Biafran4life:
Did you sell below you cost price for you to now buy below your initial quantity.If so you need to improve your communication gap btw you and your supplies

If you bought a machine at 50k per piece and you had 10 ,and sell at 60k then due to to the naira fall ,cost of said machines is now 70k to sell at 80k(with much negotiation with Customers) with your capital stock you can only buy 7

Before ,on a turnover of 500k,you had 100k profit,now you have only 70,so business income has dropped 30%....just buying and selling in the naira...while other business costs have moved higher

SeaTrade:
Oga, the business don't need to hedge any hedge,
All he need to do is to have stock,
Only foolish business people who like to keep cash will lose purchasing power.
All the serious businessmen and women actually gained from this whole inflation issue.
All they need to do is to change prices of their old goods to catch up with inflation.

You are 100% right. Its mostly fixed income earners like salary earners that inflation affect the most.

The CBN can try and patch up the Naira as best as it can but the real problem is far deeper than the CBN can handle alone.

The ultimate problem is trade deficit and CBN can't change that overnight.

Here below is how Investopedia describe the link between trade deficit(Balance of trade) and exchange rate:

The balance of trade influences currency exchange rates through its effect on the supply and demand for foreign exchange. When a country's trade account does not net to zero—that is, when exports are not equal to imports—there is relatively more supply or demand for a country's currency, which influences the price of that currency on the world market

Currency exchange rates are quoted as relative values; the price of one currency is described in terms of another. For example, one U.S. dollar might be equal to 11 South African rand. In other words, an American business or person exchanging dollars for rand would buy 11 rand for every dollar sold, and a South African would buy $1 for every 11 rand sold.

Currency Influences
These relative values are influenced by the demand for currency, which is in turn influenced by trade. If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.

For example, let's say that candy bars are the only product on the market and South Africa imports more candy bars from the U.S. than it exports, so it needs to buy more dollars relative to rand sold. South Africa's demand for dollars outstrips America's demand for rand, meaning that the value of the rand falls. In this situation, we'll surmise that the rand might fall to 15 relative to the dollar. Now, for every $1 sold, an American gets 15 rand. To buy $1, a South African has to sell 15 rand.

Trade Balance
The relative attractiveness of exports from that country also grows as a currency depreciates. For instance, assume an American candy bar costs $1. Before their currency depreciated, a South African could buy an American candy bar for 11 rand. Afterward, the same candy bar costs 15 rand, a huge price increase. On the other hand, a South African candy bar costing 5 rand has become much cheaper by comparison: $1 now buys three South African candy bars instead of two.

South Africans might start buying fewer dollars because American candy bars have become quite expensive, and Americans might start buying more rand because South African candy bars are now cheaper. This, in turn, begins to affect the balance of trade. South Africa would then start exporting more and importing less, reducing the trade deficit.

Export more goods and services than we import, any other solution that doesn't improve trade deficit is just cosmetics and temporary. U can't reap where u didn't sow.

Mean while we wait Dangote refinery and the other modular refineries.

donguutti:


If you bought a machine at 50k per piece and you had 10 ,and sell at 60k then due to to the naira fall ,cost of said machines is now 70k to sell at 80k(with much negotiation with Customers) with your capital stock you can only buy 7

Before ,on a turnover of 500k,you had 100k profit,now you have only 70,so business income has dropped 30%....just buying and selling in the naira...while other business costs have moved higher

Don't mind them.
Let them keep feigning ignorance as if they don't know that Naira devaluation will have adverse effects on all Naira assets.

Meanwhile exchange rate is currently @#562 per USD

ositadima1:
The CBN can try and patch up the Naira as best as it can but the real problem is far deeper than the CBN can handle alone.

The ultimate problem is trade deficit and CBN can't change that overnight.

Here below is how Investopedia describe the link between trade deficit(Balance of trade) and exchange rate:

The balance of trade influences currency exchange rates through its effect on the supply and demand for foreign exchange. When a country's trade account does not net to zero—that is, when exports are not equal to imports—there is relatively more supply or demand for a country's currency, which influences the price of that currency on the world market

Currency exchange rates are quoted as relative values; the price of one currency is described in terms of another. For example, one U.S. dollar might be equal to 11 South African rand. In other words, an American business or person exchanging dollars for rand would buy 11 rand for every dollar sold, and a South African would buy $1 for every 11 rand sold.

Currency Influences
These relative values are influenced by the demand for currency, which is in turn influenced by trade. If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.

