₦airaland Forum

yimikaa:
CBN should make rules and policies to make Naira VERY SCARCE and dollars in excess and watch the rate at which dollar at the parallel market will depreciate.

Having a strong Naira is not necessarily a positive. This will make imports cheaper thereby continuing to promote capital flight. What is important is for the Naira to be "appropriately priced" to reflect market realities.
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The FG and the CBN should come up with Import Substitution policies & programs to encourage investment in local production facilities. Once we begin to import less, that will reduce the demand for dollars, thereby helping to strengthen the Naira. An even more ideal situation would be for us to export more, thereby earning more dollars into the country.
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A combination of Exports & Import Substitution will definitely strengthen the Naira without the CBN having to take any extraordinary actions.

Codedzng:
I used my NairaMaster Card.... But Crediting my account back wit N199 per Dollar against N285 Charge Initially

The CBN created that lacuna for commercial banks to exploit. I think the best bet right now is to get dollars yourself and pay into your domiciliary account. That way, the bank will give you back your exact dollars when you need it. But that will mean that you'll need a USD MasterCard for your online transactions. That might set you back $40 annually (card issuance/maintenance fee).

Codedzng:
I cancelled the transaction and d seller refund my money back but to my surprise , GTB Refunded me with the CBN Rate N199.... Is this not a crime after deducting N285 and Refund me Back with N199....

Please do I need to visit the BANK ?

Let me understand you. Did you make the initial payment from your domiciliary account? If so, that would be plain outrageous. But if you made the payment from your Naira account using MasterCard, then it's possible that the bank might charge you as high as N265 when selling you dollars but buy from you at N199. That is criminal.
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That is why a lot of people are calling for the CBN to devalue the official rate to converge the prices at the official and parallel market.

BuddhaPalm:
My brother, currently, if I send USD to someone in Nigeria (wire), can they withdraw in dollars?

The CBN has directed all banks to honour USD transactions from their customers, so YES, they can withdraw.

Souljaboi1:
**doesn't**

Tnx boss! Modified.

Codedzng:
Thanks for dat....
So it doesn't applicable to online shopping?
What will happen if BDCs are not existing again ?

The bank will source dollars at whatever rate it can find and then pass through the cost to any customer that wants to use his card for online transactions.

Because GTB sources the dollars used to clear your transaction from the parallel market. Since the rate in the black market is high, you should expect your card transactions rate to be high.
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Contrary to what you may think, CBN doesn't supply dollars to banks for such transactions any more. The only bank transactions that will be backed by CBN exchange rate are LCs for approved items, medical bills, school fees, etc.

Reading....

PIPsharingan:
Waow,

Thats quite educative, talking about the accumulative amount of a year's trade when looking at a 100% profit monthly. I believe pro traders kinda relax as time goes by, especially when considering their accounts becoming bigger over the years. If a pro trader does not trade for any body or institution, I think his/her greed dwindles, its all summarized into: "how much does he/she need for upkeep monthly". If the answer is N200,000.00, claculating N300.00 to $1, the trader would need $666.

That means if the trader's capital is $30,000.00, with just 3% monthly, the returns would be $900, hence the trader would naturally focus more on forex seminars, where he/she would impact his/her knowledge to upcoming traders or just choose another hobby that he/she has an interest in.

Hmmm, quite encouraging

I have only recently began to follow this thread, but I could quickly observe that you seem to be one of the most disciplined and conservative traders around here.
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While you approach your trading with some light-hearted humor, you seem to follow a very professional and disciplined approach.
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If you ever consider moving your trading to the next level, then I'm sure we can both work on the possibility of floating a Hedge Fund in the near future. I've got lots of ideas and contacts to FastTrack the process. The key performance benchmarks will be CONSISTENCY (3-5% monthly profit) and RISK MANAGEMENT (single digit DD).
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Happy Slashing!

Keneking:
Great

Can you please explain what is great about the story? I do not understand the business model of Travelex.
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Where is Travelex going to get dollars from?

