₦airaland Forum

1freshdude:
Bros is like someone is impersonating you o, cause I was only replying to this post.
Bevista:
The CBN should allow demand and supply to determine a fair price for the dollar. A price where supply can clear all demand; they do not need to deplete the Foreign Reserves to defend the naira. That is Economics 101.

What is the difference between floating and allowing forces of demand and supply determine price? and at what price does demand equal supply?

Be nice and educate us please

The Naira has never been allowed to float in the history of Nigeria. The CBN simply looks at its balance of payments and adjust the rate to maintain some level of equilibrium.
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The major currencies in the world like GBP, USD, EURO, YEN, etc are floating which means their rates are determined completely by market forces outside Central Bank controls. That is not what I am proposing for the Naira as we are not yet ripe for that.

“However, correction towards real effective exchange rate in the form of exchange rate adjustment is likely in Q1 2016. This will reduce the pressure on external reserves,” it stated.

This is inevitable, except there is a rebound in oil prices. The Central Bank policy of maintaining an artificial exchange rate is not sustainable. The only worry is that by the time they'll finally do the needful, so much harm has already been done to the Economy.
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Folks praising the CBN policy are only looking at things from a single perspective. This is MACRO ECONOMICS, you need a multidimensional perspective to understand the NET effects of a particular policy.

Demdem2:
Am sure u are not ignorant of the rippling effect this will have on the General populace especially the vulnerable who happened to be in the majority. How this will affect their current purchasing power without adequate increase to their income. This " political consideration " is in the best interest of the people and not those in power itself.

The times we are in are precarious. Any action by the Central Bank will have negative effects. What I am concerned about is the NET effect of a particular policy action.
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I believe the CBN should do everything possible to preserve the Foreign Reserves for use for essential items like fuel imports. But why not allow those who can access dollars elsewhere (at whatever price) to be able to make transfers and payments easily?

1freshdude:
You are a Voodoo Economist! No too vex. No person in their right senses who has even a basic knowledge of economics would advise for the Naira to be allowed to float. What are you guys talking about sef? Everybody on Nairaland claiming egghead.

You lack decorum, but I'll respond to you for the sake of others reading.
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I did not talk about allowing the Naira to float freely, but finding a Fair exchange value. CBN has been adjusting the value of the Naira for ages depending on prevailing economic realities,so why the grandstanding now? When oil price started falling last year, did they not allow the Naira to depreciate from N155 - N197 in Nov 2014?
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Abacha tried to artificially hold the value of the Naira in the 90s, students of economic history know how that all turned out.

Keneking:
What animal is demand and supply? In Nigeria, this eco 101/201 principle does not apply. Imagine, one needs to conduct a forex transaction urgently and the other is ready to sell at N300/$1. In this instance, one has no choice but to buy at that rate. So consider multiple demands and its broad implications....

So, In your opinion, the better option is to create scarcity and pretend that there is no demand?
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As painful as it may seem, if my business depends on FX transactions, I'd rather buy at that high rate than not get it at all. When importers exhaust their existing stock and cannot access dollars to import, there will be complete price dislocation in the system due to scarcity.
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The CBN can protect our Reserves (which I believe they should). But why not allow those that can buy dollars in the parallel market to make legitimate transfers and payments? That way, it's not Reserves that are used to settle those int'l payments.

pendusky:
From ur comment above, its quite obvious that ur a banker

Well, it turns out I'm not.

blackpanda:
You sort of answered your own question. How do you pay something for some you have no money for. If you pay with your atm, where will your bank get the foreign exchange to do the transaction

I agree it is a painfull situation we find ourselves. But this is the reality we have to deal with till we become a real exporting country. And no cbn wasnt blaming anybody, rather just stating the facts

The CBN should allow demand and supply to determine a fair price for the dollar. A price where supply can clear all demand; they do not need to deplete the Foreign Reserves to defend the naira.

The problem is that if they allow the exchange rate to adjust downwards, there will be serious backlash on the new administration. So they are allowing political considerations to influence their monetary policy actions.

ScotsReferendum:
Your assertion will be right after my moniker is repeated in SS to decide those who wants out and those who don't

I find the talk of a Referendum in my State utterly insulting and disgusting.

Maybe the Yorubas should go to Anambra state to conduct a Referendum whether they would love be part of Oduduwa Nation.

The stupidity being peddled by your rogue leaders in the media is difficult to fathom.

