₦airaland Forum

luvinhubby:
You could not even convince yourself with this your denial.

I was hoping you would dispute what I just wrote. Opinion is cheap, facts are Sacred!

Boyo's economic views on the subject does not take into account of a lot of possible variables.
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(1) What would be the status of our Federal Reserve if CBN shares FX directly to the states? Where would the FG get FX for strategic national issues like arms purchases or fuel imports.
(2) Considering how weak our bureaucratic institutions are (as evidenced from the infamous Dasuki-Gate), how are we sure most of the dollars to the states will not find their way into foreign accounts with very little left to serve local demand?
(3) State government officials, in collaboration with bankers will engage in more roundtripping than what currently exists. I experienced this first hand working in a regional office of one of the banks. The state govt received over $80m from their divestment in Econet. They sold the FX to the bank at a rate much lower than the prevailing rate (about N5). Of course, I got to understand that the bankers and state AG/COF shared the N(5x80m=400m) amongst themselves.
(4) There is no cosmetic solution that can save the Naira other than promotion of Import substitution and exports. Failing these, any other policy will only strive to ration available FX.
(5) The current administration has stopped fuel Subsidy without increasing pump price of PMS. Government is also working hard to revive local refineries. This should reduce pressure on FX.

Do you have any idea why the Naira is depreciating and what can be done in the near term to strengthen it?

naijaboy756:
lol.. What have you done now that the dollar is worse off than when he promised and deceived gullible people like you? Isn't it enought that he deceived you. Double tragedy is when Buhari lies and deceives people and they still go ahead to support him. What a fate?

The discussion is not about me or whether Buhari is governing properly. It's about debunking a false allegation. We can discuss later about Buhari's economic policies and then you can have my views about what I think about the president.
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But I know for a fact that inspite of Buhari's low knowledge of macroeconomics, yours is below that of Buhari. That is why you resort to cheap slander without any intellectual input. If you want us to discuss intelligently about what is responsible for the current exchange rate and what government should do or not do, then I'll be willing to engage you.

Nicur:
Oga oya read and explain to me
http://www.vanguardngr.com/2015/03/ill-make-naira-equal-in-value-to-dollar-says-buhari/

The article you pointed me to simply validates my earlier comment,except you didn't read what I wrote.
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(1) The only quote attributed to Buhari in that article is - “It is sad that the value of the naira has dropped to more than N230 to one dollar; this does not speak well for the nation’s economy’’
(2) Secondly, the article makes reference to NAN (News Agency of Nigeria) as the source. How come NAN was the only media outfit that was able to report about something that was said in an open campaign ground?

naijaboy756:
ok... We yaff hear. He said it was unacceptable. Has he slapped himself now that it is even worse off with him in charge? Any one supporting Buhari is brain dead and needs deliverance...

Well, the point was not to support Buhari or not. I was simply disputing the false comments being circulated around, but typically, those of you who can't make an intelligent argument always resort to personal attacks.

BALLOSKI:
Like Bevista would ask or say, "where's the video of BUHARI making that promise?"

It's not just about seeing the video, there are a couple of things to note about the whole $1 = N1 story.
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(1) Buhari was claimed to have made that statement in an open campaign ground in Owerri, yet it was only NAN that was able to report what he said. Every other story reported by any other newspaper on the subject quotes NAN as the source. I dare anybody to give me a link to any credible newspaper on the subject that does not reference NAN.
(2) Even the so called story reported by NAN and every other newspaper does not have any quote directly from Buhari saying that. The only quote attributed to him is - "It is sad that the value of the naira has dropped to more than N230 to one dollar; this does not speak well for the nation’s economy" - Yet the original reporter of that story felt justified to come up with that ridiculous and sensational headline. I dare anybody to point me to any credible newspaper where the exact words of Buhari were "quoted" as saying that he'll make $1 = N1.
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Quite frankly, the fact that a lot of Nigerians seem to regurgitate that $1 = N1 line over and over again only goes to show how mischievous we are in distorting facts or maybe it shows how shallow we are in differentiating opinion from facts.

