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What exactly Is The Benefit Of Floating The Naira? - Business (3) - Nairaland

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Re: What exactly Is The Benefit Of Floating The Naira? by Abdulhakeem7(m): 8:35am On Feb 14
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!
How many investors or travelers are coming to Nigeria that we have to punish over 200m Nigerians?

4 Likes

Re: What exactly Is The Benefit Of Floating The Naira? by Dynamicboss: 8:36am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go

China is an industrialised and export based economy

Such policy is backfiring in Nigeria because it is an import based economy with almost zero infrastructure and other amenities
Re: What exactly Is The Benefit Of Floating The Naira? by CodeTemplar: 8:36am On Feb 14
Same benefit as exchanging your personal product and service for its actual value.

Unfloated naira meant somebody was always paying out some percentage of the naira anytime you buy forex to augment the value you get forex for. It was a form of subsidy and was a burden to the government even though they wouldn't want to admit that jus to project a better scorecard for economy under them.
Re: What exactly Is The Benefit Of Floating The Naira? by casualobserver: 8:37am On Feb 14
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.

Do you really want to learn or do you want to abuse?

If you want to learn I will give you more than 1.

1. More Naira revenue for all tiers of government. Because the official dollar is sold at a higher level, there is more money for government to do what government is supposed to do..roads, schools etc.
2. Closure of arbitrage and round tripping. Because of the floating of the naira, elites can no longer just get dollars at the official rate and sell to the black market. That money that some of our bankers used to make themselves a fortune now goes to the government
3. Because imported products are now expensive people are forced to consume products with little or no foreign composition. An example is bread people will eat more akara, for breakfast instead of bread which consists of imported wheat, margarine yeast etc. more akara consumption will lead to more profits for the beans farmer in Nigeria not the wheat farmer in Ukraine and Russia.
4. Floating of the Naira means you will get more Naira if you export products. So the cocoa farmer will make more money.

There are many more but there will be pain.

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Re: What exactly Is The Benefit Of Floating The Naira? by pocom16: 8:37am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go

So how many don enter naija to buys stuffs and do vacations

1 Like

Re: What exactly Is The Benefit Of Floating The Naira? by GeneralDae: 8:37am On Feb 14
sammhi:

None
The worst CBN Gov in history...
Destroying our industry and causing hyper inflation all in the name of floating Naira
How can you float something you don't have
Senselessnness
If you don't float, then you must defend with sufficient dollars else your black market widens.

3 Likes 2 Shares

Re: What exactly Is The Benefit Of Floating The Naira? by israelmao(m): 8:38am On Feb 14
Floating the Naira means harmonization of the market parallel with official market in forex and allowing the forces of demand and supply to determine foreign exchange rate.One the benefits is to strengthen Naira but our local currency is still struggling to regain strength since this policy set to sail.Another benefit is to check arbitrary increase in exchange rate but that still persistent because banks are engaging in illegal and unofficial sales of dollar to maximize profit.
Re: What exactly Is The Benefit Of Floating The Naira? by TheOldGods: 8:38am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go
did you hear yourself? China devalue their currency because they produce almost 70% of everything being used in the world today. All phone parts, cars etc, even if they devalue, the demand for their money will still be higher. How can Nigeria devalue when they don't produce and export nothing. Infact due to the devaluation, companies are now leaving the country. Alot of companies has exited the country to go to other countries where the dollar is stable. And you're here capping .

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Re: What exactly Is The Benefit Of Floating The Naira? by airsaylongcome: 8:39am On Feb 14
tommy589:


It is a good step but not enough to tackle naira depreciation. How do we manage the stolen trillions of naira issued as loan by cbn through ways and means of Buhari government

The looters/oppose to Tinubu presidency have cheap naira in their possession and are ready to buy and launder it at any rate.

In simple, non-technical, non-jargon English, what does the bolded mean?
Re: What exactly Is The Benefit Of Floating The Naira? by kiddkash(m): 8:39am On Feb 14
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.