PIPsharingan:
Good Afternoon Traders,

I have been pondering on this matter: HOW MUCH DOES AN AVERAGE FX TRADER MAKES, .To be honest, I have seen this topic raised in some foreign forums I have been to, and everyone seem to have his/her own say but in all, the results I get to hear is 5-10% per month.

The few times I have heard Nigerians speak about similar topic, I always get blown away because they say most make as much 100% monthly and if am not mistaken, that means 1200% yearly

I believe this may be possible but again how true is it?

Could anyone throw more light on this fact or fallacy?

Happy Slashing peeps

If it is possible for a trader to make 100% monthly, that would translate to 1200% annually (i.e. assuming that all profits are withdrawn at the end of the month).
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Now, imagine that all profits are re-invested at the end of each month and the trader continues to make 100% each month, that would translate to a whooping 409,500% per annum. That is an investment of $1,000 will become $4.09m at the end of 1 year. Simply OUTRAGEOUS!
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While I do believe that it is possible to make 100% returns in any given month, there are three issues to note:
(1) It is IMPOSSIBLE to do that on a CONSISTENT basis.
(2) It is extremely difficult to achieve 100% in any given month when you are trading a large capital.
(3) Achieving 100% monthly return requires taking a lot of risk. Any trader who strives for such target is bound to eventually BLOW his account.
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I agree with you that most retail traders should strive for consistent monthly returns in the 5 - 10% range. Institutional traders are very comfortable with 2 - 3% returns monthly. A single digit drawdown (at worst 15%) should be the goal of any trader who wants to move his trading business to the next level.

blank:
OPEC used to have the largest share of the market. At this point, they probably have 40%.

With US Shale on stream, they now control ~30%. If they cut production in a bid to shore up prices, they will loose market share much further.

He noted that by the new rule, dollars deposited in cash cannot be used for the settlement of import bill, “but can only be withdrawn in cash as well from the bank. But when you travel with your card, you can now pay with it through wire transfer. Importation is only funded with foreign reserve in the customers’ escrow accounts.”

Can someone who understands this please explain. Tnx.

The judges are so corrupt! The judges indirectly encourage corruption with impunity anytime they grant frivolous court orders in favour of those yam eaters.

That is why they keep thumping their chest that they want to go to court. They are obviously hoping to continue their corruption there not because they have any regards for justice.

N320/$ imminent as oil price flirts with $30 mark.
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For those thinking that the former president did a better job, I'd like to refresh our minds. Oil price collapsed from around $115 in June 2014 to around $70 in Nov 2014 and then to around $50 in Feb 2015. The CBN first responded by depreciating the Naira from N150/$ to N168/$ in Nov 2014 and then to N197/$ in Feb 2015. The reality is that political leaders are usually powerless to the forces of Free Market.

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Currency depreciation (in oil exporting countries) is a natural course of action when oil prices decline. This is the case currently for Angola, Libya, Russia, Saudi Arabia, Venezuela, etc. Even countries like Canada and Norway are also experiencing same fate.
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The appropriate thing for the CBN to do is to adjust the official exchange rate to around N250/$. This will help close the divergence between the official rate and the parallel rate. Grand standing is completely unnecessary. The president, as a matter of urgency, should stop having a definitive opinion about what the exchange rate should be. This only serves some futile National Pride but with dire economic consequences.
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Those blaming the current administration for the fate of the Naira are either completely ignorant or mischievous. Anyone with some modicum of economic intellect will understand the correlation between oil prices and the exchange rate of an oil exporting country. It becomes much worse when the country is import-dependent. The blame goes to previous administrations for paying lip service to diversification of the economy and for not shoring up our FX Reserves during boom periods.
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If Saudi Arabia with FX Reserves of over $750bn, Russia (over $450bn), Canada (over $500bn), etc can see their currencies plummeting due to declining oil prices, then Nigeria (with FX Reserves of $28bn) must be a complete joke for trying to maintain the strength of the Naira.
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I won't bother going into the implications and all the interwoven dynamics of oil price, exchange rate and the overall economy.