“You subsidize exchange rate – you’re making imports cheap. So you’re actually pursuing a monetary policy that undermines structural objectives,” he said.

I have held the view in my previous posts that the exchange rate has, technically, been allowed to float and that the official rate is a subsidized rate.
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I, however, want to disagree with SLS about the government subsidizing imports. The government is not subsidizing consumption, but rather production - since the subsidized rate is only available to those bringing in critical raw materials (like pharmaceuticals) or manufacturing or agricultural machinery/equipment.

I quite agree with Abati on his views here. Our entrepreneurs in Aba and other parts of the country should get their acts together and improve on the quality and standards of their goods.
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There was a time when every poor quality item was referred to as "China". But the Chinese kept at it and continually improved to the point point where their goods pass quality tests in Europe and US. Most global brands now situate their production facilities in China.
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As terrible as the current exchange rate is, this offers our local entrepreneurs a huge opportunity to step up and fill the import gap. But knowing who we are, it wouldn't surprise me if we still prefer to buy an "American Spec" Toyota Camry for N8m ($25k) than buy Innoson IVMG5 SUV for N3.5m. Our ladies don't mind buying a $7k (N2.5m) "designer" bag just to flaunt on social media.

Goke7:
There is no politics here bruv, the privatization process is flawed and the way to go is a more comprehensive privatization process that will bring more serious players than this skelewu dancers we presently have. They are the problem, do you know that we would have been at the mercy of fuel marketers and be buying petrol at a very high rate now if not for the timely intervention of PMB and his tactical removal of subsidy? That is what we need right now in the power sector, we need to be free from the whims and caprices of the unserious dicscos

The position of the Senate is politicizing a Market issue.
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The FG does not have much leverage anymore in the power sector after selling off its assets in Generation and Distribution. In the case of fuel imports, the FG has some leverage since NNPC can import over 70% of local needs and they also own local refineries that can augment supply.
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Unfortunately, the problem is not the DISCOs or government. They are only a reflection of the prevailing mindset of society. As a people, most of us are inherently fraudulent, deceitful, and cheats. When we eventually become public officials, we simply exhibit who we are.

sddiamond:
where do we get money to pay all these outrageous bills, don't you get it there is no money in this country for common man. person never see food chop na to pay high electricity bill without light. oshi

True, there is no money in the country for the common man. But are we entitled to regular power supply? Who is going to supply it?

Ikiriye:
Have you sat down to do a calculation of monthly power consumption in your house.45 percent is wicked bro.what is your salary,has it been increased.let's do maths.having an average consumption of 200kwr = 5250 to include vat.if my salary is 30k and tfare takes 10k and power takes 5250.can you calculate the probably of my survival.we should be reasonable bro.if they step up to 18 Naira per kwr it will be understandable rather than 25naira.

TBH, I don't have any idea what should be the ideal price. My point is that if the price is not right, we will continue to be in a situation where there is no power supply. The sad reality is that these companies cannot continue being operational if their revenue can't cover their cost.
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Politicizing pricing of private services is not the way to go. We created a regulatory agency (NERC) to represent us. They have said that the way forward is a review of prices. Unfortunately, we all want good things but are not ready to pay the price to achieve it.
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I wish we could pay lower prices for power, but that is not just going to happen. If only previous governments used oil windfall to invest heavily in the sector, then we wouldn't be here today. We are our greatest enemies but we always want to blame others.

ATERI:
Any example of a country that privatized this sector wholly, the way you are suggesting, that is enjoying that low tariff right now?

From NERC multi-year pricing template, tariffs should come down in 3-4 years. But that's really not the point. The real point is getting regular power supply and paying an appropriate price for it even if it is marginally higher. Most things go up in price due to inflation.

@Op, correct your title. It is 60 fold, not 60%. That is over 5000%.
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Nigerians should brace up for increase in fuel prices and resultant high inflation, once the government bows to the pressure of devaluation. I'm actually more worried about the instability that will arise due to organized labour embarking on industrial action and calling for wage increase to counterbalance the effect of devaluation/inflation on REAL wage.