They had wrong thinkings, floating the economy was a wrong move and he can't go back now because he would be mocked.
Before floating a currency, you consider your GDP and your MPS.
Do you know the MPS of Nigeria?
Re: What exactly Is The Benefit Of Floating The Naira? by Blitzking: 8:40am On Feb 14
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!
But it will make my children unable to afford things in my house cos in the first place it wasn't free for my children..so my children might starve to death cos a foreigner has a higher purchasing power..he would also rent all my room and store my food creating artificial scarcity for my children and remember my children are already shortchanged cos the little they had has already lost value. The question is how can I attract foreign investment without making my children suffer...economist in the house over to you we need to solve the riddle.

1 Like

Re: What exactly Is The Benefit Of Floating The Naira? by Inspirer1: 8:40am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go
so with other indices such as insecurity and low purchasing power how will such investments yield, hence leading to closing down of such investments if at all they even bring any.
Re: What exactly Is The Benefit Of Floating The Naira? by alimiadedayo1: 8:40am On Feb 14
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
Don't mind those half baked knowledge and lack of understanding.. wrong misapplication of economics tools is the problem with Nigeria.. What i mean is that, floating of naira but they adopt this policy at the wrong time..
Floating can only work where there are a lot of local manufacturing companies that can meet up our demand otherwise,people will experience hyperinflation and things will get worse. Imagine Tinubu removing subsidy and floating of naira at the same time, is that not act of wickedness?

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Re: What exactly Is The Benefit Of Floating The Naira? by tuzle(m): 8:41am On Feb 14
loffyloffy:


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.



How can devaluation reduce debt burden..when the amount owing is in Dollars..please enloghteen me
they borrow in dollar and not naira. So won't repaying cost more for them. Let say I borrowed $1000 last year when the rate was at $1 for #800, and I am supposed to pay this year. That means I will be paying at the rate of $1 to #1500 which means I have paid more especially if I earn in naira.
Re: What exactly Is The Benefit Of Floating The Naira? by Bridget95(f): 8:41am On Feb 14
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!
what is Nigeria producing if we are to go with your narrative.

The useless policy has made it more expensive to buy goods and services abroad and within the country.

1 Like

Re: What exactly Is The Benefit Of Floating The Naira? by uniquetechng: 8:42am On Feb 14
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
Stop wasting your time replying that boy, he is not aware of the happenings in the country.
Re: What exactly Is The Benefit Of Floating The Naira? by Procashtips(m): 8:42am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go

Only if you're a manufacturing hub and makes alot exporting.

Do we have these qualities?
Re: What exactly Is The Benefit Of Floating The Naira? by epainos: 8:43am On Feb 14
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.

The truth is that the economy was already dead before the policy was implemented. Subsidies keep making it worse and covering up. Someone must pay for it.

If we don't pay for what those people who live from Awolowo, Zik, and Bello's ....OBJ, Jonathan, Yaradua, etc did...and all the 70 years plus have caused Nigeria, our children will pay 10 times more. So, we should suffer it now, face Tinubu and compel whoever is coming on board in 2027 to keep providing solutions.

What everyone wants is a subsidy... who is paying for it later? Our innocent kids. So, let us pay for it. We are innocent too, but it is well.
Re: What exactly Is The Benefit Of Floating The Naira? by gfelo(m): 8:43am On Feb 14
Sound good on paper how then the price sachet water locally produced is on the increase we can all see everything locally produced are so going high, we all know salary and wages remain the same

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!

1 Like

Re: What exactly Is The Benefit Of Floating The Naira? by tuzle(m): 8:44am On Feb 14
Anguldi:
We've got a huge population but not productive. Industrialization is the way forward
the country itself doesn't help small industries. Imagine wanting to start a small industry and u have to depend on diesel or fuel to run ur business and many more factors that doesn't help.
Re: What exactly Is The Benefit Of Floating The Naira? by Judolisco(m): 8:44am On Feb 14
Instead of people to learn... They'll come here and be shouting tinubu.... U don't know where you'll meet yourself in d future... Better learn
Re: What exactly Is The Benefit Of Floating The Naira? by ValarDoharis: 8:44am On Feb 14
How did the PDP did it for 16yrs? Remember the military left nothing
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.

1 Like

Re: What exactly Is The Benefit Of Floating The Naira? by lexy2014: 8:44am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go

Which people and investment does floating the naira?