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N320/$ imminent as oil price flirts with $30 mark. Unfortunately, political leaders are powerless to the forces of Free Market.
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For those thinking that the former president did a better job, I'd like to refresh our minds. Oil price collapsed from around $115 in June 2014 to around $70 in Nov 2014 and then to around $50 in Feb 2015. The CBN first responded by depreciating the Naira from N150/$ to N168/$ in Nov 2014 and then to N197/$ in Feb 2015.
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Currency depreciation (of oil exporting countries) is a natural course of action when oil prices decline. This is the case currently for Angola, Libya, Russia, Saudi Arabia, Venezuela, etc. Even countries like Canada and Norway are also experiencing same fate.
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The appropriate thing for the CBN to do is to adjust the official exchange rate to around N250/$. This will help close the divergence between the official rate and the parallel rate. Grand standing is completely unnecessary. The president, as a matter of urgency, should stop having a definitive opinion about what the exchange rate should be. This only serves some futile National Pride but with dire economic consequences.
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Those blaming the current administration for the fate of the Naira are either completely ignorant or mischievous. Anyone with some modicum of economic intellect will understand the correlation between oil prices and the exchange rate of an oil exporting country. It becomes much worse when the country is import-dependent. The blame goes to previous administrations for paying lip service to diversification of the economy and for not shoring up our FX Reserves during boom periods.
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If Saudi Arabia with FX Reserves of over $750bn, Russia (over $450bn), Canada (over $500bn), etc can see their currencies plummeting due to declining oil prices, then Nigeria (with FX Reserves of $28bn) must be a complete joke for trying to maintain the strength of the Naira.
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I won't bother going into the implications and all the interwoven dynamics of oil price, exchange rate and the overall economy.

1. What controls the oil price, why does it fall and rise.
In simple terms, Demand & Supply. Demand is affected by personal income & substitutes to oil. If the global economy slows down, demand from major economies (US, UK, China, Europe, etc) who are the largest consumers of oil will slow down. Also, as developed countries move towards alternative energy (solar, electric, etc), demand for traditional fossil fuels will drop.

Supply, on the other hand, is influenced by production cost and discovery of more oil reserves. As it it becomes relatively cheaper for countries (like US) to exploit Shale Oil, then they are going to pump out more crude into the market.

There is also another determinant of price - Geopolitical events. As sanctions have been lifted from Iran, they are going to pump more oil into the market - increasing supply. When Supply becomes more than Demand, then Price will adjust to a new (lower) equilibrium.
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2. how does crude oil prices affect exchange rate, foreign reserve and the economy in general
As per Exchange Rate: As oil price declines, major oil exporting countries will see their government revenues and corporate profits decline. The Central Bank tries to compensate for this reduced govt revenue by depreciating the local currency - such that govt revenue in the local currency will be boosted. So, let's say govt has a budget that is predicated on $38pb oil price & N197/$ exchange rate. That translates to a revenue of N7,486/bbl of crude oil. If oil price crashes to $30 and is expected to stay there for long, that will reduce govt revenue to N5,910/bbl of oil. The CBN can then adjust the exchange rate to around N250/$ to enable the govt have N7,500/bbl of oil (i.e. N250 X $30) to fund the budget.

As per Foreign Reserves: A country's FX earnings is usually received into the Central Bank's Foreign Reserves. As the price of oil declines, the FX receipts into the reserves also declines. If the FX demand for imports becomes higher than the FX inflow, then the Reserves will continue to decline. The Central Bank can prevent this by depreciating the exchange rate to curb demand. But in our case, the CBN has chosen to eliminate demand by excluding certain import items on its list.