Let's put things in perspective a bit.
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Apart from Transmission, the FG has completely divested from Generation and Distribution of power. The private companies managing the GENCOs and DISCOs are likely not to make any long term investment in the sector if pricing of their services is going to always be politicized rather than regulated by the appropriate agency.
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15 years ago, even with very low network penetration, we allowed GSM companies to charge Nigerians N25k for SIM cards and N50/min for calls. The companies were excited because that price compensated for their investment risk. They invested billions of dollars in infrastructure, employing thousands of Nigerians and supporting thousands of vendors. Today, SIM cards are less than N100 and calls are less than N7/min. Today, you can practically receive calls from every nook and cranny of the country.
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My point is that the sooner we accept the initial discomfort of high price, the sooner we will get to the point of constant power and lower tariffs. If we were courageous enough to do this ten years ago, we would probably be generating over 20,000MW today with a much reduced tariff. Postpone it and you postpone progress and development. The price we are not willing to pay today will inadvertently be paid (even more) through high cost of manufacturing and running businesses due to inadequate power supply.
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The actions of the Senate can only work when trying to force the hand of the Executive, not arm twisting private businesses. The private companies have already invested some money in paying for licenses and setting up offices. GENCOs have invested in buying or building power plants. Investments on further infrastructure will need to come from customer receipts. You don't expect them to go to their bank to borrow money for long term investment without clarity on revenue expectations.

wirinet:
I am responding to your post because i respect your views a lot, i know you love this country and would like to see it progress, unlike some people who pray day and night to see Buhari fail even if it means the destruction of Nigeria.

You do no seem to understand the seriousness of the problems created by PDP 16 years of looting, profligacy and visionlessness. Have you ever heard of the word zugzwang? Zugzwang is a chess position, whereby whichever move you make is a bad move. Nigeria and Buhari is in an economic Zugzwang.

Now, what do you think will happen if the naira is allowed to float against other currencies. I think the same 2 scenarios would still play out. If you buy your $10million dollars in January when crude prices was $35 to the barrel and naira was N197 to the dollar, three months later when oil falls to $27, naira might have fallen to N300. You keep forgetting that our main source of foreign exchange is crude and the supply of dollars into the Nigeria market depends on the price of crude.

If the naira is allowed to float, it might lead to free fall as lots of speculators would buy and hoard every available dollar in anticipation of the naira falling further, leading to the naira falling further. Remember, crude prices are speculated to fall as low as $20 later this year, so we expect the naira to fall even further.

I know Buhari trying to restrict demand for dollars is an exercise in futility, the pressure on the naira is to great and so the more oil prices fall, the more the disparity between the official and parallel markets, the more banks and speculators take advantage to make billions, due to the weak regulatory capacity of CBN.

I know Buhari is just bidding for time, hoping that somehow crude prices would rebound to around $40 -$50 per barrel. If it continues to fall, then i am sorry to say, we are in trouble, whether we control or float the naira.

Finally, someone with an objective understanding of the gravity of the situation. A real economic zugzwang, indeed!
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You see, even the Oil price narrative is only one aspect of the story. We must also consider the profit per barrel of crude oil. Say, if our average production cost is ~$25/bbl and oil sells for $50, then we earn a profit of $25. But if oil price falls to $30, then we earn only $5/bbl. So, a 40% drop in oil price leads to an 80% drop in oil revenue.
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The situation is really dire and we are in an economic quagmire.

Sad to admit, but so true!
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(1) We do not consider our marriage complete until we do the "white" one and wear "white" gowns.
(2) Our system of governance was given to us
(3) Our system of worship was given to us
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Basically, we are incapable of figuring out things for ourselves. Even when we borrow a working template, we still find a way to mess it up.