For example, let's say that candy bars are the only product on the market and South Africa imports more candy bars from the U.S. than it exports, so it needs to buy more dollars relative to rand sold. South Africa's demand for dollars outstrips America's demand for rand, meaning that the value of the rand falls. In this situation, we'll surmise that the rand might fall to 15 relative to the dollar. Now, for every $1 sold, an American gets 15 rand. To buy $1, a South African has to sell 15 rand.

Trade Balance
The relative attractiveness of exports from that country also grows as a currency depreciates. For instance, assume an American candy bar costs $1. Before their currency depreciated, a South African could buy an American candy bar for 11 rand. Afterward, the same candy bar costs 15 rand, a huge price increase. On the other hand, a South African candy bar costing 5 rand has become much cheaper by comparison: $1 now buys three South African candy bars instead of two.

South Africans might start buying fewer dollars because American candy bars have become quite expensive, and Americans might start buying more rand because South African candy bars are now cheaper. This, in turn, begins to affect the balance of trade. South Africa would then start exporting more and importing less, reducing the trade deficit.

Please share the link to this, thank you

edoman2016:
You are 100% right. Its mostly fixed income earners like salary earners that inflation affect the most.

Does a trader solely depend on his products to live a satisfied life? If you sell spare parts and make some profit due to naira depreciation, you might choose to eat some isiewu during the weekend, but your regularly isiewu has been increased by 2k because iya uche also need to pay her increased house rent, so you will have to pay more to get your heart desires for both locals and foreign goods and at the end your so called gains will be devoured by inflation.

Inflation affect everyone, either you patronise local or foreign products, just that it affect people with foreign taste more

emmanuelewumi:



Please share the link to this, thank you

https://www.investopedia.
com/ask/answers/041515/how-does-balance-trade-impact-currency-exchange-rates.asp

Foodempire:


Does a trader solely depend on his products to live a satisfied life? If you sell spare parts and make some profit due to naira depreciation, you might choose to eat some isiewu during the weekend, but your regularly isiewu has been increased by 2k because iya uche also need to pay her increased house rent, so you will have to pay more to get your heart desires for both locals and foreign goods and at the end your so called gains will be devoured by inflation.

Inflation affect everyone, either you patronise local or foreign products, just that it affect people with foreign taste more

But the trader is also selling goods he bought for 60k to sell at 70k at now 110k..
So he has enough money to pay for 2k extra isiewu without flinching

ositadima1:


https://www.investopedia.
com/ask/answers/041515/how-does-balance-trade-impact-currency-exchange-rates.asp

Thank you

FACT CHECK

September 15th 1980
$1000 exchanged for N550
September 15th 2021
$1 exchanged for N562

Meanwhile External debt is at all time high of $45B courtesy of Buhariecomics and some think there is hope for this contraption called Nigeria

STNWAUME:
FACT CHECK

September 15th 1980
$1000 exchanged for N550
September 15th 2021
$1 exchanged for N562

Look at this more broadly, the dollar you are comparing the naira to is on a different category.

Have you compared the massive development by the USA since 1980 to Nigeria?

USA has spearheaded development in virtually all aspects of the modern world - Medicare, Technology, Education, Manufacturing, etc. Do you know howmanay patents they have recorded since 1980? Only revenue from windows has covered our oil exports. What has Nigeria contributed to the world since that 1980?

How do u expect naira to be at par with d dollar when our countrypeople have been sitting on there bottoms while d world was making waves?

Again, Investopedia explain why a fixed exchange rate is a burden on the CBN when there is excess dollar demand, read below:

Fixed Rates
A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate. A set price will be determined against a major world currency (usually the U.S. dollar, but also other major currencies such as the euro, the yen, or a basket of currencies). In order to maintain the local exchange rate, the central bank buys and sells its own currency on the foreign exchange market in return for the currency to which it is pegged.

If, for example, it is determined that the value of a single unit of local currency is equal to US$3, the central bank will have to ensure that it can supply the market with those dollars. In order to maintain the rate, the central bank must keep a high level of foreign reserves. This is a reserved amount of foreign currency held by the central bank that it can use to release (or absorb) extra funds into (or out of) the market. This ensures an appropriate money supply, appropriate fluctuations in the market (inflation/deflation) and ultimately, the exchange rate.

Since the amount of foreign reserves available to defend the Naira (a currency in low demand) is limited, a currency crisis or devaluation is the end result.

Why a depleting foreign reserve is bad?

Foreign reserves serve the following functions as culled from Wikipedia:

Typically, one of the critical functions of a country’s central bank is reserve management, to ensure that the central bank has control over adequate foreign assets to meet national objectives. These objectives may include:

*supporting and maintaining confidence in the national monetary and exchange rate management policies,

*limiting external vulnerability to shocks during times of crisis or when access to borrowing is curtailed, and in doing so -

A) providing a level of confidence to markets,
B) demonstrating backing for the domestic currency,
C) assisting the government to meet its foreign exchange needs and external debt obligations, and
D) maintaining a reserve for potential national disasters or emergencies.

