MeineMutter:


It is an automated transaction. That debit of Naira is converted to an equivalence of whatever currency is agreed at the moment the payment is made.

It’s only values (numbers) we are just spending, not real paper.

As conversion is made, your Naira balance decreases after considering current exchange rate used at that moment and the Dollar (or whatever currency) account of the merchant increases (credited) in value of his or her currency you agreed when making the contract of sales.

For example, if an American buys something online from European seller (merchant) and uses his card, an American is debited the equivalence of Euro at that moment he was making payment, using official rate, then an European merchant is credited with Euro value of the sales. It’s as simple as that.
The same thing will be applicable to someone buying in Naira.

We were using our cards for international payments online before in Nigeria until FG blocked it because Nigerians were using the opportunity to move stolen money abroad.

At that period, there was No pressure on Naira at all because you can easily buy with your Naira card. More so, we were importing less then, our refineries were working.

I witness an era when N0.34kobo was equivalent to $1.

That's not the way the system works. Firstly, the reason naira cards were suspended from consummating fx denominated transactions was not due to fraud or moving stolen money (not sure where you got that information btw) but because nigerian banks were unable to settle their foreign counterparts.
What happens when you use a naira card to buy an item on aliexpress for instance, is that you will be debited the naira equivalent of the item amount and the merchant's bank will credit the merchant the item amount after a couple of days or hours depending on the platform but your bank will have to source for fx and pay the merchant's bank to refund what the merchant's bank credited to the merchant. It got to a point that nigerian banks were unable to pay their fx obligations as cbn was not releasing fx (due to shortage). This is the reason why naira cards were banned. Dollar cards are allowed due to the fact that the bank does not need to source for the fx, the customer already has the fx before the card can work.
Hope you understand the way it works now and why your solution isn't tenable.

franugo:


That's not the way the system works. Firstly, the reason naira cards were suspended from consummating fx denominated transactions was not due to fraud or moving stolen money (not sure where you got that information btw) but because nigerian banks were unable to settle their foreign counterparts.
What happens when you use a naira card to buy an item on aliexpress for instance, is that you will be debited the naira equivalent of the item amount and the merchant's bank will credit the merchant the item amount after a couple of days or hours depending on the platform but your bank will have to source for fx and pay the merchant's bank to refund what the merchant's bank credited to the merchant. It got to a point that nigerian banks were unable to pay their fx obligations as cbn was not releasing fx (due to shortage). This is the reason why naira cards were banned. Dollar cards are allowed due to the fact that the bank does not need to source for the fx, the customer already has the fx before the card can work.
Hope you understand the way it works now and why your solution isn't tenable.

Your assertion means our banks must be moving plane ✈️ loads of foreign currencies to foreign lands after a Nigerian buys anything from abroad.

It doesn’t work like that. I worked at CBN in 2001/2002 and I know a few of it.

You can find out more,
The major foreign currencies they move to Nigeria is those real used from oil sales.
If you sell anything to anybody abroad, the only reason you are able to withdraw foreign currency is because our government allows domiciliary account. So when you get value in your dom account, you draw cash over the counter. If our government doesn’t allow don account, you get Naira value on your Nigerian bank account and draw Naira over the counter.

The only store of value is gold or other precious metals. It’s because we don’t have enough gold in store (reserve) that we can sell when we have commitment to pay abroad, that’s why their is less reliance or less believe that we have what it takes to meet our future commitments.
This adds to why Naira is not valuable.
Check all those powerful countries. They don’t move currencies across Europe and the US in commercial quantities the way we do on Nigeria because they don’t spend it there.
They are only debited and credited for values.
Other things that caused us to have worthless Naira is we don’t export, we import too much.

MeineMutter:


Your assertion means our banks must be moving plane ✈️ loads of foreign currencies to foreign lands after a Nigerian buys anything from abroad.

It doesn’t work like that. I worked at CBN in 2001/2002 and I know a few of it.

You can find out more,
The major foreign currencies they move to Nigeria is those real used from oil sales.
If you sell anything to anybody abroad, the only reason you are able to withdraw foreign currency is because our government allows domiciliary account. So when you get value in your dom account, you draw cash over the counter. If our government doesn’t allow don account, you get Naira value on your Nigerian bank account and draw Naira over the counter.

The only store of value is gold or other precious metals. It’s because we don’t have enough gold in store (reserve) that we can sell when we have commitment to pay abroad, that’s why their is less reliance or less believe that we have what it takes to meet our future commitments.
This adds to why Naira is not valuable.
Check all those powerful countries. They don’t move currencies across Europe and the US in commercial quantities the way we do on Nigeria because they don’t spend it there.
They are only debited and credited for values.
Other things that caused us to have worthless Naira is we don’t export, we import too much.

I never said we move physical fx, i simply said nigerian banks have to settle their foreign counterparts. There's a window for interbank settlement, both local and foreign. You say you worked in cbn in 2001, I work in a bank presently.
Even local naira transfers work pretty much in the same way. When a gtb customer sends money to a zenith customer, gtb credits interbank which prompts zenith to credit their customer even when they might not have gotten value. Interbank then settles zenith bank .i.e like a refund. The system is automated so of course it seems instantaneous and all that. A similar thing plays out when you use a card online, merchant is credited before the cardholder's and merchant's bank then settle themselves. No foreign bank will accept naira cause they aren't using it for anything. What we need is a currency swap deal, maybe with china cause we definitely don't have the might to swap with usd. The deal, if successful, will allow us make payment for yuan denominated goods in naira instead of the current system where you have to pay in dollars and then the system converts the dollar to yuan. So the pressure on usd from people importing from China or buying items on chinese websites will dissipate and free up more usd for other uses. Funny thing is there's actually a yuan - naira trade deal in place but for some reason it isn't active

Yampotatocarrot:
I don't even understand what the news mean... I guess the circular was not meant for common men like me

Abeg, those that it was meant for, who supposedly understand it, is it a good policy or not? What does it even mean (in layman's terms)?