TeOwl:
Email your exam people and tell them to split the payment into two, you pay $750 one month and the other $750 the other month.... i forsee that this policy would last for at least six months, dont let the govt mess up your career!

Really?! You expect the CFA Institute to alter their online payment platform because of one dude in a country where Capital Controls are being enforced?

ZuzuMan:
.....CORRECTION.
$100. DAILY LIMIT.

Ouch! Didn't even know the limit has been reviewed downwards.

Easy man. They were not forming, that's how breakfast is served in hotels. Can't you see from the background that they are in hotel restaurant?

Finally, some sincere introspection from the flat heads. Dear Mr Metuh, with all the "gates" revelations coupled with the expected APC high performance, rebuilding PDP is not only Difficult, it is Impossible!

He said: “The limitation on the use of debit or credit cards outside the country was not a limitation that was placed by the CBN.

“They were restrictions that Deposit Money Banks placed because they have to settle whatever transactions you make with your debit cards with their corresponding banks in foreign currency.

“And if the banks do not have the foreign currency to do that, then you create a liability problem for them.”

That explanation is plain ridiculous. How can the CBN blame the banks, when they (CBN) are the ones that stopped banks from receiving dollar cash lodgements into domicilary accounts. Where did they expect banks to get FX to meet their international payment obligations, especially with the meagre Dollar sells to BDCs.
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For the records, I fully understand the constraint the CBN is facing from low FX inflow into the Foreign Reserves due to low oil prices, however, the restrictions imposed by the Central Bank are extreme. With a daily limit ranging from $100 to $1000, How do I make a payment of $1500 for my professional exams? Or am I not supposed to write such exams again because the government is on a fvcking mission?
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I believe the current CBN Governor is a weak link in this administration, as he may not providing the president with the right monetary policy options/advice. While there are obvious benefits from the CBN policy, I strongly believe that the NET result of the policy on the economy will be negative.

yudee233:
Must everything be news in Nigeria. We know where the actual cost lies. It is akin to sacking ten Nigerians and employing three expatriate in the name of cost savings. In the actual fact one expatriate is equal to 15 Nigerians in terms of cost

But if the story was about PMB increasing his convoy, you would have loved it to be news since it would provide you another cheap wailing opportunity.

IbokUtoroh:
bro na u b only sensible buhari suporter, abeg clarify dis issue.
fg have removed subsidy so why set a price tag of 85naira? why not allow the marketers determine the price n nigerians to chose which to patronise?
its like in jeans market where thr is no subsidy, we hv diff qualities of jean n u chose d one that suits u.
i believe dis guys are hiding somthings from nigerians, this aint transparency they promised us!

I am not holding brief for the FG, as I personally do not fully understand their so-called Price Modulation.

However, I have heard that they will have a price band with a ceiling at N97. This will ensure that even if oil price suddenly takes off, the price of PMS will not follow it upwards in a lockstep manner.
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It is possible that the government wants to use the price band to generate money to compensate for the loss in oil price (pls do not quote this, I am only speculating).

Also, since Nigerian oil marketers are not known for ethical practices, they would initially exploit a completely Free Market by setting arbitrary prices. A completely free market will make sense only when all our refineries are working and petrol is ubiquitous all over the country. This will eliminate any arbitrage opportunities for marketers to exploit.

Can someone please fully explain the dynamics of the so-called "Price Modulation"?
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Why is it okay to support removal of subsidy now when we rejected it in 2012?
Back then, the effect of the removal would have been an increase in pump price from N65 to N141 (over 116% increase). As at today, subsidy removal will initially not cause any upward price review. In fact, there is talk about a downward price review to N85 by Jan 2016.
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There is no debate that the subsidy regime is not sustainable over the long term. Low oil prices has simply provided a perfect opportunity to discontinue it without causing any major price shock.

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Truth234:
This bring us back to the original topic, there is no way we will attract real investors without clear cut economic policy. Not everyday restrictions, that the little foreign investors left are contemplating to move or not. The MPC reduces interest rate from 13 to 11, its yet to reflect on loans, yet banks re-price deposit rates lower but not credit. Repricing deposit rate while leaving borrowing cost high will invalidate the MPC momentary policy of stimulating the economy.

