₦airaland Forum

I think Buhari now wants to play with fire

LRNZH:
Intro
First, I am not a trained economist but I believe that as a widely read and travelled Nigerian, I know enough to generate and add to a discourse that is rather too pertinent to the current clime irrespective of academic training.

Also, I am more of an empiricist than a theorist. This gives me the privilege to discuss issues outside of my discipline of expertise so long as I have some experience in the matter at hand.. We all of different professional, political, religious affiliations live, drink and eat the economy. I would give examples from existing economies to make my points rather than harp on theories taught in Business schools and Economics-101 classes.

[img]http://qzprod.files./2015/12/nigerian-naira.jpg?quality=80&strip=all&w=1600[/img]
Reuters/Joe Penney



So, the million-naira question remains. To devalue the Naira further in 2016 or not to?
A very good example of how to use currency devaluation and indeed undervaluation comes from China. China is regarded to have the largest and most complex economy in the world for most of the past two thousand years, during which it has seen cycles of prosperity and decline(6). My emphasis would be on the ongoing rise of the Red Dragon since 1978. Based on general consensus, the drivers for this rise are:

1. Starting from 1978, Deng Xiaoping liberalised the economy without changing the political system. China pursued capitalism with a communist political system unlike Russia that wanted to control resource distribution through Perestroika and Glasnost. For example, China had over 100 Billionaires by 2009 compared to about 30 in India in a Communist set-up(7).

2. China's brand of capitalism is heavily state supported. State owned enterprises were and are still encouraged carry out business locally and internationally. A run-through of 2014 Forbes or Fortune-500 list of 10 largest companies in China will produce mostly state-owned enterprises like Sinopec (Oil), China National Petroleum (Oil), State Grid Corporation of China (Power), Industrial and Commercial Bank of China Ltd (Banking), China Shenhua Energy Company Limited (Mining) amongst others(8 ).

3. China invested massively in physical infrastructure. A good illustration is in railways. With only 55,000 km of railways in 1985, China had a smaller rail network than India (62,000 km). By 2006, with 75,000 km of railways, China had overtaken India which had 64,000 km. In 2006, as a proportion of GDP, Chinese annual investment of 14.4 per cent in infrastructure such as power, transport, drinking water, irrigation and telecom was almost three times that of India(7).

4. Cheap, educated labour. This led to foreign companies to tap rush into China to take advantage of readily trainable human power. After the US, China is the second-largest recipient of Foreign Direct Investment in the world. Much of Chinese exports are by foreign-owned firms. In 2007, only four of China's top 25 exporters were Chinese companies

5. Lest I forget, as China started reaping from its investments in economic growth, it became hard-lined against corruption. As a communist country that doesn't have the ability to vote the corrupt officials out of office it had to devise its own rule of law to tackle corruption. In the1980s, "economic crimes" such as bribery, drug-trafficking, and embezzlement were added to the legal code for capital punishment. In fact, it is popularly stated that after the clampdown on corruption in China in the late 2000s, the sale of luxury watches (a popular gift to officials), dropped in China and Hong-Kong. (10,11)

6. Finally and most important to this discourse, China's exchange rate policy was designed to promote competitiveness. The renminbi (or yuan), which had been rapidly devalued from RMB 1.50 per US dollar in 1980 to RMB 8.62 per US dollar by 1994, was pegged at RMB 8.27 per US dollar from 1997 to 2005. By 2005, the renminbi was allowed to float and it gradually appreciated to RMB 6.82 in May 2009, and remained more or less unchanged thereafter. China has intervened heavily to prevent the renminbi from appreciating, and in the process, accumulated over $2.2 trillion by 2009 (9).

The last point above shows that currency devaluation can be a driver for economic growth unlike the same continued devaluation with SAP in Africa. The difference in economic impact lies in the rest of the 4 points that I have highlighted and I will bring the points home to Nigeria.



