

The best bet is to give up fixing prices by fiat, let market forces determine the price. The longer you leave it, the wider the gap between the official and the black market rates. In the Abacha era, the CBN fixed the official rate at N22 whilst the black market rate hit N85. Well connected people made a fortune from round tripping (that is where we are headed to if we don't eliminate this Abacha style exchange rate regime).

You are also overestimating the government's capacity to select winners and losers. This is a government that cannot provide fuel, water, electricity or even draft a budget in time. Restrictions on imports create bribery opportunities for our border agencies and such a resort to aurtakic policies have a resounding history of failure.

The said thing is that we act like what we are experiencing are policy innovations in Nigeria when we have already been through fixed exchange rate regimes and import-substitution policies in the 70s and early 80s. These policies did not industrialise Nigeria, they created economic distortions which facilitated our economic collapse in the 80s. These zombie ideas - ideas that should be dead and buried - gain acceptance in Nigeria because Nigerians are not keen students of history and our demography is dominated by youngsters who did not experience these dire policies at the time.

DropShot:
What then can the govt do in the situation it finds itself given the fact that it MUST provide forex for many essential imports?

What exactly is the way you propose since the govt doesn't have enough dollars to make available to those genuinely needing it; and the fact that it cannot afford the exchange rate to be left completely in the hands of parallel market traders?

I await your clear suggestion and not ......

Your premises are flawed and miss the substance of my posts. The government does not have to provide the forex as the market can adequately provide forex. The key difference is that the market will provide it at a price higher than N199 to the dollar which will reflect the true exchange rate value.

You may say that this may cause hardship for Nigerians but Nigerians are already experiencing hardship due to the hamfisted attempt to provide dollars at a fraction of its true value. Scarcity is the inevitable consequence of price fixing below the market value - hence fuel scarcity and dollar scarcity. Indeed, if you go back to the first Buhari government - we had scarcity of many goods as the government sought to fix the price of things like sugar.

One thing I have also noted in my previous posts is that the fixed exchange regime accelerates the Naira's depreciation as I noted here:#

The answer goes back to the initial catalyst for the Naira's fall, reduction in forex inflow due to the fall in oil prices. To remedy this, you need to find alternative sources of forex inflow such as foreign investment. Nigeria had $21bn of FDI investment in 2014 alone. However, foreign investment will reduce significantly if the official exchange rate, which is foreign investors sole recourse, does not reflect the market value. If you wanted to build a factory in Nigeria at estimated value of 200bn Naira, why invest $1bn at the official rate when the real value should be circa $600m at market rates? Therefore, the fixed exchange rate perpetuates a rapid and self-reinforcing fall in Naira as forex inflow is discouraged. This is all what I predicted in previous posts months ago and is actually borne out of the experience of many countries, including Nigeria, who try to maintain a fixed exchange regime without adequate forex reserves.

From the point of view Nigerian exporters, why repatriate forex income to Nigeria when your forex purchasing power will not reflect in the Nigerian market the real purchasing power of your forex? Hence, a fixed exchange rate regime also reduces export revenue as seen in the dramatic collapse in non-oil export revenue.

omonnakoda:
That is not the point ,the OP did not write the article he only reproduced it so why say he is writing rubbish. Learn some manners and how to behave like a human being

The conclusions he draws from the article - that it vindicates Nigeria's currency policy - are not borne out by the contents of the article. The article shows Egypt's ill-fated quest to solve its forex problems by fixing an exchange rate by fiat and cracking down on the black market. It has woefully failed and, thus, Egypt serves as a good example of the perils of a fixed exchange regime.

By narrowly focusing on devaluation, the OP misses the forest for the trees. The CBN's policy misstep is not a failure to devalue but a failure to allow market forces dictate the Naira's value given the CBN's lack of ammunition (i.e., forex reserves). Simply lowering the exchange rate's value by fiat will actually feed a speculation frenzy as the market will think that if you have done it once, you are going to do it again. Hence, it's better to leave prices to be determined by market supply and demand and not by government diktats.

chinchum:
Subjecting the naira to market forces is even a worse attempt, the forces will be against the naira for now, we are a consuming nation that imports too much, and only exports raw materials. When we activate our industrial base massively, we can throw it open.

You diagnose the problem as importing too much but insist that we should keep imports cheaper (not allowing the Naira fall makes imports cheaper). Therefore, don't you recognise fundamental inconsistence in your analysis?