I understand your skepticism. But according to PMB during the budget presentation to NASS, government Fiscal Policies and CBN Monetary Policies are perfectly aligned. We will need to watch these policies evolve before making an informed opinion. I would prefer if they talked more about their policies and explained where they are going and what they are going to achieve, as this would help gear up investors. Investors do not like uncertainty.
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The CBN is adopting an expansive monetary policy. They have reduced MPR and also reduced CRR for public sector deposits. In an ideal world, this should lead to re-pricing down of loan interest rates as well availability of more funds for loans. But the transmission mechanism of Central Bank policies are not always perfect. Even in the US and Europe, while they adopted QE, most banks were not loaning all that excess money out. Since they are the ones bearing the risk, they are always concerned about the health of the economy and the capacity of creditors to pay back.
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In theory, the CBN monetary policies are appropriate, but they need to monitor to ensure a proper transmission mechanism of the effects to the real economy.

seunmsg:
You are just a joker. Those bodies were created to formulate policy and issue clear directions on issues bothering on the economy, privatisation and national planning. The policy direction they issue is what the bureaucrats in the relevant agencies implement and that is how government is run. You don't expect the Vice president to do the work of a civil servant just to prove that he has a defined role.

Well said. Just wanted to type this before I saw your comment. Apparently, Tonye tried shamelessly to undermine the office of the Vice President. Maybe he should tell us what day-to-day running that the president does.
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The VP shouldn't take a week vacation? The kind of high moral standards we set for leaders is just ridiculous, as if they are not human beings with families.

Activa:
Thanks.

Do we really need more of them or real FDI?

Quite frankly, they should not be the priority, especially for a growing economy like ours. What we really need are those that will invest in the REAL economy with the opportunity for job creation, import substitution, exports and tax revenue for government.

Truth234:
I agreed with all you said but (4) The FED rate hike does not make US better investment destination, interest rate hike means increase in cost of servicing loans, which is not something investors want as they are struggling to cut cost with current global economic rout.

True that cost of servicing loans will increase in the US, but it is also true that yields on US Treasuries will also increase. The investors I am referring to here are the portfolio investors who are only interested in high yielding financial assets and not necessarily the real economy.

Truth234:
What do you call foreigners that invest in an Economy? You know nothing, the guy mentioned foreign investors and I explained why they are pulling out, it has nothing to do with reserve. They are wary of our rigid economic policy and government reluctant to allow market to dictate Naira value. Trust me I live the market, I am sure the market is not paying you.

@Activa. They are still Foreign Investors as long as the funds are coming from a foreign country to invest in the local country. They just belong to sub category called Portfolio Investors since they focus on investing in the financial assets of the local country.

Truth234:
That is not the reason, it is basically because of our rigid economic policy. With our reserve at current level, foreign investors are still pulling out and has pulled-out over 69.33 billion from our economy so far, according to NSE.

There are a combination of factors responsible for the pull out:
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(1) As an investor who has money in a country that is largely dependent on oil, you are aware that the economy and the currency will be largely influence by the price of oil in the international market. With lower oil prices, the CBN might be constrained to devalue the naira to protect Foregin Reserves. This move will devalue their investment so it's best to pull out now before the inevitable finally happens. It's not only Nigeria, even the Canadian Dollar is being hammered right now. Most oil dependent countries are having their currencies devalued.
(2) Also, with lower oil prices, the country will have less wealth and so very little disposable income to invest in the stock market to push prices up. Infact, most investors might start selling their shares to meet basic needs which will might cause a selling frenzy. So as an International investor, it's best to leave now.
(3) There is also the tight FX Controls that the CBN is currently implementing which is making the foreign investors very weary. They are not sure if they need to repatriate their funds tomorrow, whether they will be able to access dollars, so they better leave now while they still can.
(4) You have to also look at what is happening in the US. The FED has increased its interest rate for the first time in 10 years with opportunities for further increase in the coming quarters. This makes the US a relatively better investment destination, so International Funds are flowing out of emerging markets like Nigeria to the US.

Truth234:
How do you mean without addition? They are selling it to Bureau de change for naira, is the reserve not their for the economy or are we not selling oil at all?

The CBN is concerned about the NET inflow through the Foreign Reserves Account. If the demand exceeds inflow and they continue to meet all demand, then the Foreign Reserve will continue to decline.
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Foreign Investors and International Merchants watch these Foreign Reserves like hawks. Once they feel that it has gotten uncomfortably low, they will refuse to do business with Nigeria because they will be worried about our capacity to meet up payment obligations. It is for this reason that the CBN tries to control the outflow from this Reserves to ensure that we still have enough to meet the most essential items like Fuel imports for a few months.