It's actually meant for the banks and not common man like you and me. It still affects you and I anyway. I'll try to simplify it for you .

Banks are supposed to hold USD for their business and the CBN permits then to do so. However there's a limit they're suppose to hold for business purposes. What banks have done is holding more dollars than necessary and they use the USD to trade so that as it rises, they'll make more money. That's speculative and can have disastrous effect so the CBN is just telling them to follow the books instead of them to be holding USD and speculating. Because of this the banks will always want the NGN to fall and then they make more money. Now they will buy just what they need and not hold excess USD. I'm bad at writing and so hopes this helps you.

skj1377:
What this central bank Governor is doing is crashing the currency. He had better stop this Naira floating policy and be more realistic.

Explain how this policy crashes the economy? Do you understand the policy or you just want to comment?

ellizy:
Another trial and error
If this administration is feeling too big to learn from Elemiewele, they should at least meet with Sanusi Lamido…
It’s not rocket science…

Part of the problem is not properly regulating the banks. It's not a trial and error. They just want the banks to follow the books.

Neoteny7:

The Central Bank of Nigeria (CBN) on Wednesday said the Net Open Position (NOP) limit of banks’ overall foreign currency assets and liabilities both on and off-balance sheet should not exceed 20 percent short or 0 percent long of shareholders’ funds unimpaired by losses using the gross aggregate method.


What the fukk does this hump of weasel words mean?

Nigerian journalists write like they expect their readers to be ChatGPT.

Same when they're reporting legal cases:

"The court finds ultra vires that the defendant garnishee'd the plaintiff's omnibus sanctis and in vino veritas in the penultimate judicial rascality, which the prosecution witness alleged was hoc est corpus meum ad nauseum which the honorable judge decided ex parte was ultra judice exetera from the originating summon under appeal hitherto"

I agree with you. Many of the reports are not clear and the journalists are not helping matters. That's why many nairalanders are also confused whether the policy makes sense or not. I have explained the policy above.

studyless123:


It's actually meant for the banks and not common man like you and me. It still affects you and I anyway. I'll try to simplify it for you .

Banks are supposed to hold USD for their business and the CBN permits then to do so. However there's a limit they're suppose to hold for business purposes. What banks have done is holding more dollars than necessary and they use the USD to trade so that as it rises, they'll make more money. That's speculative and can have disastrous effect so the CBN is just telling them to follow the books instead of them to be holding USD and speculating. Because of this the banks will always want the NGN to fall and then they make more money. Now they will buy just what they need and not hold excess USD. I'm bad at writing and so hopes this helps you.

Thanks for simplifying... You're not bad at writing at all... I understand it now... Thanks again

studyless123:


Explain how this policy crashes the economy? Do you understand the policy or you just want to comment?

Let me explain. Besides your experiencing it. Between N336 to $ in 2021 and N1550 to $ in 2023 a space of 1yr plus our population did not double neither did our manufacturing capacity reduce by half. So the question is why the sudden uncontrollable crash. Let me give you a hint. Wealthy Nigerians have a penchant to convert Naira to dollars and store in foreign economy that alone is bad for our economy. Can't type much am tired! Finally the principle of floating a currency is fundamentally wrong for a country like Nigeria. The United states may float their currency but have checks and balances one of it is law against unverified inflow from other countries . They simply will not allow you to bring unknown money and invest in a " house purchase" for example besides their wealthy citizens don't have a penchant to save their currency in EURO or GBP even when those currencies are stronger against the Dollar.

https://www.premiumtimesng.com/news/more-news/653038-reps-move-to-revive-yuan-naira-swap-deal.html

@meinemutter, for your reading pleasure.

Truth is when the naira becomes useful to other countries ( when Chinese importers for instance need naira to import goods from Nigeria), the countries will be the ones proposing a currency trade deal. Fact remains that for now, no top country is willing to exchange their currency with the naira.

franugo:
https://www.premiumtimesng.com/news/more-news/653038-reps-move-to-revive-yuan-naira-swap-deal.html

@meinemutter, for your reading pleasure.

Truth is when the naira becomes useful to other countries ( when Chinese importers for instance need naira to import goods from Nigeria), the countries will be the ones proposing a currency trade deal. Fact remains that for now, no top country is willing to exchange their currency with the naira.

Thanks so much, bro. Will read through it and digest. We learn, by co-sharing.

skj1377:

Let me explain. Besides your experiencing it. Between N336 to $ in 2021 and N1550 to $ in 2023 a space of 1yr plus our population did not double neither did our manufacturing capacity reduce by half. So the question is why the sudden uncontrollable crash. Let me give you a hint. Wealthy Nigerians have a penchant to convert Naira to dollars and store in foreign economy that alone is bad for our economy. Can't type much am tired! Finally the principle of floating a currency is fundamentally wrong for a country like Nigeria. The United states may float their currency but have checks and balances one of it is law against unverified inflow from other countries . They simply will not allow you to bring unknown money and invest in a " house purchase" for example besides their wealthy citizens don't have a penchant to save their currency in EURO or GBP even when those currencies are stronger against the Dollar.

Floating the naira was never a good long term plan, it can only give you very short term gain but apparently cbn and fg prefer the short term gain to actually implementing a long term solution