The Naira has come under a lot of pressure after the CBN unified the exchange rates by floating the currency. Market watchers expected the Naira to eventually strengthen in value but the opposite as happened.

At a point, the new official rate was higher than the black market and BDC rates.

I would like your opinion on this: would payment of remittances in Naira reduce the pressure on the Naira? With a floated Naira, the receiver would receive a market determined rate for his Naira.

This is nothing new. It was the norm until 2020 if my memory serves me well. With about an average of $2bn in remittances flowing in monthly, this should reduce the pressure the Naira. The recipients have no need for the dollars they receive and it is changed into Naira either at a BDC or at the black market

I even preferred the old system where the money flowed directly into my Naira bank account hassle free.

It will have a similar effect as printing more Niara notes. Either you exchange it with forex or forget it. There are no Naira legal tender beyond Nigeria and so it cannot be remitted if not smuggled out first. Plus there are no pressure on Naira it is forex there is pressure on. People always want to go out to buy what they need and so need forex to do that thereby creating pressure on forex.

grandstar:
The Naira has come under a lot of pressure after the CBN unified the exchange rates by floating the currency. Market watchers expected the Naira to eventually strengthen in value but the opposite as happened.

At a point, the new official rate was higher than the black market and BDC rates.

I would like your opinion on this: would payment of remittances in Naira reduce the pressure on the Naira? With a floated Naira, the receiver would receive a market determined rate for his Naira.

This is nothing new. It was the norm until 2020 if my memory serves me well. With about an average of $2bn in remittances flowing in monthly, this should reduce the pressure the Naira. The recipients have no need for the dollars they receive and it is changed into Naira either at a BDC or at the black market

I even preferred the old system where the money flowed directly into my Naira bank account hassle free.

Try that n watch remittances reduce by 80%

Most remittances now come in through the crypto currency channel, easier , faster, and cheaper

The only way to ease pressure is why working with importers provide them credit to manufacture what they import in Nigeria, don't give credit to none importers ooh

Criteria should be evidence of minimum of 7 years importation of that product, technical know how, well established distribution channels that can support the factory via guaranteed customers

But na they don't want to do they maybe simple because the importers are mostly from a region they don't like

grandstar:
The Naira has come under a lot of pressure after the CBN unified the exchange rates by floating the currency. Market watchers expected the Naira to eventually strengthen in value but the opposite as happened.

At a point, the new official rate was higher than the black market and BDC rates.

I would like your opinion on this: would payment of remittances in Naira reduce the pressure on the Naira? With a floated Naira, the receiver would receive a market determined rate for his Naira.

This is nothing new. It was the norm until 2020 if my memory serves me well. With about an average of $2bn in remittances flowing in monthly, this should reduce the pressure the Naira. The recipients have no need for the dollars they receive and it is changed into Naira either at a BDC or at the black market

I even preferred the old system where the money flowed directly into my Naira bank account hassle free.

If you think naira is on a free fall because of scarcity alone then I'm very sorry to say, you are very far from reality, for me the reason why naira is on a free fall and dollar is very scarce is because of incompetence, corruption, nepotism and greed, when you combine all these evil ingredients together what Nigeria is experiencing on Forex matter is the end result.

No matter the policy they put, if they don't tackle these issues I mentioned, forget it, the naira is on a long thing....

CodeTemplar:
It will have a similar effect as printing more Niara notes. Either you exchange it with forex or forget it. There are no Naira legal tender beyond Nigeria and so it cannot be remitted if not smuggled out first. Plus there are no pressure on Naira it is forex there is pressure on. People always want to go out to buy what they need and so need forex to do that thereby creating pressure on forex.

How will it be the same as printing Naira? It has been done before and it was not inflationary.

The standard practice is actually to pay the recipient in the local currency. The only reason why they reintroduced dollar payments was to encourage dollars to flow into the black market to strengthen the value of the Naira there. Now that the exchange rates have been unified, it no longer makes any sense to continue it

grandstar:
The Naira has come under a lot of pressure after the CBN unified the exchange rates by floating the currency. Market watchers expected the Naira to eventually strengthen in value but the opposite as happened.

At a point, the new official rate was higher than the black market and BDC rates.

I would like your opinion on this: would payment of remittances in Naira reduce the pressure on the Naira? With a floated Naira, the receiver would receive a market determined rate for his Naira.

This is nothing new. It was the norm until 2020 if my memory serves me well. With about an average of $2bn in remittances flowing in monthly, this should reduce the pressure the Naira. The recipients have no need for the dollars they receive and it is changed into Naira either at a BDC or at the black market

I even preferred the old system where the money flowed directly into my Naira bank account hassle free.

