₦airaland Forum

ahmedjika:
my problem with nairalanders they don't go beyond local news

paschu:
Maybe you need to know that Wikipedia is NOT an authoritative source of information. Any dick can edit any content on Wikipedia. And Wikipedia does not maintain an archive or history of edits that I know of. Don't be suprised if the stuff you are citing now is not there again tomorrow.

Xerum:
@OP

Nice write-up and analysis.

I do miss the term arbitrage though (spread between bid and offer price), it is the gap between these prices that parallel market operators take advantage of. Arbitrage is very common in most 3rd world / developing economies as a result of the fact that most are extremely import dependent / netto importers like Nigeria.

The Nigerian economy is still at the very basic stage (extractive), we still import refined oil which entails incurring huge expenses in the process (Transportation & insurance) all paid for you USD.

It is almost beginning to sound like a cliché; we need to create enabling environment in which our SME’s will thrive, by so doing creating employment and increase purchasing power which will boost internal consumption. If we are able to boost our internal market this will reduce our yarn for imported goods & services that are available in Nigeria. Importation of unnecessary goods and services should be made expensive.

Nigeria is not an isolated market, the government and CBN can stick to their current policies of not doing the needful and wait it out hoping for a miracle, at the end of the day it is the market that determines the value of the Naira (taking into consideration our over dependency on import)

It is rather weird, that the official position of the government & CBN is that the Naira is pegged between 190 – 200 which is the price commercial banks buy USD from CBN. And the commercial banks in turn charges their clients who make purchases on the net / make withdrawals abroad close to the black market rates (excluding bank charges).
Commercial banks are making huge profits here and we wonder why the parallel market still thrive? Which brings me to my next question which is, why isn’t any of the Financial regulatory bodies doing anything about this? cos this action of the commercial banks is tantamount to jeopardizing the exchange rate policies of the government.

That the Nigeran government is reluctant to go the way of devaluation is understandable as this will increase the prices of imported refined oil products (with its multiplier effect on inflation) & will also make our debt more expensive. But something must be done to discourage over-dependency on importation and must be structural too.

You just summarised a large part of my epistle in less than 10 paragraphs.

Arbitrage, is what I was referring to as percentage premium in the analysis. Remember say I no go makaranta for Economics. I will miss out some key jargons of the trade.

Thanks for the clarity you just provided. I agree that a certain privileged few are making a killing from the ongoing arbitrage. The economic team has its work cut out for it.

azikiweironsi:
OP, God Bless you for the writeup. Well educating. Hope other NLs will follow this step rather than using abusive words.
Nigeria will be great again.
God Bless Nigeria.

omonnakoda:
If you look at it it says CITATION NEEDED and does not provide a source but the figures do not look real to me . Again I recall the £ in 1988 was 12 naira and dollar about 18

MrGerald:
You're not in a position to know, he said re-appeal, they've appealed to them before and given them the items, so go and sit down!!

omonnakoda:
Please share those references.They may be talking of the official rates but I BOUGHT dollars at Bristol hotel in 1984 for 3 Naira and 4 Naira early 85 before Babangida took over in August. I did not read it up.....

omonnakoda:
I did not say Buhari was there in 1980?

I said the dollar was 3-4 Naira under Buhari in the Parallel market and Buhari was there before Babangida

You wrote that it was 1.70 under Babangida. This is untrue and was never the case. In fact the deterioration started under shagari and never reversed.

cckris:
Devaluation is not only to aid exports. Producing match sticks can create jobs, & save Forex. How about Machetes for millions of farmers, or MUST USE kitchen knives, or shovels & head pans & other construction tools.
IBB started on the path of Structural Adjustment, but when he & his political friends saw that the South had more & better infrastructure for immediate take off, they backed out.Why?
You may have heard such nonsense as EVEN DEVELOPMENT, by which IBB & his political allies presume that they can hold down the South until the North catches up. Unfortunately Economic Development is not about how much money people have, otherwise Saudi Arabia & Brunei would possess patents on IT & Rocket Maths.
Today all Economic Indices, even in the Core North, is now COMPELLING Nigerians to use the FREE OIL MONEY to create jobs, instead of creating KINGS in every hamlet.