What type of people are you talking about here?

How many people and investments has floating of the naira brought to Nigeria?
Re: What exactly Is The Benefit Of Floating The Naira? by Blaze14k: 8:44am On Feb 14
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.

Nigeria is a consumer nation. Our export is way lower than our import. The dollar will keep rising and things will get more expensive
Re: What exactly Is The Benefit Of Floating The Naira? by VeeVeeMyLuv(m): 8:46am On Feb 14
Abdulhakeem7:
How many investors or travelers are coming to Nigeria that we have to punish over 200m Nigerians?
I wonder o

Help me ask am
Re: What exactly Is The Benefit Of Floating The Naira? by ValarDoharis: 8:46am On Feb 14
Yet, these things are still not in place because of ineptitude and insecurity
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!
Re: What exactly Is The Benefit Of Floating The Naira? by uniquetechng: 8:47am On Feb 14
blacknp:
You even dey try to even convince these nomadic minded things, let them be waiting for government to keep giving them a subsidized existence.

Nothing them they export for foreign exchange, 220 million sambos are waiting from 1.4 million barrels per day crude oil receipts, they no get shame, Oblivious minded Things waiting for the CBN to do magic.

Una go wait tire.
Nigerians are one of the least subsidized people in the world so stop making it look like subsidizing the citizens with tax-payers money is a bad practice.

Do you know how much each senator earns monthly in Nigeria doing nothing ?

Our politicians earns far higher than their counterparts for say US yet offers nothing in terms of civil services to the nation other than enriching themselves and their unborn generations.
Re: What exactly Is The Benefit Of Floating The Naira? by GeneralDae: 8:48am On Feb 14
airsaylongcome:


In simple, non-technical, non-jargon English, what does the bolded mean?
Ways and Means is debt issued to the federal Government by the CBN. The CBN is the bank of the FG but worldwide (including in Nigeria), the Central Banks are only allowed to give a certain percentage to the FG. CBN has access to unlimited naira because they can print it but if you keep printing for the Government there becomes too much naira in the economy not tied down to equal amount of goods and services.

When that happens, you have too much of the currency in the economy not tied down to anything that brings returns for economic growth, so the currency loses value and there is inflation.

America prints more than any other country but because the currency is sought after worldwide, they make up for it.
So Emiefele printed excess naira into the economy like many other nations in the World in 2020, 2021, and 2022 but it was careless and just too much.

Today, there is 78 trillion naira money excess supply that can chase few dollars. This means people (usually politicians and the elites) have enough naira to buy dollars.

1 Like

Re: What exactly Is The Benefit Of Floating The Naira? by ogawisdom(m): 8:48am On Feb 14
Terrible decision that we must protest for it to be reversed before it is too late
Re: What exactly Is The Benefit Of Floating The Naira? by Obviouslyblunt: 8:49am On Feb 14
PoliteActivist:
*Politeness*
It will bring in people and investments.
Don't you see US always accusing China of intentionally devaluing their currency?
Example, if Togo devalues their currency you'd be going there to buy stuff and vacations, but if they inflate their currency you won't go
not when the country isn’t stable for investment . This will only make people buy at lower prices in Nigeria and ship out or hoard the item till it increases in price.
Re: What exactly Is The Benefit Of Floating The Naira? by ValarDoharis: 8:49am On Feb 14
APC and voodoo economics. PDP was running low exchange rate but still had the 3rd fastest growing economy in the world!
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.



Re: What exactly Is The Benefit Of Floating The Naira? by franchasofficia: 8:50am On Feb 14
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!
This only works in a business friendly and investment welcoming environment like China where there is:

98% security guarantee
100% electricity supply
150% cheap competent labor supply
85% foreign investment friendly policies in terms of tax and other deductibles.



It is useless in Nigeria where there is:

0% security of lives & properties

Unfriendly business environment that rips off investors via government agencies and officials corruption and corrupt practices

1% electricity supply

<25% competent labor supply

>150% national corruption that rips off investors via corrupt staffs and management

Difficulty in accessing FOREX to repatriat your earned profit back to your country

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