Your analysis is not entirely correct. The CBN does not just hand out dollars to importers. Most imports are done through LCs (Letters of Credit), and the bank will settle those payments only after there is evidence that the importer has taken delivery of the items.
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It is possible that some roundtripping still exists but clearly not at the exaggerated levels you are trying to portray.
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Finally, I am also a proponent of devaluation, but we all need to be aware of the unintended consequences it will bring. Fuel will become more expensive leading to higher inflation - basically, every item in the market will react instantly once the devaluation is official. There is also the possibility of industrial action from labour unions who will demand wage increase to counterbalance the effect of devaluation and inflation on REAL wage.

The administration's lack of clear direction as regards economic policy is quite disturbing. This is causing a lot of uncertainty and anxiety.
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Having said that, Fayose needs to remind himself that he is a leader. Focusing half his time criticizing another leader when his domain is in crisis is the height of hypocrisy.
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With zero contribution to the Federation Account, Fayose and Ekiti State are a liability to the Nigerian State. He should focus on emulating his brothers in Anambra, Abia, Akwa Ibom, etc in coming up with economic programs to increase the state's IGR. Ekiti allocation from FAAC is currently less than N2bn monthly, barely enough to implement Fayose's stomach infrastructure. That should be his primary concern and not using his state money to pay a Special Assistant whose only job is to write press statements criticizing the president.
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By always playing to the gallery, Fayose is simply exhibiting how shallow and irresponsible he is in matters of governance. What do I know? Maybe it is true, indeed, that the people deserve the leader they get!

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MathsChic:
Of course, there's no doubt the best course of action is "import substitution". The more innovative this becomes, the less sluggish the national economy goes. The government needs to do a lot in terms of policy making and regulations creation in order to stimulate the economy in this direction. You'd expect the national parliament to be hard driven in this area or to be immediately spurred to action by the realities on ground. Unfortunately, that doesn't seem to be the case, at least as far as I can see.

By being economically tardy, the country continues to encourage all kinds of irregular demands for foreign exchange for purposes not all too dear, not to talk of the different manipulations which have undesirable consequences. As you noted, demand and supply drive price. By making foreign exchange continually scarce, the government is unwittingly increasing demand for it. The resultant effect could be a run that'll see the dollar continually become expensive in the parallel market unfortunately rendering unreal its actual value to the naira. A run meanwhile is dependent on human reactions and feelings, nothing to do with actual facts. A run can only go so long as to erode confidence in the nation's currency. And if that happens, too bad it'll reflect current realities and the national Bank may be unable to defend the naira any longer. Only heaven knows what the outcome will be. That import substitution thing better work fast and work well, and that's hoping the lawmakers key into it.

I'm also not unwaveringly for devaluation. However, the current economic flip-flopping isn't looking very much good replacement.

Malawi was one country that resisted devaluation for a while, with the president pretty much rendering the same arguments Buhari is tendering now. Their economy continued on its shabby course and multiple devaluations had to follow. Same with Azerbaijan until they depleted their foreign reserves and had to devalue. Perhaps Pakistan is even a better example. Tough and insistent, the country refused to devalue. However it had no choice but to buckle after China and other neighbors devalued to make exports cheaper.

We risk getting isolated from trade partners by making the value of our exports larger than it "actually" is and this can't have a positive effect on trade balance. While I do not see an outright devaluation, I see a possible downwards revision of the naira value to a little above 200ngn (still a devaluation sha) and I think that may just be a good enough thing. But better early than too late.

... Just my opinion

This is not just your opinion, but very valid views on the current economic / FX situations in the country.
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One area where this administration has failed woefully is its inability to articulate and communicate its economic (fiscal & monetary) policies. The uncertainties create a lot of problems, which validate your RUN theory.
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Just to comment on the bolded part. I don't think the government is deliberately making dollars scarce. Dollars is, indeed, scarce and limited due to the realities of oil prices. Are you suggesting that government should make the $28b in the Reserves available for all manner of imports (including luxury items)? What happens when we eventually run out of Reserves - Do we then approach IMF to borrow SDRs with all its attendant conditions?
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My view is that the exchange rate has been technically allowed to float as evidenced in prices in the parallel market. The official exchange rate, in my opinion, is government way of subsidizing the rate for essential items like fuel imports, critical raw materials, manufacturing and agricultural machinery, etc.
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As you noted, the Executive and parliament should be aggressively pushing for clearly defined import substitution policies and programs. Every government official car and computers should be sourced from local assembly plants, Medical tourism should be drastically reduced, Self sufficiency in food production and production of refined Petroleum products should be a priority, policies to encourage OEMs to setup production and assembly plants in Nigeria should be pursued, etc.
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Just my 2 cents!

