₦airaland Forum

ositadima1:
In the first part of your discussion, you made comparisons of interest rates. Did you consider that the inflation rate is over 20%? Have any of these European countries you looked at ever had such high inflation? Do you still think they will maintain the 5% interest rates if that were to happen?

"U.S. interest rates reached 15% in the early 1980s. This was primarily due to an effort by the Federal Reserve to combat extremely high inflation, which peaked at over 14% in 1980."

In the unlikely situation they have such inflation rate, their interest rates would exceed 5%.
In my first post, I explained how this works. Temporary rise in interest rate is a good lever against inflation where the system is flush with consumer credit. My issue is that we see western nations doing this and hastily copy them without understanding why it worked for them and if it would for us. Why has the raised interest rate not worked for us in combating inflation? Its either we try to replicate the system in the west or craft out other means of fighting inflation.

I'm happy you brought up the US scenario. The end of the world war saw the birth of consumer credit and the period between 1945 and 1980 saw unprecedented growth in consumerism i.e mortgages, credit for cars, hoysehold items, holidays e.t.c hence why rate hikes worked.
Another example is last year. Every 0.25 rise the Federal Reserve or Bank of England made was met with significant media fanfare and analysis as it had a direct impact on everyday folks. How many people in Nigeria know the current rate or are directly affected?

Secondly, for rate hike to work, every rise is usually met with fear and a change in perception/spending habits. There'd be concern about house price and stock market crash, job lay offs e.t.c. Even fund managers and banks do not want increased rates as it means less return elsewhere. Here, we are celebrating it which shows quite well its not having the intended effect.

ositadima1:
But the rate of inflation is about 26%. Does it not imply that an entity borrowing your money today at 19% to pay a year later is actually profiting at your expense? The entity can simply invest your money and profit from the difference. For example, it can buy goods like palm oil, store it in large reservoirs, and one year later, they pay you your 19% and pocket the change. I'm not saying this is exactly what the government is doing, but I am answering your question that the government can have that money invested or even spend it today.

The other point you raised is that it is always oversubscribed. Maybe they are constrained on the initial offer quantity, and they rely on the oversubscription. Perhaps by hiking the rates, it will be even more oversubscribed, as I've heard there is a very high amount of Naira in circulation currently.

I'm not a professional, and these views are just layman's views aiming to see things from the other side of your argument. Thus, on another day, I can be on your side, lol.

I see your point. Our views matter.

Issue here is that interest rates by central banks are not for purpose of generating profit but rather to drive 3 main macroeconomic levers viz: stimulating growth, combating recession and fighting inflation. During covid, major central banks crashed interest rates to zero so people and businesses could have access to cheap credit, keep spending and hence maintain demand.
Outside recession/inflation major economies maintain interest rates at very low rates to encourage businesses growth. In some nations, its even negative. I.e you loose money by buying government bond. They still get subscribed (just like here) as some financial houses/pension funds have to hold government debt as part of their core portfolio. The analogy you gave is right for an individual or business but not for the government. The average Westerner is able to get a loan to buy a house at 5% today. Meanwhile Nigeria is borrowing same foreign currency at over 12%. How can we compete? 'Lending' the government money hardly generates any economic footfall and hence shouldn't be overly rewarded moreso if it's new money being printed for this purpose.

Regarding oversubscription, they mostly take up what they set out to (rarely go over). I've stated why it'd be oversubscribed irrespective of the rate. Yes, there's high amount of money in circulation. The way to tame that is by stopping excessive printing and chanelling printed money to productive parts of the economy. What this does rather is push the can down the road so they print more next year and we're back to square 1 just like in 2018.

Seems the 2018 era of high interest rates.

The CBN would typically say its to battle inflation and attract foreign investors. We already know TBs are always oversubscribed irrespective of the prevailing rate. Why then are rates being increased? Like in 2018, I still ask

1. Where does the government get the money to pay the 20% interest on TBs? Is it more printing?
2. Who benefits from high TB rates- is it the rich large institutions or everyday folks?
3. If foriegn investors cared about local interest rates, why wouldn't they skip Nigeria and head to Argentina with over 100% interest rate?
4. With CBN interest rates typically forming the minimum floor for commercial loans, how would Nigerian businesses survive sourcing loans at over 20% when foreign counterparts are at 5%?

