DeLaRue:
During Buhari's government, Nigeria, through the CBN, was spending according to some estimates, more than $12billion per year to maintain 2 exchange rates N440, and I think N570 to a dollar.

That $12 billion dollars was effectively a subsidy.

By the time Buhari left, Nigeria had just about $3.5 billion in its account. It is from that amount that we have to pay our debts and pay for imports of goods.

As you can see, Nigeria no longer had the $12 billion dollars required to keep naira/dollar rate at less than N600. So the current government had no choice but to give up on trying to subsidise the naira.

If Atiku or any other candidate had won, they would have had no choice than to follow the same path.

It is like buying a BMW when you had money. If you no longer have money to maintain it, what do you do, you give it up. No be so?

Your friends and neighbours who see you taking Okada will call you stupid for giving up such a beautiful car. But, younno longer have know what they don't know - you no longer have the money to maintain the car.

This is exactly where Nigeria is at present.

Validated:

So, investors are now flooding SW?
Tinubu is a Buffonish President

Maxxim:

So this is an artificial condition, if the government did this on purpose why reassuring the masses on empty promises.
The irony is that this country won't be able to sustain this development cos we adopt American lifestyle which is the consumers type.
This is just like treating malaria with chemotherapy treatment

Genius100:


Look at what happened in the last few years when for example, official rate was N450 and parallel rate was N800. Nigeria essentially restricted the people that could get the dollar at N450. What that means is that there is a thriving black market where the rates are much higher. First, International airlines that sold tickets in Naira and wanted to convert their money to Dollars to take it back to their country could not do so because CBN did not have enough dollars to give them. Nigeria became the number 1 country where airlines had their money stuck. So this puts the country in a situation where foreign entities would not want to invest in the country.

Now think about Diasporan remittances which is supposed to be over $20 billion a year. This money will never come through the official changes because no one will change dollars for N450 when parallel rate is N800. So consequently, the CBN reserves became very low. With low forex reserves, the Country was in a position where we almost could not pay our foreign debt back which constitutes is a death sentence to the economy, if we default.

Also, the Diasporan remittances never made it into the country. It was being held by certain Fintech and their partner banks in Nigeria. They hoarded it which made dollars more scarce and led to Naira continuing to lose value. They were seeing crazy gains while the rest of the country suffered.

Compare that to when you float. The official rates and parallel rates are largely harmonized. Now Diasporans can send money through officially licensed IMTOs. These IMTOs will give the CBN a certain percentage of the dollars- let's say 50% - That amounts to about $10 billion.

Second, the people that were speculating and hoarding millions of dollars for gains, now can no longer make arbitrage money because there is no longer substantial difference in rates between official and parallel. Those dollars can now go to productive activity. Last, foreign companies now know they can get their money in and out of the country which will spur investments.

Ultimately, floating allows CBN to grow its reserves, which allows Nigeria to service debts and also procure additional low interest debt that can be used for the desperately needed capital investments in the country.

PoliteActivist:

*Politeness*
See my post above. Actually the government just said, let's stop wasting resources trying to artificially hold up naira (with the attendant round-tripping, corruption, black market, hoarding, and speculation) and just let the market decide it's value with everything transparent.
No way it can be a bad thing in the long run.

Gadafii:
mention any local manufacturer that are likely to replace these foreign ones, are you aware of how many local companies have folded the past one year,??!

If this is the case, why is dangote cemetery expensive since the source raw material locally??


Why is tomorrows and onions fucking expensive since they are produced locally

Jessyjeff:
Please, just say APC mismanaged the Naira by over borrowing and floating of the currency.

When Obasanjo took over in 1999, Nigeria had around 3 billion dollars in foreign reserve. Nigeria was still then heavily dependent on importation; he didn't float Naira, and he didn't stop subsidy on petrol, diesel and Kerosene.

Yet, Nigeria's inflation rate was under 15% and food was affordable too. He assembled able hands who were able to grow the economy and pay Nigeria's debts or negotiate some debt forgiveness.

Why did everything about Nigeria's economy start deteriorating rapidly immediately APC took over government in 2015? APC has no clue about economic management, especially on federal level.

malali:
Cheaper Exports: When the Naira is devalued, it becomes less valuable compared to other currencies. This makes Nigerian products cheaper for people in other countries. Think of it like selling your cool toy cars to friends abroad at a lower price. More exports mean more money flowing into Nigeria!

Expensive Imports: On the flip side, devaluation makes foreign toys (imports) more expensive for you. Imagine your favorite video games suddenly costing more because they’re imported. This encourages people to buy local toys instead.

Boosting Local Industries: When local toys (goods and services) become cheaper for foreigners, it helps Nigerian businesses grow. They can sell more, hire more people, and contribute to the economy.

Tourism Advantage: Devaluation makes Nigeria an attractive travel destination. Foreign tourists find it cheaper to visit, explore, and spend money here. Imagine more tourists enjoying Nigerian culture, food, and music!

Investment Inflow: Investors like to put their money where it grows. Devaluation encourages foreign investors to set up factories, offices, and businesses in Nigeria. This creates jobs and stimulates economic growth.