Most of what he's counting as legacies are not true legacies and simply illustrates how out of his depth he was. For instance, the point about being the largest economy was largely a reflection of the fact that the statistics were updated during his presidency. Boasting about having Africa's biggest billionaire is silly in a country with endemic poverty especially where that billionaire reflects rent-seeking in our economy.

GworoChewinMaga:
But OP what you are pointing out in Egypt is exactly what is going on in Nigeria with the huge gap between the parallel market and the official rates.


Did you even read the rubbish you posted?

The sad thing is their obliviousness to their profound economic illiteracy. He puts up an article about the ill-fated move by the Egyptian government to fix exchange rates, instead of leaving it to market supply and demand to determine as economists recommend, and proclaims that this illustrates that the Nigerian government is vindicated!

To the contrary, the Egyptians are doing what the Nigerians are doing and are predictably failing. The fact that they have chosen to devalue a bit doesn't refute the fundamental diagnosis - governments cannot simply fix echange rates unless they have sufficient forex reserves to back it up. Nigeria does not have the reserves to fix the Naira at a particular price level so insisting on doing so will cause unnecessary hardship and creates opportunities for corruption via round-tripping. Why is this so difficult for Nigerians to understand?

What has been called for is a free float of the Naira and not mere devaluation. If the CBN comes out today and announces that the Naira will now exchange at N280 to the dollar, that does not eliminate the problem as fixing exchange rates by fiat with insufficient reserves is a recipe for disaster. This is what the Egyptians have done and it goes against sound macro-economic advice.

A free float eliminates the black market as you have one exchange rate market and the market determines the exchange rate. People don't realise that having a fixed exchange rate regime in Nigeria was the norm from the 70s to the 80s and it helped hollow out our economic capacity and created all sorts of economic distortions.

Prices dictated by supply and demand play a crucial signalling role in the allocation of economic resources. By maintaining an inflated exchange rate, resources are misallocated and necessary economic adjustments are not made until it is too late.

You have to ask yourself - what does having the Naira at N200 to the dollar do for the economy other than to make imports cheaper? Why do these our so called nationalists want to make the importation of goods cheaper when they claim that Nigeria needs to weans itself off the dependence on imports?

An update on this:

FG's share for January 2016 (as noted above) was N137.5bn, February 2016 was N127.2bn and March 2016 N109.11bn. See the following 2 links for February and March 2016:

http://www.premiumtimesng.com/news/top-news/200668-faac-fg-states-lgs-share-n345bn-february-revenue.html

http://leadership.ng/news/520354/faac-fg-states-lgs-share-n299-7bn-march-revenue-drops-n39bn

PRYCE:
How can a "Technically defeated" sect be posing a threat let alone a threat that grows??

Boko Haram Still has the capacity to attack a GOC's convoy and we letting our guard down cos one dullard in Aso Rock went "technical"??

Well, Boko Haram are still technically killing people while we technically playing down the Rhetoric!

Lalasticlala

The US government is part of the IPOD conspiracy against the almighty and infallible Buhari government.

Our immediate economic imperative is to provide a Keynesian stimulus to reflate the economy.

I have touched on this before, there is nothing like a Keynesian stimulus when interest rates are at double digits and in an inflationary environment. Keynesian stimulus was conceived for situations where the economy is facing deflationary pressures (prices are falling) and interest rates are at the zero lower bound (at zero or near zero). The idea is that at such levels, deficit spending can boost aggregate demand and inflationary pressures as the government borrows money which would otherwise be idle. With inflation and interest rates at or near zero, such spending won't spiral into hyper-inflation and painful rate rises. In contrast, Nigeria is an inflationary environment with high interest rates, the very antithesis of an environment which Keynesians think can be remedied by stimulus.

The argument that capital spending justifies such borrowing is analogous to the argument she used as Ogun state finance commisioner. We all know how Ogun state ended up. Yes, Nigeria desperately needs to upgrade its infrastructure but it's pure fantasy to think that if you, for instance, borrow $1bn to invest on a highway that that highway will spur enough economic activity to yield additional +$1bn tax revenues to pay back the principal on the loan and interest. In reality and as she found with Ogun state, the total stock of debt (not to mention interest obligations) will increase faster than the additional tax revenues.

What Nigeria needed to concentrate on was firstly to get its books in order - cut down waste and diversify the tax base. Policy reforms like asset sales - ports, power plants and refineries come to mind - and deregulation would have helped boost foreign investment (which will help with the Naira) and yielded an increase in tax revenues. They may prove politically unpopular but they are hard choices that Nigeria needed to make.