As per the Economy: For an oil exporting country, most of its economic activities will be tied to oil revenue, from government revenue to corporate earnings. In Nigeria, most banks that have loan exposure to Oil & gas will see their non-performing loans (NPLs) increase resulting in lower corporate profits. Companies directly involved in Oil & gas activities will also experience lower corporate profits. These banks and oil companies usually engage a lot of Service companies. They will cut down on these services to manage cost, resulting in lower corporate profits for these service coys. Most banks and oil related companies may also engage in employee retrenchments to save cost. All these will lead to lower tax revenue (Company Income Tax, Petroleum Profit Tax, PAYE, etc) to government. The combined effect of these activities is a slowdown in the economy and a decline in GDP growth. In extreme cases, it could lead to a Recession. Note that as portfolio investors anticipate these events to unfold, they will flee the country with their capital resulting in a stock market collapse.
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3. If naira is already declining, why are some economist suggesting devaluation
The Naira is only declining at the parallel market. The CBN is still holding it steady at N197 as the official rate. What people are calling for is for the CBN to devalue the official rate to a more realistic and appropriate price (say N240) to help converge the prices at the two markets.
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4. Some people have argued that nigerians should be buying fuel at a very low price due to the oil crises, how true is this.
That argument usually comes from a limited understanding of how the economic dynamics are interwoven in an oil dependent country.

So, let's just use hypothetical figures for purposes of analysis. Let's say oil was selling for $80pb and petrol is imported into the country at $0.5/ltr (i.e. N97/ltr assuming N197/$ exchange rate). If oil price collapses to $40/bbl, then the import price of petrol might reduce to around $0.35. Note that apart from oil price, most other refining cost (like staff, haulage, insurance, shipping, etc) will remain constant so one would not expect an exact movement with oil price and petrol price.

Typically, if the exchange rate adjust to around N250 because of the reasons we explained earlier, then the landing cost of petrol will be like N250 X $0.35 = N88. Clearly, N97 - N88 is not the kind of reduction most people would expect from a reduction in oil price from $80 - $40.

But you might argue that the official rate of the Naira has not changed, so the price should be lower. This would have been so, if the government wanted to maintain the same level of subsidy that existed. Usually, with subsidy, the landing (+ ex Depot) cost is much higher than the recommended pump price. So, while we were buying petrol at N97, the real ex-depot price was around N140. Currently, the ex-depot price is under N85 meaning the government is not subsidizing a dime. N140 to N85 is a fair reduction in price. The government cannot afford to go lower than this, else, if the CBN happens to adjust the exchange rate later, then the ex-depot price might rise up to over N100, either forcing the government to increase pump price or re-introduce subsidy (to maintain price at current level). This is what the former Finance Minister used to refer to as Interest Rate Differential when talking about subsidy payments.

modath:
It's already 290 in Abuja but I don't see it going beyond that!! Banks are already receiving forex deposits, & will temporarily be able to sort out their customers till the 250 band is feasible...

I'm not an economist but this policy will be better for the country in the long run.

I have a minor problem with that theory. Those who need FX are not likely to go to bank to buy them, they are likely to still patronize the black market. As long as the demand in this market is relatively higher than supply, then the odds of the Naira staying above N280 appears high.

IleIfe2:
Seriously i need more explanation for fellow students here. They are tired of my low oil price/revenue explanation.