- LRNZH



References:
(1). http://www.investopedia.com/articles/03/060403.asp#ixzz40cyLSRcN
(2). http://documents.worldbank.org/curated/en/1994/03/698538/parallel-exchange-rates-developing-countries-lessons-eight-case-studies
(3). https://en.wikipedia.org/wiki/Nigerian_naira
(4). http://blogs.premiumtimesng.com/171189-2/
(5). http://web.mit.edu/africantech/www/articles/PlanningAdjust.htm
(6). http://eric.ed.gov/?id=ED460052
(7). http://business.rediff.com/column/2009/nov/23/guest-reasons-behind-the-rise-of-china.htm
(8 ). https://en.wikipedia.org/wiki/List_of_largest_Chinese_companies
(9). https://en.wikipedia.org/wiki/Renminbi
(10). http://www.tradingeconomics.com/nigeria/balance-of-trade
(11). http://www.bbc.com/news/business-23541923
(12). https://en.wikipedia.org/wiki/Capital_punishment_in_China

Next time make your story short and concise. No one has the luxury of time to read this length of an article.

afroxyz:
Lazy children. So they can't look for jobs to raise cash for their upkeep and fees. Let them keep crying

Dey for Nigeria roast. Jobless human being

HAH:
If they can afford to take their children abroad then they should be able to buy black market or better bring back your children to Nigeria where they will pay in Naira afterall we have good private universities here

which private university? The place you bought your result?

Yomieluv:
Let the kids come home to school then.

Because your papa no fit send you abroad

modath:
Why on earth are they crying for heavens sake!! schooling abroad is a "Luxury", it is not a Basic need!! .... The country is barely able to give oil importers & manufacturers the Forex they need, where on earth will the one for "Luxury" items come from....

It's not easy for the parent but the country is in a dire straits & their wards problems are the least of the present worries! Your analysis is just so poor. Parents sent their children abroad for studies and your are giving filty analysis. You are a duch bag.



*Modified*


The problem with most of you quoting without comprehension of the point is that you have refused to understand the context.. & check the meaning of Luxury, Time for some is a LUXURY.

RICH PEOPLE who can afford it are not feeling the pinch, it is the average Joes & janes who are STRUGGLING that it is a LUXURY for, if they get to ABOk1, they will find, AFFORDABILITY is the issue.... step out of your cocoons & see people who can afford to buying scarce FX like it's water...... You won't find the elites moping on front of bank tellers... and while at it pray for oil price to miraculously climb out of the valley cos without that padding to jumpstart the economy... things are really messed up!!

what a stupid analysis

assana:
Dey shld send der kids back to 9ja sch,d ones in 9ja sch neva die finish,dey are all doing well#feeling lyk wanna go to abroad study# Dey shld send der kids back to 9ja sch,d ones in 9ja sch neva die finish,dey are all doing well#feeling lyk wanna go to abroad 2study#

You go dey there suffer with this your terrible statement. Envious and Jobless person

Achuwa1:
Weep no more parents,coz there are lots of universities,polytechnics & college of education here in Nigeria..
They should all withdraw there lads from all those oversea schools coz they are using those kids studies oversea to delapiidate the little foreign reserve we have tht would have being used @ forex for importation of important goods into the country,,,
only students going to study professional courses & those going for research with guarantee tht they will return to practise should only be given preference...
why should a student be going abroad to study political sc.,sociology,etc with our foreign reserve s going down the drain.,,abeg let them withdraw all of them & send to schools in Nigeria,,afterall,there are still gud private universities here if u feel u dont like govt. Owned schools..

You are a part of the world's problem. What's wrong with parents sending their children abroad. I pity you

ournaijablog:
Everyone can see this isn't real, an Adidas online assistant wouldn't commit such grammatical blunders. Smh

There are no grammatical blunders. Stop being a critic.

Kgdavid:
she could have at least tried to speak better english na....which one is "did you have any other questions"??

anyhoo, it looks like she is enjoying the attention but looking for a way to cover her arse in case the conversation comes to the notice of her supervisor.... otherwise i see no need for her to tell him her marital status...does that one have anything thing to do with Adidas?

And what is wrong with her English? that was a correct way of asking if he had any questions. Americans use the phrase 'did you'.

Hy

Hi house