The next excuse is inflation but again I wonder if we are just blindly copying the West.
In Western nations, Interest rates and inflation reverberates throgh the society and reaches the common person. Due to good exposure to cheap credit, a rise interest rate means monthly mortgage payments and subsequently rents increase, house prices fall/stall, more interest on credit purchases for cars, holidays, gadgets e.t.c hence less demand. It generates a drag limiting discretionary spending. Hence why the west quickly conquered their highest inflation in decades by raising rates to 5%.
In Nigeria, How does this rate hike filter through to the common man and even then, how much discretionary spending do we make? How much credit exposure do we have?

It's the reason why high interest rates hardly ever brings down inflation but instead causes more inflation, destroys businesses, enriches the rich/banks and leaves us chasing our tail. Keen to get alternative views.

Quiteparrot:
This country is finished, everybody is now chasing after the dollar, #1800/$ as at today. I'm so depressed right now, all my investments are in Naira. Mutual funds is giving me 11.5%, Bond at 15.7%, my purchasing power has been reduced by more than 50%. I sold my SUV about two years ago, hoping to buy something bigger, now the old version type I sold is now 14m for Nigeria used, I can't keep up. I had to close down my business because of government satanic policies, fixed investments wey I put eyes to dey use take care of family, devaluation and hyperinflation no gree, I'm so tired.

Each time I want to process a withdrawal from my mutual funds investment in order to starch it all in dollars, I get weary because of the monthly income I will earn from it which I've been using solely to take of my family, the more I tarry the more the dollar soar. Newbies should learn from my mistake, don't keep more than 20% of your investments in Naira, 80% should be dollar investment.

Is there anyway I can sell my 10 years SUKUK? Nigeria bonds is a loss in disguise

Scarry stuff. Sadly, this is becoming the reality of many. As with most things, the folks who benefited are those who saw the signs when exchange rate was 350- 750 and not now when the fruits of earlier moves have ripened. Someone recently argued the the NSE has historically outperformed the US stock market cos he went on a website and read some percentages. Comparing the strongest market of the last century to one of the weaker ones.

Looks like the CBN has gone full circle with its moves.
We are still paying subsidy (even at a higher rate), more exorbitant loans have been taken, inflation is higher, currency more volatile, high interest rates are back.

The only thing that has changed is the end to senseless naira printing via ways and means. But then, we still have printing going on thats not being funnelled into the right sectors.

FalseProphet1:
Favor found me this morning as I was driving out to meet a client at my spiritual center.

Behold, this "Bush meat" was running towards me. Na him I march am.

See am! I don put am for Booth. Meat don sure for me today.

I enjoy doing the Lord's work.

All romancelanders are invited to have a taste of this divine Bush meat.

This I have seen.

Remember there is an outbreak of suspected lassa fever which is spread via rats and deadly.

hustla:
Racially abused is even good.

People dey chop slap wella

Sexual assault nko? Plenty wella

Oh dear! abeg gist me.

I heard a resident once openly screamed at a care worker calling her a black monkey. Everything went under as dem say na dementia. If na some oyibo, it'd be 4 weeks off at least to sort out their mental health. People would later say we need people with passion for the job. Why dem no go do the work?

RealLordZeus:
A woman met in a night club complained of sexual assault...
A news also graced the front page some days back where someone was charged for sexually assaulting a prostitute... as in I don't understand
The law over there is twisted..
I don't blame them sha, dem no get much problem so they must create one

I just pity some randos trying to bring that mentality here

Prostitute or not, sexual assault is a crime. Still the case irrespective of where you met the person

Difrent:
I know stable coin and I know you know what I'm talking about.
I'm an early crypto adopter and enthusiast.
That's not to say I should not say things the way they are

Eventually crypto will be universally accepted but it can't replace FIAT CURRENCY.

and just so you know....the thing that was driving crypto is it's decentralization and the fact that there will be no need for Central banks..... but as we can see, that is not even possible.....just that it will be public information instead just being available to a few.

I mainly agree. There's lots of speculation in the industry but there's little or no sense speculating on stable coins.

What becomes of crypto in the future is anyone guess.

wallg123:
passion for whipping ass … this so funny

People make it out like its some high postion immigrants should be eternally grateful for. Ive heard of care workers being racially abused by clients and the whole episode gets covered up in the name of dementia.
Carers are only allowed in cos the nation needs them. Reason why I'm annoyed the government has finally seemed to craft a route of perpetual servitude that would bring in oversee workers on low wages with no family life.

I'd much rather the government ended the care route, significantly raised care worker salaries while increasing taxes plus reducing the treshold for inheritance tax to pay for higher demand.. Afterall, British taxes should pay for British care.

