NAIRA AT AN ALL-TIME LOW
They say the naira fell to an all-time low of N1,099.05/$ yesterday at the official Investor and Exporter forex window. A 30.36 percent decline from its previous closing rate of N843.07/$! A country's national currency losing 30% of its value in just one day can only mean something is drastically wrong with the managers of that economy and that currency.

But not like managing a country's currency is rocket science, it's simple economics - ECO 101

OK, LET'S GO BACK TO PRINCIPLES OF ECONOMICS
Elementary Economics (WAEC level not even university level) they taught everybody in school said money should be able to function as a store value. But for that to happen, it must have one quality - STABILITY. It’s terrible to say the least for anyone who has assets is a currency that lost 30% of its value in a day!

- The exchange rate is simply price. For Naira for example, it is the price you must pay in Naira to buy a Dollar.
- Price determination is all about DEMAND and SUPPLY, and in the case of exchange rate, also GOVERNMENT REGULATION.
- If you want to influence the price, you either work on the Supply, the Demand, or both.


WHAT THE CBN NEEDS TO DO VERSUS WHAT THEY HAVE DONE
I agree with what Chief Obasanjo said, when he explained his decision to make Soludo the CBN Governor, that a Central Bank should be led by a renowned economist and not a commercial banker. The focus and objectives of a Central Bank and a commercial bank are fundamentally different, and it doesn't automatically follow that a successful commercial banker can run a central bank. This CBN Governor and his team has been there for a while now and one would expect a competent team that was ready to hit the ground running to have been able to achieve some sort of stability, it’s a concern that the new CBN Governor and his team may not have been prepared for the job that has been given to them.

WHAT THE CBN NEED TO DO
- The national currency of many countries including some African countries have been stable for long. I expect the CBN to study and model after one of these countries. Find out the policies they have in place that help them to moderate supply and demand and replicate the same.

- I expect CBN to work on both the Supply and the Demand sides of the market with focus on achieving STABILITY


THE SUPPLY SIDE
- Use regulation to improve supply as many other countries do.
- Foreign investors must convert inflows to Naira within a specified short period of time
- Inbound remittances should be converted to Naira
- Exporters must show evidence of repatriation of a good chunk of their export proceeds before they are allowed continued use of the financial system
- Commercial banks should be directed to close domiciliary accounts of individuals and businesses. Owners of foreign currency in banks must convert them to Naira at the prevailing market rate but they should not be allowed to hold them in FX.

THE DEMAND SIDE
- The decision to lift the previous ban of some 43 items (vegetable oil, rice, toothpick, etc.) from accessing Fx through the official market was a wrong decision! The CBN should rather have pursued outright ban of their importation into the country. The country should focus on promoting local production of those things.
- The CBN should use regulations to eliminate speculators and artificial demand for FX. Find out, in some jurisdictions, people can't just walk into a bank and open a domiciliary account, express approval of the central bank is required. Anyone who has no genuine, visible means of earning FX should not be allowed to open a domiciliary account. These are the speculators who distort the system.
- Purchase of FX for any item that can be legally imported into the country should be allowed through the official market. Anything otherwise leaves the importers with little other option than to go to the parallel market.
- Importers must show evidence of receipt of imports paid for after the expected delivery date to be able to access any further FX.

NOT AN EASY ROAD
- The actions required to save the Naira are tough and will sure meet with resistance. The beneficiaries of the current system, which include some highly placed people, will try to resist any reforms. I came across some Nigerians overseas who lamented seriously when the value of the Naira appreciated significantly some weeks back. Lesson: not everyone loves Nigeria and not everyone want Nigeria to get better.


CAN CARDOSO MUSTER THE SOLUDO-KIND OF GUTS?
- Let’s be clear, there is no easy way to save the Naira. Tough regulatory action is required. Soludo had guts. Only a CBN Governor with a lot of guts could have moved the capital requirement for banks at that time from 2 to 25 billion Naira. It was a tough action but that is what was required to create big banks with capacity to finance big ticket transactions and play internationally as several Nigerian banks have become today. Such level of guts is required is required to save the Naira, but can Tinubu’s Central Bank of Nigeria Governor Cardoso muster the Soludo-kind of guts? I sincerely do not know the answer.

TIME IS OF ESSENCE
- Good leaders know they have to hit the ground running. Soludo moved the capital requirement from 2 to 25 billion in his very first Bankers Committee meeting. Tinubu removed subsidy in his very first broadcast. It is therefore not a good sign that Cardoso has not hit the ground running. But there is still time for him to redeem himself. He needs to act, and he needs to act fast. Time is of the essence because in this world, no one has forever to do anything.