The 3 things which will determine whether or not the Naira strengthens in the short-to-medium term are

1. Who Tinubu appoints as the next CBN governor. This is by far the most important factor. If Tinubu appoints someone the international financial markets consider credible, someone with both the necessary qualifications and a proven track record, this will give investors confidence that Tinubu is committed to monetary stability. Without that confidence they will be wary of bringing their funds into the country, given Nigeria's long track record of erratic policy-making.

2. Who Tinubu appoints as finance minister. Investors want to see that the finance minister and the CBN governor won't be fighting against each other, with the finance minister pursuing inflationary spending policies the CBN governor then has to combat with extreme measures. A credible finance minister will be someone who understands how precarious Nigeria's finances are, and is ready to say "No" even when there are powerful political pressures to hand out freebies to bribe the electorate ( aka "palliatives" ). This individual will need to come up with ways to raise revenues without killing the economy, and to cut spending in a sustainable way. Needless to say, few Nigerian politicians possess the necessary combination of intellect and backbone to do the job well.

3. Whether Tinubu commits to substantial privatization and deregulation. Tinubu needs to show that he is serious about decreasing the cost of governance, and selling-off loss-making parastatals is a great way to do this. Besides the boost to investor confidence this will provide, if the sales are conducted with transparency and openness, the resulting share sales will directly contribute to an inflow of forex.

The root cause of Nigeria's ever-depreciating currency is runaway inflation, which in turn is due to government after government living beyond its means, and trying to bridge the gap borrowing can't cover by simply printing money. The Naira will never appreciate until that basic problem is fixed. If you have two currencies, and currency A has 2% inflation while B has 22% inflation, it's no surprise that B declines by 20% against A - otherwise it would be possible to make risk-free profits by arbitraging any difference.

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

https://www.investopedia.com/terms/c/covered-interest-rate-parity.asp

grandstar:
The Naira has come under a lot of pressure after the CBN unified the exchange rates by floating the currency. Market watchers expected the Naira to eventually strengthen in value but the opposite as happened.

At a point, the new official rate was higher than the black market and BDC rates.

I would like your opinion on this: would payment of remittances in Naira reduce the pressure on the Naira? With a floated Naira, the receiver would receive a market determined rate for his Naira.

This is nothing new. It was the norm until 2020 if my memory serves me well. With about an average of $2bn in remittances flowing in monthly, this should reduce the pressure the Naira. The recipients have no need for the dollars they receive and it is changed into Naira either at a BDC or at the black market

I even preferred the old system where the money flowed directly into my Naira bank account hassle free.

no. it wont...only the supplies of FX can reduce the pressure on the naira...also the government can try to control the demand for dollar through bans of some imported goods or reduce capital flight


Another way is to go the route og the " famous vanguard columnist" Lesleba, who argues tha a simple monthly payment in FX of all government arms corresponding with a strict law against the Use of such FX for transactions purpose withing the territory will greatly ease the pressure on the naira...


for him, government shld only control the supplies of Naira nd allow the arms of government get their monthly allocations in dollars

grandstar:


How will it be the same as printing Naira? It has been done before and it was not inflationary.

The standard practice is actually to pay the recipient in the local currency. The only reason why they reintroduced dollar payments was to encourage dollars to flow into the black market to strengthen the value of the Naira there. Now that the exchange rates have been unified, it no longer makes any sense to continue it

what will a foreigner buy with Naira asides crude?

EconomistXplain:


no. it wont...only the supplies of FX can reduce the pressure on the naira...also the government can try to control the demand for dollar through bans of some imported goods or reduce capital flight


Another way is to go the route og the " famous vanguard columnist" Lesleba, who argues tha a simple monthly payment in FX of all government arms corresponding with a strict law against the Use of such FX for transactions purpose withing the territory will greatly ease the pressure on the naira...


for him, government shld only control the supplies of Naira nd allow the arms of government get their monthly allocations in dollars

I do agree with your first paragraph. The influx of dollars into the black market through payment of remittances failed to improve the value of the Naira. Likewise, paying them in Naira may not.

Lesleba and the late economist, Henry Boyo seemed to be on the same page. Boyo argued that paying the monthly dollar accrued allocations from oil to the 3 tiers of government in Naira leads to an excess money in circulation which excess has to be mopped up using costly bonds. Excess money in circulation is inflationary. That's why the economy is plagued with double digit inflation.

He too proposed paying the allocations in dollars. When these dollars are exchanged into Naira, it would not only strengthen the local currency, but end the excess money in circulation, which would compel the CBN to reduce interest rates as it would subdue inflation.