ReesheesuKnack:
Read this on the Metro(Newspaper) this morning.
I agree with the writer, 100%

Hehe.. well said

Even here we were reminded how 'the quality of care' might drop by letting in Africans via the care route or better put those who do not have passion for care but rather want to emigrate. Like anyone wakes up and has a passion to wipe another and be insulted while at it.
If the British system is so passionate about quality, then they ould make care giving a degree programme so natives with passion can take up student loans to learn it. Or better still, increase the hourly wage to £20ph to attract locals.

What's annoying is that incoming care workers have been shoehorned into a state of low wage, reduced social mobility and solitude (as they cant effectively bring family). No wahala after a while they would become citizens. They also have mental health and can also have fibromyalgia. Good thing is nothing exposes you to everyday British life working in community health and care

Difrent:
They are not Solely responsible but they are a part of the problem.
The P2P traders are using Crypto like it is FIAT currency. But it's not.
Cryptocurrency prices depends on speculation
You hold a coin in the expectation that its value will rise..... No nation will allow its currency be played with like this
And it's a duty of every well meaning Nigerian to stop it. Speculators don't mean well for us....just a few of them will put the vaaaast majority of us deep shit if we allow it.....

It's worth knowing about the crypt0 industry before you argue for or against it. Stable coins are pegged to the value of their underlying fiat currencies i.e usdt to the dollar

OkoEmm:
God bless you. You know what you are saying. You just mentioned that binance did/does $1.5m in 24 hours(less than $10m per week. At the NAFEX window over $200-400m is traded per week.

That tells you that Binance is actually used for stupid speculation.

The irony he had failed to see. How can the miniscule volume on Binance be the one driving the wider market? That rarely happens.

How much forex is generated from over 1m barrels of crude sold daily that its now $1.5m that's having such a profound effect. USDT now serves as a way for the ordinary tech savvy citizen to protect their buying power else poverty comes knocking.

Nobody is mentioning the effect of over 27trillion naira the last government manufactured out of thin air or the excessively expensive dollar loans taken up which are today eating most of our forex revenue.

missjekyll:
GIVE . Dont lend.
Thats the point I was making.

I see your point and see the cliché as a guide which I follow on most occasions. However, life has taught me there's exception to every rule.
These days, on the occasions I lend, it's a sum I know would not be an undue burden on the recipient and one I know I could potentially forgo if push comes to shove. Moreso, I know who I lend to. All this has meant I've been able to help a greater number of people I'd otherwise have turned down.

What a mess. Flagging off 5km roads.
A government official should loose his job for spending public funds to organise such a flagoff.
These are things that should be sorted by the local governments/councils without any fanfare.
What's annoying is that Wike would go abroad and see proper roads that were build without this praise singing.

missjekyll:
This advice is general : DO NOT lend anybody money to come over. Give what you can spare and tell them you haven't got any money.
People have stopped talking to me over this policy but hey-ho


As to

Hehe.. all this advice sef

Most folks who came in last year via the care route was via the support of their family here. I've come across families who are long and well established in the West. Ask how, and it was almost always by lifting themselves.

In the end, there are no hard and fast rules to life. I hardly lend folks money but on certain things, I make exceptions. For many, helping a sibling come over and get established would ultimately mean more to them than thousands stashed away and being the only one giving freebies. Ultimately, it's for each to know their root and what they can forgo as sad stories also exist.

VeeVeeMyLuv:
That's a very sick decision

Suppose the country breaks up, Will the debt from this sick move, still be bored by the emerging country or countries?

The lenders would have good legal teams that would have factored in certain eventualities in the terms and conditions. There is of course market risk but without access to such documents, we can only guesstimate.

In such event, the newly born nations or whatever nation that retains the NNPC might bear the liability. They could also put a lieu on or ringfence part of our foreign reserve. JP morgan did something similar recently by asking the CBN to deposit some of our reserves with them before they could access a loan.
Ultimately, if the lenders stand to lose out completely, then you'd expect them to be heavily involved in the war or sell the debt to those who'd do the dirty job.

This is less of my concern though. What worries me is that just like with eurobonds, as we've unlocked this kind of borrowing wouldn't surprise me if the FG keeps going and pledging more crude until there's none left to pledge. Another is that much of it would be looted back to europe without any benefit for the common man

deept:
who approved the PSW visas? were they compelled to?

Hehe. PSW is the carrot dangled in front of international students as a reasonable pathway to longterm stay.
In 2012 ish the backdoor song was chorused hence the 'study and go' approach was tried but we know how that ended. The funny thing with all these is they can decide to cap the number of any kind of visa to whatever number they so choose and stop this constant moaning.