EternalTruths:
You are right and very correct

But

Is oil the only thing Nigeria can exchange for dollars.? No.

Tell Buhari to encourage True Federalism by sending a bill to the National Assembly to create a law that will empower the States to control 25% of any mineral and non mineral wealth gotten within their territories.

This will spur massive exploitation of full economic potential fetching us extra dollars

Your obsession and hatred for Buhari is taking a toll on you. If you so knew that True Federalism and Resource Control was such a good thing, why wait till now to rush the new president? Why don't you take a chill pill and watch this government evolve its policies before you go all haywire.
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Currently, oil accounts for over 95% of Nigeria's Foreign Exchange earnings. We need to find ways to export more items, so we can earn more FX. But these export measures will take time, so the focus should first be on Import Substitution. The administration is trying to achieve this by ensuring local refining and self-sufficiency in agriculture. These efforts alone can save Nigeria over $2bn monthly on FX payments.

The fact that the anti corruption war is currently ignoring APC members does not mean the war is not sincere. It is only a pragmatic approach to a complex problem. When you have a lot of complex problem to solve, you ranked it and choose where to start from. That is currently what is going on.

I particularly like the above quote but your whole writeup was well scripted. Exactly my thoughts except that I wouldn't have been able to articulate myself as good as or better than this.

IzonOwei:
every single one of them ..they all deserve to die some way..The Niger delta is as good as shit. .I hope our militants who forgot about the real fight to emancipate their own people can now rest now that oil price would nose dive to nothing...collectively the Niger delta became foolish to almost an irredeemable point. ..All oil companies are now located in lagos and jobs evading indigenes of the Niger delta like never before all because of the foolishness of a few erratic humans..sea piracy and militancy has dragged us aback..


Truckpusher what do we do

Your sentiments are fully noted. Nice to see ND indigenes like you finally opening their eyes to the real problems.

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Fuel Subsidy:
Just remove the damn thing right now; it is not sustainable based on current economic realities. In any case, with such low oil prices, PMS will still sell less than N90 even without subsidy.
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Boko Haram:
The Nigerian Military needs to increase the intensity of the offensive against the sect.
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Payment Of Salaries:
Funny that payment of salaries of states is now PMB's headache. State governors need to be held accountable.
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What To Do With Jonathan:
He should not be prosecuted to avoid unnecessary political tension. But he should be visited by EFCC to say all he knows about the various "gates". More importantly, PMB should get him to cough out all the looted funds in his possession. If he doesn't cooperate, he should be prosecuted.
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What Next For Anti-corruption Fight?
Increase the heat. High profile cases must be successfully prosecuted and criminals sent to jail. More importantly, all looted funds must be recovered.
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Decreased Naira Value:
Using fiat to defend the Naira is a futile effort in the light of current oil prices, and it will have dire unintended consequences. CBN should officially devalue the naira to around N250 and watch it.
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Power Supply:
State governments should be allowed to be directly involved in the whole Power value chain - Generation, Transmission & Distribution.
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Keeping The APC Together:
There is a National Economic crisis, and you are still talking about spoils of victory. PMB should focus more on governance than party politics.
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Can His Ministers Deliver?
Within the economic constraints facing us right now, I believe they can and they will.
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Agitation For Secession:
IPOB should be allowed to freely express themselves as long as they do so peacefully. They should be advised to follow laid down UN conventions and NEVER to include SS in their contraption.

When a man of Intellect and Good Character assumes leadership, the people will rejoice. Kachikwu clearly looks the part - a round peg in a round hole indeed!

Dear BMB, I think you should focus on issues concerning Entertainment and forget about the Economy.
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First of all, Exchange Rate has to do with Monetary Policy and NOI was in charge of Fiscal Policies, not Monetary Policies.

Secondly, exchange rate is directly tied to FX receipts, which in our case is directly related to oil price (Oil accounts for 95% of FX). For most of NOI second term, oil was consistently above $100.
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If oil dropped this low under that administration, we would be talking about exchange rate @ N300+. Did you not observe that when oil dipped to around $65 in late 2014, the naira was devalued from N155 to N197.

That was an EPIC response. PDP must be utterly shameless or they must really think that Nigerians are senseless.