MathsChic:
Yet someone was saying 1000ngn to $1 is not a possibility. Na surprise e go be last last
I give this country 5 more years with its continued economic sluggishness and we'll be exchanging the dollar for slightly more than 1000ngn. By then, the country will be profusely begging to devaluate.

The exchange rate (price) is, primarily, determined by supply and demand for dollars. The question is, if CBN devalues, will that increase the supply of dollars or will it curb demand? Apart from a number of foreign portfolio investors who might move into the country with their dollars, devaluation will have little impact on supply. On the other hand, the continued demand for dollars, even at N330/$ also shows that devaluation may not curb a lot of demand. And if the CBN were to meet all these demand in the face of limited supply, then it's only a matter of time before we run out of Reserves, and then we will face the mother of all crises.
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Also, once essential items like critical raw materials and fuel imports become expensive due to devaluation, then headline inflation will hit double digits immediately.
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For the records, I still believe that the appropriate course of action for the CBN is to devalue, but it is not silver bullet and I am fully aware that it's a catch-22 situation. There will be a myriad of unintended consequences like organized labour embarking on industrial action and calling for wage review due to the impact of devaluation on REAL wage.
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The most effective course of action for the country is massive import Substitution programmes. There should be massive reorientation to encourage corporates and individuals to source alternative items locally. When next you are buying a car or laptop, maybe you should consider Innoson and Zinox. In the meantime, we can pray for temporary respite in oil prices to increase supply of dollars.

tuale4u:
It is better late than never.
This is what you get when u have a president who values his integrity and name.

For sure it is an embarrassment, shame and poor oversight performance in the part of Buhari.

But 4 him to admit the errors rather than compromising and sharing Ghana must go to NASS members to overlook tins as we are used to in Nigeria, is a great positive Change.

This is d Change i voted for. We are gradually going there. We wont get there in 4 or 8 years. But we will be closer to it.

Reprimand to Buhari for poor oversight function and for not screening d document properly. For this Buhari messed up big time.

On the other hand, I strongly commend Buhari for accepting d embarrasment and his willingness to make corrections. I salute him for supporting his ministers for openly rejecting the figures. This is d strongest level of integrity i have seen from a Nigerian President. Kudos PMB

This is the time for Nigerians to pay more attention to the positive impact of the current happenings in the NASS defence budget than focus on unnecessary technicalities and use of English.

For the first time in 16years, the executive led by PMB have refused to defend inflation of Budget that some government officials and civil servants would have easily stole. The current rejection of some huge figures by various ministers is a clear reflection of president Buhari anti-corruption stand. It is very difficult to indict yourself on a document you signed. it takes courage, sincerity and high level integrity to do that. We must commend president Buhari for that. For Buhari to openly indict himself in public when he can easily make a deal with the senate president by compromising the trust the people place on him like it was done in the past just to cover a little "embarrassment" is very commendable.

We need to tell ourselves the truth. Most of the items in the Budget that are rejected today by Buhari administration, are items that have be existing in the Budget for the last 3 or more years. The items have been defended in the past without any scrutiny by the National Assembly because in the past corruption was worship.

I know some people will argue that PMB is to be blame for the current embarrassment. Yes I agree that the Budget is his responsibility. However we must as well tell ourselves the truth that there is no way PMB would have read all the 1000 page documents. No president in the world does that. The truth is that the civil servants who made the budget estimate did it base on previous template and mindset in the past. They did not fully understand the change agenda of PMB. Hopefully by 2017 budget, we will have less of this misunderstanding between PMB stand and the civil servants interpretation of his stand. Some people will argue why use a template from a previous government you condemn. We must be sincere and know that change is gradual and takes time. The change agenda is a 4year to 8year agenda. So everything cannot be changed in months.