In reality, I suspect that this big spending splurge is not driven by economics but by politics. This is an attempt to reward political supporters at the expense of the country's long term fiscal health.

The real reason why it was difficult to accumulate a rainy day fund when oil prices were higher is because of the public sector wage bill. During the OBJ era, the minimum wage was N5000, Yar'Adua and GEJ more than tripled public sector wages - making the minimum wage N18,000.

If you look at government budgets - both at state and federal levels - recurrent expenditure dominates and most of it is public sector wages. With a tripling of wages, consumer demand increased driving up fuel consumption and in turn the fuel subsidy bill, fuel subsidy had to increase anyway due to higher oil prices. The combination of a bloated wage bill and high fuel subsidy bill eroded the capacity to save.

The above is why I say that Nigeria's economic problems aren't simply driven by corruption. Nigeria is poor because we collectively support policies that inhibit sustainable development. Both the unsustainable increases in wages and the maintenance of the fuel subsidy received public support. It is not a good argument to claim that workers deserve higher wages otherwise the politicians will steal. If you support policies that damage the country's long term economic prospects, the ordinary people will suffer most whilst the politicians will continue stealing no matter what.

Another thing that has to be mentioned is that until oil prices collapsed and exposed the folly of not saving, there was no public demand for saving. To the contrary, Lai Mohammed was on record stating that APC's first policy will be to abolish the excess crude account and the sovereign wealth fund. As it is his wont to play to the gallery, this reflected the popular view. At the state level, state finances were run like oil prices will always stay high (witness Kemi Adeosun's stint bankrupting Ogun state as the state finance commissioner).No one was doing threads on Nairaland bemoaning the paucity of our rainy day fund. Only with hindsight did we realise the hole we had dug ourselves. People get the leadership they deserve and Nigerians have got what they deserve.

koboko69:
Why are u talking like an illiterate todler. You are not making any sense. What exactly is your point.

Mine is so far no good Buhari have not borrowed to pay salaries.
Buhari gave bailed out funds to states
Buhari is fighting terrorism and have won technically without borrowing

Bros, can you please type in FGN bonds 2016 in Google. Do you know that last week alone the government borrowed 125 billion Naira and plans to borrow 3 trillion Naira this year?

According to him, FGN bonds are currently being used to finance recurrent expenditure.

“If this much is being invested in recurrent expenditure and it’s not bringing capital into the industry, we are not quarrelling with government, we are very open and ready to partner with government on well-conceived projects,’’ Longe said.

http://thenewsnigeria.com.ng/2016/03/nigeria-fritters-away-bond-treasury-bills-on-recurrent-expenses/

Nigeria expects a budget deficit of 3 trillion naira in 2016, which is equivalent to $15 billion up from 2.2 trillion naira, or $11 billion, that had been previously estimated.

http://www.africanews.com/2016/02/05/nigeria-s-world-bank-support-to-fund-budget-deficit-welcomed/

Honestly, I have never seen a more surreal situation in Nigeria like this. I think it's time to stop pretending that there is a symmetry between the dishonesty of the PDP and APC.

Guys, there is no additional 3 trillion Naira stashed away in the TSA accounts. Think of it - the budget is circa 6 trillion Naira of which the government plans to borrow 3 trlllion whilst around 3 trillion will be realised in 2016 tax revenues. Where then does an additional 3 trillion come into play?

luvmijeje:
I'm educated enough to realise that it will unfair to expect drastic change for a country destroyed by 16 years of PDP led government.

I'm wise enough to realise that APC inherited an economic in depression and it will take time to stabilise the country.

To be honest I'm not confident that the APC led government will deliver but I'm giving them benefit of the doubt.

This "destroyed Nigeria in 16 years" business is an utterance of such profound stupidity that it tells you a lot about the benighted intellect of many Nigerians. Anyone reading such a comment would think Nigeria was in pristine condition 18 years ago when Abacha was in power.

The reason people make such a grotesquely ignorant comment is that for most, the Abacha and immediate post-Abacha era was when they were in primary or secondary school. Apart from the intellectually curious, most people relying on childhood memories to guage the socio-economic condition of the distant past have a memory distorted by the naivety or innocence of childhood. In 16 years time, the children of today would be telling you that it was APC that destroyed Nigeria even if the standard of living has improved substantially by then.

With the exception of security, particularly re Boko Haram, Nigeria is a much better place today than the famished existence that was more commonplace in the 90s.