As you probably know already, oil accounts for over 90% of Nigeria's FX earnings. This means that when oil price declines, FX receipts into the country's Reserves will also decline.
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The CBN uses the FX from the Reserves to auction to importers of essential items like fuel, critical raw materials, etc. They also use the FX in the reserves to clear international payments, whether they are LCs by other large importers or your offshore ATM withdrawals or online/POS purchases.
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As you are also already aware, Nigeria is an import dependent country. Currently, due to declining oil prices, demand for FX by importers (+ MasterCard/VisaCard purchases and withdrawals) is higher than FX receipts into the CBN Reserves. If the CBN continues to meet this demand at its current level, then the Apex Bank will soon run out of Reserves.
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Once the country runs out of Reserves, there will be cataclysmic consequences. We'll need to borrow FDRs from the IMF with all the attendant conditions. Also, international banks and merchants like Amazon, Ebay, etc will effectively unplug Nigeria from the international payment system.
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The CBN has chosen to eliminate certain import items from accessing the FX Reserves. They have also restricted the use of MasterCard/VisaCard for POS/online payments as well as international ATM withdrawals. All these are to protect the Reserves so that essential items like fuel, arms, critical raw materials, etc can still be imported into the country.
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Also, by pushing everyone else to the parallel market, the rate in the parallel market might go over N300/$1. This should make imports expensive, thereby forcing foreign/Nigerian business men to consider setting up local production facilities instead.
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The mess we are in is not caused by CBN. The Bank is merely trying to prevent a bad situation from getting worse. The blame should go to previous governments for not saving enough in our FX Reserves during the Oil boom and for not diversifying the economy to make us less import dependent.
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That's already too long. I'll be glad to respond to you again if you have further questions.

ZUBY77:
In Comparison, return to black Africa where you belong for now. You have neighbors in Ghana and Cameroon.
Stop comparing your black self with people who are way out of your reach.

How many trillions did the previuos administrations left before Jonathan?

I understand you will grasp Saudi Arabia and leave the other two in your quest to tell me they are not China and Russia.
There is the development and Population factors.
How many Saudi Arabians come to Nigeria to spend their foreign reserve yearly?
How many Nigerians go to Saudi Arabia and Israel to spend our foreign reserve yearly?
The number of Nigerians buying from outside are way too much compared to that of Saudi Arabia.
The population of Nigeria is 5 times higher than that of Saudi Arabia.
The production of oil by Nigeria is below that of Saudi Arabia.

When next you google up foreign reserve figures, find out why it has to be that way.

Apparently, you have a prejudiced notion about my objective for comparing the various economies.
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In any case, for the benefit of other readers, my objective was simply to show how constrained the CBN is in continuing to support the BDCs due to our relatively low FX Reserves.

Freegift75:
Take note of one fact. Crude will be dug in Nigeria. Shipping allowances are no more. Import allowances no more. Just from Warri - To - Lekki. Straight...!

Tell me by your own calculations, even the N50 would be too hide self.....

Preferably N45 per litre. Watchout

What if the price of Crude oil falls to $10pb by then. What if price rises above $60pb by then.
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You see, the price of petrol could be any where from N30 to N100, depending on the price of crude oil.

Nobody can say what the price of petrol will be in 2018. The price of any refined product will be determined largely by the price of crude oil in 2018.

OKKO:
I don't even understand what is happening in this Govt. I think kero was peg at N50, why does this APC ppl bring more hardship to the ppl even as their praise worshipers continue to suffer and smile.

Does it mean that the effect of the technically removed subsidy on petroleum products is here to increase the woos of the masses.

The fuel that FG enforce filling station to sell at N86.5 remain N130 in most capital cities and over N150 in villages and it has become a norm.

I pity the poor masses in my village!

How often do you see the the product to buy at the so-called N50 price? Also note that the landing cost and other related cost makes the market price of DPK over N75. Do we still want the government to continue subsidizing the product, even in the face dwindling revenue?
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Whatever woes the masses are facing right now has very little to do with this government. It is a result of backlog of failed policies and administration. This administration should be given some breathing space to do the best it can.

Our loan system are very bad, they only focus on established organisation/businesses and give little or no attention to new ideas.

What you wrote in your post is very apt. Nigerians need a paradigm shift towards entrepreneurship. The job you are looking for needs to be created by someone else.
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As per the quoted text, Banks have been trained to only give loans to entities (individuals / firms) that meet a certain minimum risk profile. While your case may have been unique and your idea would have become a hit, the truth is that the bank cannot know for sure. Trust me, if they start giving loans in that manner, fraudulent Nigerians will exploit that and before you know it, non-performing loans (NPLs) in banks will rise from 5% to over 30%.
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Maybe government can play a big role here by underwriting the risk, so that banks can have the comfort to lend n@ked to startups without collateral. Now that BVN has been fully implemented, a credible credit scoring systems is necessary for banks to guage default risk of loan applications. Nigerians also need to do away with "entitlement mentality" and start acting honestly to encourage banks to open their vaults. If inflation can be controlled to under 6%, then there is a chance of single digit interest rates on loans.