Reference:
What do you need power for. Abeg go siddon. Do you need power to farm, to raise the chicken you are importing. Do you need power to mix cement and build your roads and bridges. Nigeria doesn't need all these high-wire industries to develop. It is the basics that build economies and it is the lack of basics that destroy. Our biggest import bill is fuel, then food. Two things we have potentials and should produce abundantly if we can restructure and be hardworking. Your quest for electricity is just a lazy excuse. The average youth uses the little power available to charge phones to chat. Electricity has not benefitted most and 24hr power will not make a millionaire out of a sloth. How do I know this. The price of electricity has gone up and people are shouting. A productive person will not because he can easily swap costs. A industrious exporter will desire a devaluation to enable him remain in the game despite rising costs.

Reference:
Don't mind these senseless people. Top exporting countries like China and Japan struggle to keep their currencies WEAKER than set levels so as to make their goods competitive. Productivity and market share is the key. Foolish Nigerians struggle to keep their currency strong and so cannot attract or sustain productivity thoughtless of exports. Devaluation is not the destination but the key to killing wanton importation and inflation only affects unproductive lazy bones. Productivity is the counter to inflation. Nigerians are just to lazy mentally and physically but they love good things. The result is either poverty or theft. Two things in abundance here. Tell me why Buhari doesn't want to devalue and I will tell you that he is protecting his constituency, people of low productivity but of high taste. Sorry for this country.

omonnakoda:
Factually it is not true that the period of parallel was brief. During Buhari's tenure the dollar exchange for 3-4 Naira so I do not see where the 1.70 quoted in Babangida's time came from.It is not true

LordVoldemort:
The items include the following:

Rice
Cement
Margarine
Palm kernel/Palm oil products/vegetables oils
Meat and processed meat products
Vegetables and processed vegetable products
Poultry chicken, eggs, turkey
Private airplanes/jets
Indian incense
Tinned fish in sauce(Geisha)/sardines
Cold rolled steel sheets
Galvanized steel sheets
Roofing sheets
Wheelbarrows
Head pans
Metal boxes and containers
Enamelware
Steel drums
Steel pipes
Wire rods(deformed and not deformed)
Iron rods and reinforcing bard
Wire mesh
Steel nails
Security  and razor wine
Wood particle boards and panels
Wood Fibre Boards and Panels
Plywood boards and panels
Wooden doors
Toothpicks
Glass and Glassware
Kitchen utensils
Tableware
Tiles-vitrified and ceramic
Textiles
Woven fabrics
Clothes
Plastic and rubber products, polypropylene granules , cellophane wrappers
Soap and cosmetics
Tomatoes/tomato pastes
Eurobond/foreign currency bond/ share purchases

undisputedk:
I have read elsewhere where some persons have proposed that the disparity between the two prices maybe shortened by devaluation, while some have argued that unless the naira is 'floated', we'd continue to have the differences. Whatever that means anyways. Please can you shed some light on the adverse effects of having the two markets and how does 'floating'(another vocabulary I see being around around lately) seek to help the naira.


Yet again sir, I'm yet to get the answers to my first question.
When a BDC operator gives me about 400 naira for a dollar, how does he make a profit?
I'm deeply sorry for being an economic pain in your arse. I just need to understand that basic phenomenon. :-(

Reference:
Devaluation will flog you to a solution. Propping up the naira will only maintain the status quo, slavery to big oil. Make your choice oh ye irresponsible, ease seeking, ostrich hiding, can kicking, lazy ar.se.d citizens. Na una sabi. I am exporting and my clients are loving it.

DickDastardly:
Buhari will read the OP with grin and mumble some gibberish, then curse under his breath while scratching his head. He will be like
"Kai this ekwonomik froplem don taya me. Why i gwo snatch this kain wahala prom Jona put por bodi at zis my old age"

Saifullah01:
I think you r right. That's why I stated this on another thread:

I read rider on this forum that MAN (manufacturers association of Nigeria) saying many companies would close shop due to the FX policy of government. For me this is a misplaced statement from man.

As unauthodox as it may seem this is a time for Nigeria to boost its local industries. This is like a protectionist regime imposed by the government for local manufacturing to take advantage of by governments refusial to devalue.