I don't know about the accuracy of this story but the reality of a fixed exchange regime is that it is a haven for corruption. As I have noted in previous posts as follows:

The fixed regime creates an incentive for round-tripping as it provides arbitrage opportunities for the highly connected. This is inherent to the regime as its whole raison d'être is to maintain the Naira at a higher fiat value than the market value. Therefore, a fixed regime will see more round-tripping, this is our actual historical experience, and lead to a self-reinforcing acceleration of the loss of the Naira's value.

https://www.nairaland.com/2969088/why-support-buhari-naira-dollar/2#43489831

During the Abacha regime, the fixed rate remained at 22 Naira to the dollar whilst the market rate got to 85 Naira to the dollar. This created an excellent opportunity for "round-tripping", i.e., buying dollar at the official rate and selling at the market rate.

This being Nigeria, corrupt interests are formed and converge to exploit these opportunities and to denounce those who criticise the exchange rate policy as exploiters of the masses and the representatives of malicious foreign interests. Because political loyalty in Nigeria is based mainly on ethnic and religious affiliation, bad policies will subsist for long notwithstanding the compelling arguments offered by real world experiences.

https://www.nairaland.com/2939764/how-buhari-dealing-deadly-blows/2#43031475

The Economist reported on the phenomenon recently:

That the bank has the power to hand out subsidised greenbacks naturally invites corruption. An executive at a big importer says its budgets now include a 30% “premium” to be paid to central bank officials to get dollars.

http://www.economist.com/news/middle-east-and-africa/21695065-how-make-hard-currency-shortage-worse-can-you-spare-dollar

You cannot claim you are fighting corruption while creating lucrative avenues for money to be pilfered.

It doesn't take a lot to impress Buharists. Pictures of the President just sitting at a table are often met with chants of "Sai Baba" or "my amiable president."

Supporting Buhari these days is like religion, support is hinged on faith/loyalty rather on evidence. Gone are the days when the "idea of Buhari" or the set of expectations projected on him evoked strong support. What is left now is a motley crew of the delusional and the bigoted.

Increasing interest rates helps curtail inflation and currency depreciation.

These have been major problems for Nigerians thus far.

Siberia101:
Is Bokoharam occupying territories like they did with reckless abandon in 2014? From Biu to Damboa to Gwoza to Malamfatori to Baga

Does Boko Haram still hold territory? Absolutely. If they do not, the Nigerian army should take 1 or 2 journalists on a tour of some of these areas.

We also tend to forget that the scale of Boko Haram's territorial conquest in 2014 was an anomaly, much of which was reversed by March 2015 when it occurred to the GEJ government that it ought to do its duty of defending the country. For most of Boko Haram's terror campaign, it has exercised control over a lesser amount of territorial space than it had in late 2014. One cannot simply sit back and congratulate our leaders for reducing the territorial control exercised by a terrorist organisation.

Johnnyessence:
at least they are getting half salaries i want to tell u that he's still try alot providing the salaries for them. half bread is better than none ok.

This post belongs in the Hall of Infamy as one of the most gratuitously crass statements on Nairaland. It seems like a parody but the frightening thing is that it probably truly reflects the poster's feeling on the matter.

Adminisher:
It depends on your IQ level. Cause and Effect is life. Americans were mature enough not to blame Obama for the first two years because they know clearly that Bush caused most of the debt of 10trillion then due to the Iraq war.
You have to have modest mental faculties not to realise that the oil market has crashed completely and painful restructuring is required. You also have to be a moral coward (which is sad for a young man) not to realise that Jonathan was extremely corrupt and he did not prepare Nigeria for this period that is why we have this problem.

How do you buy a second hand vehicle? Do you go over the history before buying?.If the engine knocks in the first three months and you find that the oil was not short is it not time to blame the previous owner?

All the stupid figures you have rattled don't mean shit until you use superior judgement. An amateur economist will see in it evidence that today's disaster was sewn in the middle of Jonathan's presidency.

The exam you fail tommorrow is the net effect of your preparation over two years not because your parents changed addresses.

Masochistic reasoning in its purest expression. What your salad tossing post fails to recognise is that for all the problems Buhari inherited, his actions have served to exacerbate the economic difficulties.

Making public announcements that the Naira would not be devalued and maintaining a fixed exchange regime amplifies currency depreciation and inflation in the domestic markets.