Its interesting that despite the recent immigration brouhaha, the 'study and go" approach has hardly been mentioned again. Some lessons have been learnt.

ehizario2012:
...for what it is, and not what it should be. Well said. A dentist friend of mine was narrating how some patients refuse black doctors till now, as if na d doctor disease go kill.

R***SM and tri****sm sit deep in the human nature, nothing can take it away. It can only be managed. Michael Jackson tried to become white but he still wasn't accepted, so no matter the number of years spent here or ILR/citizen or whatever status, never forget who you are. It's their land, and rightly so.

The aim is to make the best of the opportunities here, and firmly understand your place while actively contributing to the development of the host country/community. That's a better way of seeing the symbiotic relationship.

I see your point but the phrasing is a bit off.

Britain is quite multicultural and the that change is set to continue. Our place in the UK is not at the bottom. Many of us would in 5-10 years contribute more to this society than many have over decades/lifetimes. We can fight our corner.

As an immigrant, you can rightly make the UK your home. Yes, the overall default is to point fingers at the immigrant when things go wrong but as more immigrants fight through the ranks, acceptance becomes inevitable.
The rise of many Nigerians and Indians in Healthcare and other fields has watered down the otherwise racist views on these group. If you GP you always see is an Indian, it overtime has an effect on your subconscious moreso with second gen folks like Kemi and Rishi pushing through

Tier4Dependant:
Study route is the most common route to relocation and this has been going on for decades even the government knows this. And it’s a Front door route as long as it’s done legally.

I find it funny when folks use the back door statement

Every policy maker knows that higher education is a front door to immigration. Same as with most western societies. This does not mean that every student should stay back.
Its the masters students I partly blame. If I'm paying over 20k, then I would be clear and vocal on what I want. It's my money afterall and locals wouldn't pay anything close.

That was the reason why the government reintroduced the PSW visa. To make the pathway between study and stay more straightforward and attractive.

Zahra29:
There will no longer be the option to sponsor family on the care route (except in the NHS, and there will be no threshold in this case)

When last I checked, carers could still sponsor family but they'd be subject to same salary treshold as everyone else (38k) not the reduced salary treshold for the initial visa.

Look at the recent loan by Nigeria facilitated through AFREXIM that was used to 'defend the naira'

The details are bothersome.

We borrowed $3.3B at an exorbitant interest rate of almost 12%. The collateral was pledging 90,000 bpd of our crude at a suspect price. This is just free stvpid money being given to the western banks behind this loan.

So for future generations, part of the crude the nation would be producing would already had been sold before they were born. Given the hesitance of IMF to lend us money and our eurobond debacle, it wouldn't surprise the country rushes to borrow more this way.

So we are done selling and squandering the crude we produce, we are now doing that for future generations. Like a son taking a loan using his living fathers property as collateral cos he believes one day the dad would die.

Whats more surprising is that some folks praised this deal here. Nigeria is borrowing against our oil reserves they said.

oluayebenz:
1k most likely.

Does the CBN have forex to defend that rate?

Fixing is easy, defending it is the hard bit.

ehizario2012:
Do the guys currently running a Masters programme really have a disadvantage? I thought they just like every other immigrant already in the UK.

From my understanding, after completing masters and PSW, they'd have to meet the new 38k salary treshold to be sponsored or move into select sectors e.g care. Even with care, they need to meet the treshold if they are to sponsor family. Quite similar to when PSW was initially scrapped a decade ago. The other thing is the visa cost for masters and psw and the fact the time spent don't count towards ILR (work route).

Wouldn't surprise me if the route to ILR is made 7 years. For the govt, why chop IHS fee for 5 years when you can chop same for 7 or 10 years and then collect ILR fee at the end.

oluayebenz:
Buying dollar at this point is extremely risky..

CBN is about to reverse the floating of naira policy.

Reverse and then fix at what rate?
The gallop from 1k to 1.5k was quite clear over 3months ago. I'm surprised it took this long.

Once 1k was breached and the exchange settled above 1.2k, it was clear 1.5k was only a matter of time. I remember stating that here.
I expected the CBN to put a fight at 1.5k which they have. For the love of my nation, I hope they succeed else 2k and subsequently 3k wouldn’t take too long. If they can't reign in at this level, wouldn’t surprise me they go next for Domiciliary accounts soon as they are running out of options.

What surprised me this time was the haste in which the market responded. People have truly learnt. With previous devaluations, it usually took 2-3 months for the effect to be felt in the market. This time around, prices were up the next day.

ogawisdom:
.....
[b]To compete well TB should be over 25% [/b]now BC it looks unwise to chain down money in naira for a year BC the value will be gone by the time you receive it due to super hyper inflation. USD is the Koko now

Hehe... nd where would this 25% come from?
Is it it money that is being printed to reward banks?