Another signature to borrow $4 billion has just been requested, the situation in Lebanon is most likely, these politicians have all stacked Forex and have unlimited access to Naira earnings so they don't mind whatever happens to the commoners.

Read below ;

PresidentBuhari:
Another signature to borrow $4 billion has just been requested, the situation in Lebanon is most likely, these politicians have all stacked Forex and have unlimited access to Naira earnings so they don't mind whatever happens to the commoners.

Read below ;

what’s the situation in Lebanon at the moment?

ositadima1:
The CBN can try and patch up the Naira as best as it can but the real problem is far deeper than the CBN can handle alone.

The ultimate problem is trade deficit and CBN can't change that overnight.

Here below is how Investopedia describe the link between trade deficit(Balance of trade) and exchange rate:

The balance of trade influences currency exchange rates through its effect on the supply and demand for foreign exchange. When a country's trade account does not net to zero—that is, when exports are not equal to imports—there is relatively more supply or demand for a country's currency, which influences the price of that currency on the world market

Currency exchange rates are quoted as relative values; the price of one currency is described in terms of another. For example, one U.S. dollar might be equal to 11 South African rand. In other words, an American business or person exchanging dollars for rand would buy 11 rand for every dollar sold, and a South African would buy $1 for every 11 rand sold.

Currency Influences
These relative values are influenced by the demand for currency, which is in turn influenced by trade. If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.

For example, let's say that candy bars are the only product on the market and South Africa imports more candy bars from the U.S. than it exports, so it needs to buy more dollars relative to rand sold. South Africa's demand for dollars outstrips America's demand for rand, meaning that the value of the rand falls. In this situation, we'll surmise that the rand might fall to 15 relative to the dollar. Now, for every $1 sold, an American gets 15 rand. To buy $1, a South African has to sell 15 rand.

Trade Balance
The relative attractiveness of exports from that country also grows as a currency depreciates. For instance, assume an American candy bar costs $1. Before their currency depreciated, a South African could buy an American candy bar for 11 rand. Afterward, the same candy bar costs 15 rand, a huge price increase. On the other hand, a South African candy bar costing 5 rand has become much cheaper by comparison: $1 now buys three South African candy bars instead of two.

South Africans might start buying fewer dollars because American candy bars have become quite expensive, and Americans might start buying more rand because South African candy bars are now cheaper. This, in turn, begins to affect the balance of trade. South Africa would then start exporting more and importing less, reducing the trade deficit.

All these will work provided both country has Same infrastructure structure, and capital and man power, political stability, economic stability, etc....

This theory doesn't work in Nigeria, because despite our economic deficit, a devaluation still didn't bring more export to us or makes our goods cheaper. Our taste for foreign goods is out of this world.

donguutti:


If you bought a machine at 50k per piece and you had 10 ,and sell at 60k then due to to the naira fall ,cost of said machines is now 70k to sell at 80k(with much negotiation with Customers) with your capital stock you can only buy 7

Before ,on a turnover of 500k,you had 100k profit,now you have only 70,so business income has dropped 30%....just buying and selling in the naira...while other business costs have moved higher

How about if you bought at #50k and sold at #80k

Still politicial and economic crisis has eaten deep into their system, they learnt their lesson, the Lebanese have trooped into Nigeria, taking advantage of the corrupt Nigerian system.
Officially the Lebanese pound is pegged by its govt at $1 = 1502 Lbp but their black market sells it at $1 = 14,200 Lbp, people who held dollars in their accs has been restricted from withdrawing them.

Similar thing could happen in Nigeria unfortunately, there is no rocket science that keeps a poor performing economy like Nigeria, Lebanon, Zimbabwe afloat.
When very poor economic decisions are made, the poor masses will suffer.
Politicians in Nigeria hold more cash and assets worth over $30 billion.

cucumbar:
what’s the situation in Lebanon at the moment?

STNWAUME:


Don't mind them.
Let them keep feigning ignorance as if they don't know that Naira devaluation will have adverse effects on all Naira assets.

Meanwhile exchange rate is currently @#562 per USD

The rent for living in a fool's paradise is paid for with a reality check. Let them be deceiving themselves

Upon all what God has blessed dis country with, d people above are still confused how to utilize it. while those with d ideas can't even smell d positions to present those ideas

Fertile lands
Natural Gas
When it comes to tourism we are only missing d snow, but we got all other nature types
Crude oil
Gold
Uranium
Highly educated & hardworking youthful population
Very resourceful citizens
High population.