Due to the present turbulence in the market, I have lost faith that it would help improve the value of the Naira. What I am sure of is that it is capable of bringing down commercial bank lending rates to less than 10% in the short term- within a year.

omohayek:

The 3 things which will determine whether or not the Naira strengthens in the short-to-medium term are

1. Who Tinubu appoints as the next CBN governor. This is by far the most important factor. If Tinubu appoints someone the international financial markets consider credible, someone with both the necessary qualifications and a proven track record, this will give investors confidence that Tinubu is committed to monetary stability. Without that confidence they will be wary of bringing their funds into the country, given Nigeria's long track record of erratic policy-making.

2. Who Tinubu appoints as finance minister. Investors want to see that the finance minister and the CBN governor won't be fighting against each other, with the finance minister pursuing inflationary spending policies the CBN governor then has to combat with extreme measures. A credible finance minister will be someone who understands how precarious Nigeria's finances are, and is ready to say "No" even when there are powerful political pressures to hand out freebies to bribe the electorate (aka "palliatives". This individual will need to come up with ways to raise revenues without killing the economy, and to cut spending in a sustainable way. Needless to say, few Nigerian politicians possess the necessary combination of intellect and backbone to do the job well.

3. Whether Tinubu commits to substantial privatization and deregulation. Tinubu needs to show that he is serious about decreasing the cost of governance, and selling-off loss-making parastatals is a great way to do this. Besides the boost to investor confidence this will provide, if the sales are conducted with transparency and openness, the resulting share sales will directly contribute to an inflow of forex.

The root cause of Nigeria's ever-depreciating currency is runaway inflation, which in turn is due to government after government living beyond its means, and trying to bridge the gap borrowing can't cover by simply printing money. The Naira will never appreciate until that basic problem is fixed. If you have two currencies, and currency A has 2% inflation while B has 22% inflation, it's no surprise that B declines by 20% against A - otherwise it would be possible to make risk-free profits by arbitraging any difference.

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

https://www.investopedia.com/terms/c/covered-interest-rate-parity.asp

Written like an economist.

Your third point is something most Nigerians are ignorant about

That why almost every 4 to 5 years, the Naira enters into turbulence in order to stay competitive.

mrvitalis:

Try that n watch remittances reduce by 80%

Most remittances now come in through the crypto currency channel, easier , faster, and cheaper

The only way to ease pressure is why working with importers provide them credit to manufacture what they import in Nigeria, don't give credit to none importers ooh

Criteria should be evidence of minimum of 7 years importation of that product, technical know how, well established distribution channels that can support the factory via guaranteed customers

But na they don't want to do they maybe simple because the importers are mostly from a region they don't like

Typical thinking of a low budget trader.

If import substitution is to be the alternative, importers and traders should be the least concerned and the last to be consulted.

Nigeria's major problem has been and is still manufacturing and the factors and pillars supporting it, to grow the naira, we take care of needs that can be taken care of by people concerned - the producers, not the middlemen.

Remittance in naira will only bastardize the currency further, having remittances come in in USD will reduce the pressure on naira and give the CBN some respite though I doubt the quoted figure of $2b monthly.

Raheeqilmaktoom:



Typical thinking of a low budget trader.

If import substitution is to be the alternative, importers and traders should be the least concerned and the last to be consulted.

Nigeria's major problem has been and is still manufacturing and the factors and pillars supporting it, to grow the naira, we take care of needs that can be taken care of by people concerned - the producers, not the middlemen.

You think a manufacturer without a distribution network would succeed? When there is an alternative?

You obviously don't own a business it's obvious

omohayek:

The 3 things which will determine whether or not the Naira strengthens in the short-to-medium term are

1. Who Tinubu appoints as the next CBN governor. This is by far the most important factor. If Tinubu appoints someone the international financial markets consider credible, someone with both the necessary qualifications and a proven track record, this will give investors confidence that Tinubu is committed to monetary stability. Without that confidence they will be wary of bringing their funds into the country, given Nigeria's long track record of erratic policy-making.

2. Who Tinubu appoints as finance minister. Investors want to see that the finance minister and the CBN governor won't be fighting against each other, with the finance minister pursuing inflationary spending policies the CBN governor then has to combat with extreme measures. A credible finance minister will be someone who understands how precarious Nigeria's finances are, and is ready to say "No" even when there are powerful political pressures to hand out freebies to bribe the electorate (aka "palliatives". This individual will need to come up with ways to raise revenues without killing the economy, and to cut spending in a sustainable way. Needless to say, few Nigerian politicians possess the necessary combination of intellect and backbone to do the job well.

3. Whether Tinubu commits to substantial privatization and deregulation. Tinubu needs to show that he is serious about decreasing the cost of governance, and selling-off loss-making parastatals is a great way to do this. Besides the boost to investor confidence this will provide, if the sales are conducted with transparency and openness, the resulting share sales will directly contribute to an inflow of forex.