Balance of Payments: Devaluation can improve Nigeria’s balance of payments. It’s like keeping track of how much money comes in (exports, investments) versus how much goes out (imports, debt payments). A positive balance is good!

Inflation: Devaluation can lead to higher prices for everyday items (inflation). Imagine your pocket money buying fewer candies because prices went up. But controlled inflation can be healthy for the economy.

Reducing Debt Burden: Nigeria owes money to other countries (national debt). Devaluation makes it easier to repay those loans because the Naira is worth less. It’s like paying back a smaller amount.

Competitiveness: Devaluation makes Nigerian businesses compete better globally. Just like you try to win in video game tournaments, our economy competes with other countries. A cheaper Naira gives us an edge!

Learning Opportunity: Finally, understanding devaluation teaches us about economics. It’s like leveling up in your favorite game. By knowing how money works, we can make smarter decisions for Nigeria’s future!

hansomb:
this is one reason for food scarcity, because Nigeria now prefer to export to neighboring countries

kokoA:
In Nigeria locally produced items are more expensive than imported ones.

PoliteActivist:

*Politeness*
I modified my post. See above. It is not economic jargon, it is common sense. If my money can buy more in your house, I'd like your house and buy stuff from your house... until I realize I'm giving you all my money!

GeneralDae:

To make matters worse, they export to countries buying it with CFA not even dollars, euros, or pounds.

Genius100:


Look at what happened in the last few years when for example, official rate was N450 and parallel rate was N800. Nigeria essentially restricted the people that could get the dollar at N450. What that means is that there is a thriving black market where the rates are much higher. First, International airlines that sold tickets in Naira and wanted to convert their money to Dollars to take it back to their country could not do so because CBN did not have enough dollars to give them. Nigeria became the number 1 country where airlines had their money stuck. So this puts the country in a situation where foreign entities would not want to invest in the country.

Now think about Diasporan remittances which is supposed to be over $20 billion a year. This money will never come through the official changes because no one will change dollars for N450 when parallel rate is N800. So consequently, the CBN reserves became very low. With low forex reserves, the Country was in a position where we almost could not pay our foreign debt back which constitutes is a death sentence to the economy, if we default.

Also, the Diasporan remittances never made it into the country. It was being held by certain Fintech and their partner banks in Nigeria. They hoarded it which made dollars more scarce and led to Naira continuing to lose value. They were seeing crazy gains while the rest of the country suffered.

Compare that to when you float. The official rates and parallel rates are largely harmonized. Now Diasporans can send money through officially licensed IMTOs. These IMTOs will give the CBN a certain percentage of the dollars- let's say 50% - That amounts to about $10 billion.

Second, the people that were speculating and hoarding millions of dollars for gains, now can no longer make arbitrage money because there is no longer substantial difference in rates between official and parallel. Those dollars can now go to productive activity. Last, foreign companies now know they can get their money in and out of the country which will spur investments.

Ultimately, floating allows CBN to grow its reserves, which allows Nigeria to service debts and also procure additional low interest debt that can be used for the desperately needed capital investments in the country.

Belial06:


This is a very inane childish way of looking at it. In that case why isn't everyone rushing to Venezuela?

If you don't understand something don't comment

hansomb:
The Honest Truth is all those theories if implemented will work. But has anything ever work in Nigeria? Truth is we have our dubious way/systems of doing things upside down hence the system even if it good doesn't turn out well. Corruption, nepotism, dishonesty has replaced the normal way of doing things to the extent that anyone that tries to do the right thing is seen as abnormal.

Genius100:


Look at what happened in the last few years when for example, official rate was N450 and parallel rate was N800. Nigeria essentially restricted the people that could get the dollar at N450. What that means is that there is a thriving black market where the rates are much higher. First, International airlines that sold tickets in Naira and wanted to convert So this puts the country in a situation where foreign entities would not want to invest in the country.

PoliteActivist:

*Politeness*
See my post above. Actually the government just said, let's stop wasting resources trying to artificially hold up naira (with the attendant round-tripping, corruption, black market, hoarding, and speculation) and just let the market decide it's value with everything transparent.
No way it can be a bad thing in the long run.

GeneralDae:

Obasanjo floated naira. When Abacha died, parallel market was almost 90 naira while he kept official rate at 22 naira (x4 less). Obasanjo floated naira in order to get debt forgiveness amongst other things. So naira went from 22 to 90 and he left it at 150.

Validated:

So, investors are now flooding SW?
Tinubu is a Buffonish President

Jessyjeff:
Olusegun Obasanjo never floated Naira, he did some devaluation of Naira. During his administration the CBN was still defending Naira to a large extent.

Floating a currency means abandoning any form of control mechanism, while currency devaluation means allowing your currency lose some percentage points to other major currencies. Every other administrations in Nigeria since independence has never floated the Naira, except Tinubu's.

ckc:
Based on the catastrophe this floating of naira of a thing by Tinubu is causing to the economy, can anyone please educate me on the ONE benefit of this policy. I want to learn.

Kenneth4u205:
It will reduce the price of cocaine which is the most important commodity to our drug lord