SO WHY IS IT NOT WORKING!!

PresidentBuhari:
Still politicial and economic crisis has eaten deep into their system, they learnt their lesson, the Lebanese have trooped into Nigeria, taking advantage of the corrupt Nigerian system.
Officially the Lebanese pound is pegged by its govt at $1 = 1502 Lbp but their black market sells it at $1 = 14,200 Lbp, people who held dollars in their accs has been restricted from withdrawing them.

Similar thing could happen in Nigeria unfortunately, there is no rocket science that keeps a poor performing economy like Nigeria, Lebanon, Zimbabwe afloat.
When very poor economic decisions are made, the poor masses will suffer.
Politicians in Nigeria hold more cash and assets worth over $30 billion.

Can't you just stop been negative

Always wishing bad for the country.....

Never take a time to pray for the country....
Is this the kind of mindset that will improve our dear nation?

God, why did I share same airspace with these kind of people

ositadima1:


Look at this more broadly, the dollar you are comparing the naira to is on a different category.

Have you compared the massive development by the USA since 1980 to Nigeria?

USA has spearheaded development in virtually all aspects of the modern world - Medicare, Technology, Education, Manufacturing, etc. Do you know howmanay patents they have recorded since 1980? Only revenue from windows has covered our oil exports. What has Nigeria contributed to the world since that 1980?

How do u expect naira to be at par with d dollar when our countrypeople have been sitting on there bottoms while d world was making waves?

Don't mind them
Always comparing and complaining...

Usd vs Naira lol

oluayebenz:


Can't you just stop been negative

Always wishing bad for the country.....

Never take a time to pray for the country....
Is this the kind of mindset that will improve our dear nation?

God, why did I share same airspace with these kind of people

No country develops via prayers, China does not subscribe to Prayers but almost all the microphones / chairs, sound systems used in Nigerian churches and mosques are from China

Australia / Canadians, USA, Western Europe are not prayer warriors like Nigerians and they are all doing well.

The GCC countries are Muslim countries, they observe their prayers 5 times daily but they don't rely or depend only on prayers alone , the GCC countries all have visionary leaders who wear their thinking caps, invite the best professionals from across the world to build their various countries.

The same oil and gas Nigeria has is what they also have and they are using it very well for the betterment of their respective countries and their citizens while the proceeds from oil and gas in Nigeria is frittered away via corruption


Prayers without work is dead, faith without corresponding action is dead. Nigeria can pray all they want but if they fail to do the right things which other countries are doing and are progressing, they will pray till the end of the world and still remain poor and backward.


God is tired of useless prayers void of mercy, compassion, righteousness, holiness, the fear of God, godliness, love + doing the right things

Oh, close your eyes let us pray for Nigeria then, the Bible said prayer without work is in vain

oluayebenz:


Can't you just stop been negative

Always wishing bad for the country.....

Never take a time to pray for the country....
Is this the kind of mindset that will improve our dear nation?

God, why did I share same airspace with these kind of people

He was also upbeat about the proposed central bank degital currency, known as the e-Naira which is expected to be unveiled next month, saying it would foster greater inclusion using digital channels, supporting cross border payments for businesses and firms as well as providing a reliable channel for remittances inflows into the country.

Emefiele said when fully deployed, the e-Naira would ensure that Nigerians in remote areas conduct financial activities using their digital as well as feature phone devices.

He, however, pointed out that the support of the financial industry would be critical in the deployment of the electronic money, adding that efforts were ongoing to encourage continued partnership between the CBN and stakeholders in the financial industry.

https://www.thisdaylive.com/index.php/2021/09/15/buhari-rallies-banking-sector-support-to-lift-nigerians-out-of-poverty/

As I postited earlier, CBN has come out clear on the main reasons for the enaira. Foreign remittance was major... Unfortunately, measures put in by CBN over the past 1 year drove remittances into Nigeria via the crypt0 world. Though this is new, it does hold potential. While the enaira would still be equivalent to the naira, being CBN backed does give a platform for other crypt0 backed projects to grow on. For instance, things like quick loans, good interest rates e.t.c in the crypt0 world, just holding similar non-volatile coins can attract interest rates of upto 12%.
Also, I'm sure other countries will be closely watching the CBN experiment

The Vice President, Prof. Yemi Osinbajo, who stressed the need for banks to invest in housing and electricity projects, said the banks were not doing much in supporting the federal government’s efforts in the areas of housing and electricity.