TonyeBarcanista:
We should drop sentiment and demand for explanation from the Presidency

And what would you consider sentimental about my post? I simply agreed with the previous comment which provided a logical theory why the Aisha Buhari being referred to is most likely the President’s wife.

coolscott:
[size=13pt]Well, I think the question to ask is how many Aisha Buharis are

i) Within the corridors of Nigerian power,
ii) Connected with ruling class figures like Atiku and
iii) Have any connection with Mr. Kachikwu

The triangle of connections (which includes the appointment of the elder brother of Dumebi Kachikwu as NNPC head by Buhari) firmly places Aisha Buhari head and shoulders above every other possible.

[/size]

I wouldn't disagree with that theory.

TonyeBarcanista:
We have to know whether Ibe used Dumebi as a front or otherwise. Atiku also has a case to answer in the Jefferson case. The Aisha Buhari is the only Aisha Buhari that we have in Nigeria. Do you know any other Aisha Buhari?

Quite frankly, I don't. But I'll be shocked if there's only one Aisha Buhari in the country. I would think that Aisha and Buhari are fairly common names in the north? I guess I am wrong. My bad!

TonyeBarcanista:
This should not be swept under the rug. President Buhari, his wife and Ibe Kachuckwu need to explain to us what transpired.

While I have been able to confirm that Dumebi Kachikwu is a brother to Ibe Kachikwu, can you confirm to me that the Aisha Buhari referred to is wife of Muhammadu Buhari? And why should Ibe answer questions for an act committed by Dumebi?
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I'll reserve further comments for now.

As regards the issue of accepting FX cash deposits to domicilary accounts, I think the CBN has done the right thing by reversing itself.
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On the issue of stopping sales of FX to BDCs, I think the CBN has been constrained to take this position due to the continuous decline in oil prices (today $31) and the resultant decline in FX Reserves. This will, however, have serious implications on the exchange rate in the parallel market (expect N290 - N320 soon).
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Sadly, this is not the fault of CBN, it is the result of the collective failure of our past leaders to diversify the economy and promote exports. The last administration left us with $30bn in Reserves (despite high oil prices). In comparison, Russia has FX Reserves of $450b+, Saudi Arabia has over $750bn, China has over $3tn.

duby91:
the banks are accusing the BDC for exploiting price arbitrage...and the banks in turn are using the BDCs exchange rate to make more money cos there's really no difference in the exchange rates if you use your card for online transactions considering that they all get the dollars at N197. I still wonder how this policy would go a long way to help because banks will still charge you at the same rate the BDCs are charging whether they have access to more dollars or not.

When I said the bank accuses BDCs for exploiting price arbitrage, I was referring to the CBN and not DMBs.
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I don't think the policy will help improve the exchange rate. In fact, it might even get worse. But the CBN objective is not to improve the exchange rate but to conserve FX Reserves by pushing everybody else to source FX from independent sources. The BDCs will also be sourcing dollars from this independent sources, hence, their MasterCard conversion rate will reflect this rate. Expect N280 - N300 to $1 very soon.

A currency strategist at Ecobank Nigeria, Mr. Kunle Ezun, described the ban of forex sale to the BDCs as “double jeopardy and counter- productive,” but noted that the lifting of deposits into domiciliary accounts was a welcome development that would not have a major impact on the naira outlook. Ezun said, “In the immediate, it will help to bring dollars outside the banking system in. The impact would have been significant if the CBN has said it will allow transfer out of the system.

Does the bolded, by any means, suggest that the CBN has not authorized for outbound wire transfers from the deposited cash dollars?