I was in kaduna yesterday and met with one of sokoto state government officials, he told me he was coming back from inoson motors HQ to discuss the possibility of supplying 800 sedans to the state government (and am very sure other states are looking towards that direction too).
My fear is does inoson motors have the capacity to service this sudden interest in their motors. So rather than MAN complain on government FX policies they should encourage their members to seize the opportunity. I expect inoson motors to drag CBN top officials to their plant - just like dangote did to his refinery - and secure commitment from the CBN to prioritise them if they choose to request FX for expansion of operations.

I read an article once in the Harvard business review about international businesses in China, the author was complaining about how it takes more than 6 months to obtain a 1 year business permit in China! (You think that was just because of bureaucracy? ). That was their government delibrately protecting local companies from foreign competitors. Little wonder Chinese companies are number 1 in all sector of their economy.

And those that feel devaluation provides some sort of silver bullet, if we devalue then what?

Devaluation is meant to reduce the pressure on governments scarce dollar reserves by freeing it up for "other purposes". But by banning non essential items (call controlled devaluation) government has effectively freed up FX for essential purpose or "other purposes" like importation of raw materials and spare parts for local manufacturing. So let's not get it twisted, devaluation of the naira won't bring the price of the perfume (Montale - black auod) I coughed out 39k naira to buy online down to 19k naira.

Rajjah:
This exactly was the topic Ahmadu Bello University Zaria and Kaduna State University just debated on, here in A. B. U...

Toeyoursea:
Sir, I want to write an opinion piece on a similar subject for naij.com, I hope you don't mind if i reference your post? I can spot some relevant data there already.

undisputedk:
Good day. As we continue to flog this pertinent economic issue, lately I've found myself devour so many materials yet understand so little. Unless one does not handle money then economics may not be that important. Well who doesn't anyway.
That said, may I use the opportunity of this interesting thread to find answers to some questions bothering on the fx crisis.

Firstly, How do Bureau the Change operators make their money?
I know that a dollar exchange for about 200 at the banks (they say it's the official price), but these operators change at a higher price compared to that. How is it done? I hear those monies are repatriated to the CBN. What and how does it affect the economy.

I have other questions but I kindly seek answer to this first. I don't intend to derail the thread, I'm just a confused soul. Thanks.

Toeyoursea:
Thank you OP for not making your write up a Buhari or Jonathan affair, it is really down to earth. God bless your knowledge and help this nation move forwards.

omenka:
Will hold my fire until I read this from a more credible source.

payosehtor:
thank God we stiil some nigerians who chooses objectivity in reasoning rather than weilling like ipob, A norviss (economics) is expected to listen to those who can atleast attempt the answer & complement them or keep quiet. thanks to the op.

Nobody has a monopoly of knowledge. We are all meant to learn from each other. Bring your two cents while I bring my two kobo

989900:
You will be arrested at MMA.

1. It is illegal to carry that much Naira outside the country.

2. Naira is not an internationally acceptable currency, no international financial instituition will accept it from you -- maybe your friends.

aloeman15:
No dollar abi?
Ok now. But banks in the abroad no dey unda cbn.

So what if i cari half milla cash naira enta uk bank. I com say "change am to dolla"? Wetn go hapn?

Una cari go.

Cc- obiagelli, 989900, firefire, lalasticlala, mynd44, LRNZH

Firefire:
Serious scam oooo, by APC.

Ecoterrorism:
do you think its evey raw material that can be sourced locally? Tone down your insults to get an Abrahamic age

omenka:
Too bad I won't be participating this time. I know battles worth fighting and this isn't one of them.


Now, when we say Bruce Lee is very hypocritical with his twitter campaign, people call us names. Where is he when this near octogenarian who's been there since '99 is still insisting on going back in contesting against a youth??

Where is he to trend another hashtag critical of DM's inordinate ambition just as he did Baba's knack for pushing the youths aside in preference to "old men"??

Is Bruce Lee's commonsense only common when it comes to opposing the ruling party??

Time will tell.

talk2myles:
"economic crimes" such as bribery, drug-
trafficking, and embezzlement were added
to the legal code for capital punishment...

the above is what we really need to fight corruption.