There are major differences between Obama and Buhari. For instance, Obama, recognising the urgency of the economic situation, took the time between his election and inauguration to put in place an economic team and submitted the American Recovery and Reinvestment Act 2009 to Congress 6 days after inauguration. In contrast, can you actually summarise your president's plans for revitalising the economy?

What is the justification for providing 38 billion Naira of FG money to explore for crude oil in Bornu state? For proposing to make higher capital investment in the Aso Rock clinic than all the federal hospitals in the country combined? I suppose this is all part of the legacy of GEJ.

You have to laugh at the notion that the man who appointed as his finance minister the former finance commissioner of Ogun state, a state whose ill-thought loan undertakings under said commissioner rendered it insolvent and requiring a bailout, somehow represents a repudiation of the financial recklessness of the GEJ era. Here is his party's spokesman and now information minister when oil prices were high:

September 30, 2014 — 6:14 PM BST

Nigeria’s main opposition party said it will scrap the country’s sovereign wealth fund and a separate excess crude account if it wins elections in February.

“We’re going to put a stop to them,” Lai Mohammed, a spokesman for the All Progressives Congress, or APC, said in an interview in London yesterday. “The sovereign wealth fund and the excess crude account are illegal.”

http://www.bloomberg.com/news/articles/2014-09-30/nigeria-s-opposition-wants-to-scrap-sovereign-oil-funds

The members of today's regime spent the period of an oil boom demanding that federal government savings be scrapped and borrowing money at state government levels as if the oil boom will last forever, despite state government finances depending heavily on federal allocations, only to react with utter "astonishment" when oil prices collapse at the adverse impact this is having on government finances. Having gained power at federal level, they then compounded the problem by failing to announce an economic team or a clear set of well thought out policies at the earliest possible opportunity.

This is why they say people get the government they deserve.

dammytosh:
Very typical.

No intelligent contribution. How about stepping forward with facts ?

Write nonsense and paint it red may be that will force sense out of it.

If you are sincere, you will realise that the Nigerian military can simply refute this US claim by taking journalists on a tour of all the local govts since they now control the whole lot in Bornu.

Abbam and Mobbar were mentioned sometime ago as in Boko Haram's control. Why can't our military do a video of the respected areas?

This administration is an improvement over GEJ's in the fight against Boko Haram. It's taken the war very seriously from day one and you can see a notable reduction in Boko Haram activities.

It's still not an optimal state of affairs as soldiers continue to complain of delayed payment of their entitlement. Also, the government's almost pathological propensity to propagandise, witness the comical claims about technical defeat, has reduced confidence in its supposed achievements.

The fight against Boko Haram will still take many more years to conclude and we are no where near defeating them.This is only, at best, the beginning of the end.

I always wondered with Boko Haram whether they were considering the long term implications of their indiscriminate violence on their food security. It's probably one of the most brainless insurgent groups known to man.

Just an update on this: The FG's projected borrowing has gone from $11bn to $15bn -

Nigeria expects a budget deficit of 3 trillion naira in 2016, which is equivalent to $15 billion up from 2.2 trillion naira, or $11 billion, that had been previously estimated.

http://www.africanews.com/2016/02/05/nigeria-s-world-bank-support-to-fund-budget-deficit-welcomed/

FG's share of January 2016's FAAC allocation was 137.5bn Naira -

The January allocation shows a decrease of N17.4 billion.

Giving the breakdown of revenue among the three tiers of government, Ms. Adeosun said the Federal Government received N137.5 billion, representing 52.68 per cent, while states got N69.7 billion, representing 26.72 per cent.

http://www.premiumtimesng.com/business/business-news/198937-faac-fg-states-lg-share-n370-4b-january.html. This was based on $39 oil.

This is what I said in the initial post:

Hence the likelihood that the FG will raise 3.8 trillion in 2016, averaging 316bn Naira monthly and at $38 per barrel, from mainly revenue collection alone is far-fetched to put it mildly. The last 3 months, the FG averaged 161bn Naira when oil was close to $50 per barrel. The FG needs to more than double current revenue collection just to come close enough to its revenue target.

Hence, never mind borrowing 1.88 trillion Naira (FG says it will recover another 350bn Naira from looters even though it has yet to recover much thus far), for the FG to fully implement its 6.07 trillion Naira budget at current assumptions, it will have to borrow at least 4 trillion Naira!

$15bn takes us to 3 trillion Naira in borrowing using the official exchange rate. I suspect they would still need to borrow a further 1 trillion Naira or $5bn unless they massively devalue, which Buhari has ruled out, or simply forgo much of the budgeted spending.