According to Osinbajo, “It is either the finance sector is shy to invest in housing projects, or have not found the right housing finance model that will work for them. Nigeria do not have a functional mortgage housing system, which is the most reliable source of generating capital for individuals.

“Banks should come up with innovations such as housing financing, by supporting poverty reduction and economic growth. Ubiquitous housing for example will create employment and generate demand for related services.”

Also, similar to my reasoning earlier, it's good to see our VP question banks regarding mortgage...

If there was one industry in Western, I believe does hold the potential to lift at least a million Nigerians out of poverty with far reaching implications for the state, it's the mortgage industry...

Lets take a well paid FG young worker for example... If that person wants to own a home today, they'd need to save for at least 2-5 yrs to buy land. Then they process papers >>> look for an architect to draw a plan >>> pursue approval >>> look for a builder >>> take the next 10 years trying to build an apartment block by block ... All this while, the person is at the mercy of the builder/architect as its not his field. Also, the well established builders are not willing to get bogged down on a single house for years I've seen well earning families struggle for over a decade to build their house. This impacts heavily on their disposable income for things like holidays e.t.c during that time....

Now compare th above to another system where Julius Berger discusses with the government for land title, builds standard apartment with facilities leveraging on the economics of scale, and put these up for sale. That same young civil servant goes to his bank and gets a loan of 75 million at < 3% interest (which he could realistically payup over his career), buys that apartment in a good area with a proper title, pays a little amount monthly (which most times is less than what he'd have paid as rent), has loads of spare cash for other things... With time, if the price of the house appreciates, he could even sell it, pay the bank their loan and have more money to go for a bugger one...

The government benefits with such a streamlined process... Building laws are adhered to, things like ground tax e.t.c are paid, with the right database, the government can target certain groups to support e.g first time buyers can pay little or no tax e.t.c...

Comparing the age-old buying land and building to tge mortgage system is like comparing cocoa pods to its refined components like bournvita, chocolates e.t.c... The mortgage system can be an economic miracle...

But then, the CBN could help in kick-starting that process by encouraging/funding credit rating systems... When you have that, the banks know who they could safely lend to.... The construction companies can then get to work

SeaTrade:
But the trader is also selling goods he bought for 60k to sell at 70k at now 110k..
So he has enough money to pay for 2k extra isiewu without flinching

Lol, them no know na.

jedisco:


Also, similar to my reasoning earlier, it's good to see our VP question banks regarding mortgage...

If there was one industry in Western, I believe does hold the potential to lift at least a million Nigerians out of poverty with far reaching implications for the state, it's the mortgage industry...

Lets take a well paid FG young worker for example... If that person wants to own a home today, they'd need to save for at least 2-5 yrs to buy land. Then they process papers >>> look for an architect to draw a plan >>> pursue approval >>> look for a builder >>> take the next 10 years trying to build an apartment block by block ... All this while, the person is at the mercy of the builder/architect as its not his field. Also, the well established builders are not willing to get bogged down on a single house for years I've seen well earning families struggle for over a decade to build their house. This impacts heavily on their disposable income for things like holidays e.t.c during that time....

Now compare th above to another system where Julius Berger discusses with the government for land title, builds standard apartment with facilities leveraging on the economics of scale, and put these up for sale. That same young civil servant goes to his bank and gets a loan of 75 million at < 3% interest (which he could realistically payup over his career), buys that apartment in a good area with a proper title, pays a little amount monthly (which most times is less than what he'd have paid as rent), has loads of spare cash for other things... With time, if the price of the house appreciates, he could even sell it, pay the bank their loan and have more money to go for a bugger one...

The government benefits with such a streamlined process... Building laws are adhered to, things like ground tax e.t.c are paid, with the right database, the government can target certain groups to support e.g first time buyers can pay little or no tax e.t.c...

Comparing the age-old buying land and building to tge mortgage system is like comparing cocoa pods to its refined components like bournvita, chocolates e.t.c... The mortgage system can be an economic miracle...

But then, the CBN could help in kick-starting that process by encouraging/funding credit rating systems... When you have that, the banks know who they could safely lend to.... The construction companies can then get to work

Your submissions are pure facts.
It only takes vital economic policies here and there to revive the country.

Even when CBN stopped issuing FX to the BDC, the exchange rate was stable at 510, CBN then went for the Fintechs, causing panic and disrupting the black market. Instead of the rate to improve after the ban, it became worse.
Now the court has forced CBN to lift the ban on the Fintech accounts, unfortunately the rates might not revert back to 510.

CBN is the architect of the problems we are facing with exchange rate. They are always fighting shadows.