Many developing nations just copy western nations by raising interest rates thinking this would work on inflation without understanding the intricacies of western economies

Also in the news...

The number of people inactive for health reasons was 2.8 million by the end of 2023 – a rise of more than 200,000 on the year and a jump of 700,000 since before the Covid pandemic. In a literal sense, this is a sick economy....Employers are also trying to plug the gap by employing more people from overseas. The number of UK-born workers decreased by 312,000 between the fourth quarter of 2022 and the fourth quarter of 2023, while the number of foreign-born workers rose by 405,000.
https://www.theguardian.com/politics/2024/feb/13/uk-labour-market-long-term-sickness-economy-workers

I remember my statement the last time this record was broken...

The next 1-2 years hould be interesting.

The effect of the salary cap should soon simmer through. Less number of masters students, the few coming have no dependents. Care pathway has been restricted.

For starters, I'm say more vacancies would crop up in the care sector (like we had 2-3 yrs ago), more shortages in other sectors and universities moaning. I pity some folks doing masters though.

justwise:
I was shocked when I read that story on BBC website. £11K a month he is getting for round the clock care and he was able to save 50K for holidays with his two PAs. No wonder city councils are going broke. Shocked !!

My council would soon join the list. Number one expenditure and rising for most is adult social care. While very important, many are beginning to understand that money needs to come form somewhere.

lavida001:
We pay tax and they use it to pay benefit and disability allowance. Yet we are not entitled to public funds. Immigrant eyes dey see shege.

Looking at my tax deductions and I fit just start to cry

Hehe.. the immigrant of today would be the Brit of tomorrow. Just that most immigrants have already been chiselled in a way that they'd put in the extra effort for the sake of their kids

victorazy:
Bros am telling you the fact. Because you don't know doesn't mean it doesn't exist.

A furniture set in Chinese market is N1.2m but here in Nigeria, Furniture house, Vento, Alibert mention them sold it N5-7m grand.

Am an architect, I know things that moves, building & interior deco things, cosmetics and children wears na hot market.

That's the issue with folks who lack a hands-on experience. You see the headline price, press calculator and start dreaming of bags of money.

Jokes apart, if you really know how to make 600% in 6 months, why are you not richer than Dangote?

Take the example you gave. Have you factored in costs of shipping, clearance and and associated risks, cost of renting a showroom good enough to showcase furniture of that price, staff costs, taxes and levies, inflation and turnover? Even if at the end, you make such turnover, what stops someone from buying same furniture and selling it for 4m to put you out of business?

Less than 10% of Nigerians have 500k in their account. How many Nigerians can afford furniture of 8m to give a good turnover? As an architect, can you afford it? Why then do you think its a 'hot market'?

victorazy:
More than enough to start big business here!

I use 500k rent a very wide shop in good location.

Use 300k to shelf it to my taste.

Use N2.5m arrange clean Toyota Corolla or Matrix.

Use 2.5m to start mini importation from China
Use 200k to waybill it to Nigeria. Plenty change to remain, in next 6month you've made 600% even more.

You hold 8m u wan Japan? Come make I lecture you.

Lol...
You know if you can truly make 600% of your capital in 6 months and do so on a consistent basis, you'd be richer than Elon Musk in a few years?

I wonder if you've ever run a business before

victorazy:
With 8 million and still wan travel?

You think those who travel do so with 2k?
Ticket to UK alone na how much?

Tolzeal:
Thanks for the well detailed post.
Do you think it’s smart to invest outside US? I’ve always been putting money aside working with US dominated index funds .

With low cost global funds , I have VUSA , VOO on T212 and VUSA did 15% gain this year which undoubtedly quite astonishing.

Would you prefer VUSD to VUSA to this depends on aggressive you want to go with your investment approach.

Again many thanks for your contribution and looking forward to hearing from you.

Generally, the US vs global market moves in ebbs and flows with one outperoming and the other lagging until they swap.
The US markets have been astonishingly strong over the last decade but how long that dominance would continue for is uncertain moreso after such strong growth.
While still a good option, buying only US means less diversification and you being fully exposed to any downside there.

A global or developed world index would have about 60% US exposure so the gains from the US would feed through. The caveat here is that in certain things, the rich (US) only get richer.

There shouldn't be a longterm difference between VUSD and VUSA hence worth going for that which is straightforward.

I came across an article recently which backtested a global index and a US only index over the last century. Oddly, the global index performed better as it had less downside risk (usual caveat).