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Nairaland Forum / Nairaland / General / Politics / Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve (354 Views)
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Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by NoApology(m): 9:42am On Dec 03, 2021 |
Ok let me explain Foreign Reserves to you in layman’s terms (and I welcome any expert or CBN to challenge this) Got this inspiration from Tosin Adeoti. You probably have heard Buhari looking to borrow $3bn for God knows what. 2. And you’ve heard that Nigeria’s foreign reserves is circa $40bn Why is Buhari not taking from the reserves. Why is he putting us in debt abi? Well those foreign reserves are not really reserves � 3. Abi if you reserve money, it means that it is yours for the rainy day, night right? Well not in this case. Nigeria sell goods to the world majorly oil and collects dollars in return. 4. Dollar is the global currency. The standard unit of money as at today. So almost all countries change their currencies to dollars and pay for what’s bought. After we take their dollars after giving them oil, FG meets CBN, oya help me change this dollar to naira. 5. Why? FG can’t spend revenue in $ in Nigeria. They must pay contractors, workers salaries (and other obligations) in guess what? Naira. Why do they meet CBN? Because only CBN is authorized to print Naira. 6. So CBN takes the dollar and gives Naira to FG to do whatever. FG flexes and enjoys the Naira, CBN keeps the dollars. Now that dollars that FG gave CBN is what we know as FOREIGN RESERVES. 7. From all I’ve said above, that dollar no longer belongs to FG. Almost like meeting one “aboki” to change N500k to $1k, then you go home and enjoy your N500k then boast to your wife that you have reserves of $1k somewhere. ��. Weyrey! 8. It’s not over. What’s the use of that dollar that FG gave CBN. CBN uses that dollars to give anyone who needs to buy things from abroad 9. Dangote wants to buy stuff from abroad, he meets CBN and give them Naira in exchange for dollars and he pays his suppliers abroad. You want to use your bank Naira card to buy stuff abroad, your bank changes Naira in your account to dollars with CBN and pays for it 10. CBN can’t spend the dollars with it. They can only exchange for Naira so imports happen. It is reserved for making foreign payments. 11. Foreign reserves also determines what we can import as a country. If Nigerians spend $10bn per month on imports and CBN has just $30bn in reserves, we will survive for just 3 months till.... This is also why we must look at exports. Get those dollars flowing in! END! https://twitter.com/morris_monye/status/1466334056879210502?s=21 2 Likes
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Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by NoApology(m): 9:45am On Dec 03, 2021 |
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Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by Jomonix: 9:48am On Dec 03, 2021 |
You tried but i am still wrapping my head around it. Thanks. |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by NoApology(m): 9:51am On Dec 03, 2021 |
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Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by darocha1: 9:51am On Dec 03, 2021 |
Well simplified 1 Like |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by Ttalk: 10:10am On Dec 03, 2021 |
You won't see useless and bigoted youth on topic like this. Brainless and idiotic people that knows nothing beyond ego massaging, chestbeating, unnecessary comparison and I-better-pass-my- neighbour conversation 1 Like 1 Share |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by rayvelez(m): 10:16am On Dec 03, 2021 |
Well articulated and me be thinking say we have $40bn foreign reserves lwkmd. |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by flamingREED(m): 10:19am On Dec 03, 2021 |
Foreign reserves that have already been used up. Great enlightenment. |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by lexrichy(m): 11:30am On Dec 03, 2021 |
Buhari needs to borrow more to develope the economy. |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by aribisala0(m): 11:46am On Dec 03, 2021 |
The foreign reserves are not "OUR " foreign reserves . They belong to the CBN. The CBN is a Bank It has assets and it has liabilities Foreign reserves are ASSETS Naira notes are LIABILITIES OF THE CBN Just like the balance of your bank account is a LIABILITY of the BANK holding your deposit The naira notes in circulation are essentially a debt of the CBN. They have no intrinsic value. They are only balanced by any assets the banks have So effectively , in theory CBN assets belong to those carrying Naira notes and or any other CBN Paper(debt) The less the assets the CBN has the less the value of the Nara in your pocket The more difficult it is to CASH THE CBN DEBT i.e change Naira into dollars the less the debt is worth So it is important to think of Naira not necessarily as money but a debt of the CBN . f the government spends the reserves it is effectively putting a straw into the savings of those who save in naira and having a free drink That has been going on for the past 6 years and longer It is worth noting that the same principle apples to the dollar. The dollar is a debt of the US Federal Reserve subject to the same principles. It has managed to retain value because the US has manoeuvred a situation where most of the World is forced to demand dollars . It that demand shifted elsewhere the dollar would crash That demand is maintained not by free market activity but by very effective coercive foreign policy 1 Like 1 Share |
Re: Explained: Why The FG Keeps Borrowing Despite Our Huge Foreign Reserve by suffering: 8:02pm On Dec 03, 2021 |
It never stopped Abacha from using the money to enrich his generation. One of our biggest problems was having illiterates as presidents. It won’t surprise me to learn the white man gained from the demerit as ignorant people are easy to control — unless they develop illusions of grandeur a la Idi Amin and Muammar Ghaddafi. |
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