We must also know that the reason the National Assembly is doing more critical work in this budget rather than rubber stamping it as they use to do in the past is because of Buhari anti-corruption stand. If Buhari was sharing Ghana must go to the senate like it use to be in the past, there will be less noise coming from the National Assembly.

I work in a multinational company. I have not met any boss who reads 100 page documents prepared by me or any other of his staff page to page. Some of us here on nairaland are bosses too. For that we can forgive PMB for poor oversight for a document of about 1000 pages.

I am not saying this Budget and the process are perfect. But what I am clearly saying is that, this Budget and National Assembly scrutiny of the Budget, and ministers open rejection of possible inflation is the best Nigeria has had in the last 16 years. This is a major progress every sincere and objective Nigerian who loves the progress of this country should applaud. Because this new development is in the best interest of the country.

I am very happy with current noise about the Budget. This is a clear sign that Change has come. And change has come to stay.
Change is always difficult. Change usually face a lot of resistance and rough path. This Budget is actually a BUDGET OF CHANGE.

Finally relieved to read some constructive comment, rather than the juvenile tantrums that have come to define NL.

Technically, the CBN has allowed the Naira to float which has led to an exchange rate of around N310/$ in the parallel market. What we still call the official CBN exchange rate is, technically, a subsidized rate by the government to support critical sectors of the economy.
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The sad reality is that, with oil prices below $29, the dollar receipts in to the country is declining and cannot support our import demands. If the CBN continues to fund all import needs, then we are going to run out of Reserves within just a few months. By then, the crisis will be full blown.
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Quite frankly, Nigerian businesses should take advantage of the subsidized FX rate by CBN to bring in farming and manufacturing equipment & machinery to ramp up local production and create jobs. Most of the items we source through imports can be sourced locally. If we truly want to continue importing, then we should bear the high cost.

MathsChic:
It was all just a joke to me. I wouldn't recommend you stay off mathematicians, or even physicists. That's a lot, a great lot, to gain from a relationship between two smart heads.

Of course, I didn't mean that strictly. It was only meant to be a light-hearted joke as well.

MathsChic:
Haha. That? Well, I'll steer clear of physicists then.

Would you advice that I steer clear of mathematicians as well?

Dtman:
Inflation 9% may 2015 - 9.6% in dec 2015
GDP growth 6.3% in 2014 - 2.83% 3rd quarter of 2015
Foreign direct investment $20.75billion 2014- $11.1billion 2015.
Exchange rate parallel market N215 in may 2015 - N310 in Jan 2016
Gdp percapita $3416 in 2014 - $3298 2015
Federal govt borrowing N715billion 2015 - N2.2 trillion in 2016

You forgot to compare Oil prices in 2014 & 2016

EmmanuelD1st:
PM replied

Mail not received. Kindly drop your email or send a mail to xxxxxxxcfx@gmail.com.

Tnx.

EmmanuelD1st:
email replied

I sent you a PM.

EmmanuelD1st:
SL. Hit on both trade

Full disclosure. I respect that.

blueAgent:
They could have not introduced school in the first place. if that was their purpose.
people take the postive impact of colonization for granted. i bet you Africa could have been worst. if not for western influence.

prior to colonization were they groundnut pyramids in Nigeria .were our farmers able to acheive that prior to colonization.?
Did we develop.rubber and palmoil plantation
did we know that we had oil?
were their banks,pipe. borne water.e.t.c
i need answers.
i know the negatives of colonization .so just give me answers of the ones above.

And I would dare to add that, had the British stayed in Nigeria till 2000, Nigeria would probably be in the top 10 economies in the world. The South African experience is a good example. I'm sure, if SA had gotten their independence in the 60s, they would be worse than Liberia.

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