The root cause of Nigeria's ever-depreciating currency is runaway inflation, which in turn is due to government after government living beyond its means, and trying to bridge the gap borrowing can't cover by simply printing money. The Naira will never appreciate until that basic problem is fixed. If you have two currencies, and currency A has 2% inflation while B has 22% inflation, it's no surprise that B declines by 20% against A - otherwise it would be possible to make risk-free profits by arbitraging any difference.

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

https://www.investopedia.com/terms/c/covered-interest-rate-parity.asp

which of these three will change the story bandits levying farmers and.help reduce.production cost to.make export attractive?

mrvitalis:

You think a manufacturer without a distribution network would succeed? When there is an alternative?

You obviously don't own a business it's obvious

To support the naira, we produce what we can - meaning we pay more attention to factors that aid production, not try to make importers/middlemen (who in an ideal world we should be cutting off) the drivers of the economy.

Every 100 level economics student knows this.

Besides, who said manufacturers can't have their own distribution networks? Every major manufacturer does.

Sometimes, remove the tribal cap and put on a thinking one.

Raheeqilmaktoom:



To support the naira, we produce what we can - meaning we pay more attention to factors that aid production, not try to make importers/middlemen (who in an ideal world we should be cutting off) the drivers of the economy.

Every 100 level economics student knows this.

Besides, who said manufacturers can't have their own distribution networks? Every major manufacturer does.

Sometimes, remove the tribal cap and put on a thinking one.

You produce what we can yes, but who produce it matters... You can't destrupt an already established market structure... It would fail

That is probably why most government interventions failed ,

mrvitalis:

You produce what we can yes, but who produce it matters... You can't destrupt an already established market structure... It would fail

That is probably why most government interventions failed ,

And what are you saying?

Middlemen should be made the leaders of a market trying to emerge?

The term middleman in economics isn't a good one, they are short of being called saboteurs.

grandstar:


I do agree with your first paragraph. The influx of dollars into the black market through payment of remittances failed to improve the value of the Naira. Likewise, paying them in Naira may not.

Lesleba and the late economist, Henry Boyo seemed to be on the same page. Boyo argued that paying the monthly dollar accrued allocations from oil to the 3 tiers of government in Naira leads to an excess money in circulation which excess has to be mopped up using costly bonds. Excess money in circulation is inflationary. That's why the economy is plagued with double digit inflation.

He too proposed paying the allocations in dollars. When these dollars are exchanged into Naira, it would not only strengthen the local currency, but end the excess money in circulation, which would compel the CBN to reduce interest rates as it would subdue inflation.

Due to the present turbulence in the market, I have lost faith that it would help improve the value of the Naira. What I am sure of is that it is capable of bringing down commercial bank lending rates to less than 10% in the short term- within a year.

to your last paragraph, i think it is worth trying......Nigerians dont hv much multinationals firms which can bring in flFX cash flows, thereby leaving the FG as almost the lost important route to FX into the country..

bring down demand pull inflation is still an achievement, i still believe the dollor payments for allocation will do the trick

Good thread. Learned something, thanks

Raheeqilmaktoom:


And what are you saying?

Middlemen should be made the leaders of a market trying to emerge?

The term middleman in economics isn't a good one, they are short of being called saboteurs.

Just realized I was talking to a socialist
Sorry

mrvitalis:

Just realized I was talking to a socialist
Sorry

Lol, ok.

Raheeqilmaktoom:
Remittance in naira will only bastardize the currency further, having remittances come in in USD will reduce the pressure on naira and give the CBN some respite though I doubt the quoted figure of $2b monthly.

How will it bastardize the Naira further? It was the standard practice a few years ago and it wasn't inflationary.

grandstar:

I even preferred the old system where the money flowed directly into my Naira bank account hassle free.

Naira isn't printed in publishing houses abroad. CBN controls and does that.

nairalanda1:
Good thread. Learned something, thanks

lol. You should have spotted the folly in the topic if you were not the OP.
Naira isn't spent or printed by any other country and has to originate from Nigeria so makes no sense to be remitted. Some smart bankers and tech guys have programmed interfaces for exchanging naira to foreign currencies seamlessly and when you pay your dollar abroad into their banks with intent to send to Naira domain(Nigeria), they quickly exchange it for you at their own favoured rate. They can then resell the dollar you credited them to importers within Nigeria looking to go out to buy where dollar is accepted. That's why it appears like naira was sent from abroad to you directly.
Some japa Nigerians(remitters) are wiser now. They maintain naira and dollar accounts separately and so avoid sending it through regular banking channels where they get official rate for of about N780 to the dollar(hard earned dollar actually). Instead they sell it on what'sapp group closer to the black market rates of N1000 and get a better deal for their dollar. That's why the black market is getting bigger and bigger, to the point that govt cannot meet up with their needs any longer and have to be crying about black market.