You sound very patriotic to to be honest. But many of your suggestions are at cross purposes. If you ask CBN to close people's usd accounts due to speculations and convert to naira, you will have huge Forex flight out of the country and exporters will now keep their fx outside the country. Wale Edun and Cardoso have brought better plan for this. Get attractive fx investment bonds that will move these huge bank Fx deposits into income yielding Govt bonds. Think deep about this, it will keep Fx funds within the country and reduce speculators powers.

sholatech:
You sound very patriotic to to be honest. But many of your suggestions are at cross purposes. If you ask CBN to close people's usd accounts due to speculations and convert to naira, you will have huge Forex flight out of the country and exporters will now keep their fx outside the country. Wale Edun and Cardoso have brought better plan for this. Get attractive fx investment bonds that will move these huge bank Fx deposits into income yielding Govt bonds. Think deep about this, it will keep Fx funds within the country and reduce speculators powers.

I am patriotic, that's why I am offering this free consultancy.

The most important thing is to achieve a uniform rate and stability in the value.

If the value is stable, no one will have any serious issues with converting their fx to naira, cause they know they can always convert their money back to FX if they want. The reason people do not want to convert their FX to Naira is because the exchange is very unstable and the value of the naira is on a constant decline

I beg to differ in some certain areas with this write up,my first area of disagreement is in two folds.
The first is the area of our foreign exchange earnings and expenditure
As I was taught in my Economics 101 class,the value of a currency is primarily determined by the overall strenght of its economy
An economy that is primarily dependent on imports for everything it consumes is already exposed to market forces which are sometimes outside it's sphere of contact
In Nigeria,our biggest exports as at today is Crude Oil.According to the latest figures released by Statisense, Nigeria's biggest import in the first three quarters of 2023 was refined crude oil and other byproducts used by manufacturers
This item alone consumed about 60% of our foreign exchange earnings
The Solution to this problem can only be solved when we begin to refine locally

2) The second problem of the heavy devaluation of our currency is our monolithic economy
Any serious government knows that there is an urgent need to diverse our foreign earnings from crude oil
I have always insisted that most of the minerals being exported in some parts of Nigeria are not captured by the government and thereby making Nigeria loss a lot of hard currency
The solution is simple: We need to rejig the Ministry in charge of Soild minerals,we must create a system that can adequately compensate the people involved in this illegal trade so that we can start capturing their earnings

There is a lot to be said in the area of Banking lnfrastructre and capacity, Portfolio Investors,Treasury Bills etc

Our Christmas and End of Year promo is still holding in all our Estates, kindly click for more information
https://www.nairaland.com/7926530/christmas-end-year-promo-silvergate#127237817

Now that all the initial gra gra have failed

Oh sure. But that's only for speculative individuals. Every CBN gov will tell you it's not a huge number. Many businesses have foreign operations and obligations that require huge daily/weekly/monthly Fx deposits without speculative reasons. Make your currency Stable and many speculators will no longer store value in USD. How many Nigerians had domiciliary accounts 20 years back?

kingsways:


I am patriotic, that's why I am offering this free consultancy.

The most important thing is to achieve a uniform rate and stability in the value.

If the value is stable, no one will have any serious issues with converting their fx to naira, cause they know they can always convert their money back to FX if they want. The reason people do not want to convert their FX to Naira is because the exchange is very unstable and the value of the naira is on a constant decline

Faiththatworks:
I beg to differ in some certain areas with this write up,my first area of disagreement is in two folds.
The first is the area of our foreign exchange earnings and expenditure
As I was taught in my Economics 101 class,the value of a currency is primarily determined by the overall strenght of its economy
An economy that is primarily dependent on imports for everything it consumes is already exposed to market forces which are sometimes outside it's sphere of contact
In Nigeria,our biggest exports as at today is Crude Oil.According to the latest figures released by Statisense, Nigeria's biggest import in the first three quarters of 2023 was refined crude oil and other byproducts used by manufacturers
This item alone consumed about 60% of our foreign exchange earnings
The Solution to this problem can only be solved when we begin to refine locally

2) The second problem of the heavy devaluation of our currency is our monolithic economy
Any serious government knows that there is an urgent need to diverse our foreign earnings from crude oil
I have always insisted that most of the minerals being exported in some parts of Nigeria are not captured by the government and thereby making Nigeria loss a lot of hard currency
The solution is simple: We need to rejig the Ministry in charge of Soild minerals,we must create a system that can adequately compensate the people involved in this illegal trade so that we can start capturing their earnings

There is a lot to be said in the area of Banking lnfrastructre and capacity, Portfolio Investors,Treasury Bills etc

Our Christmas and End of Year promo is still holding in all our Estates, kindly click for more information
https://www.nairaland.com/7926530/christmas-end-year-promo-silvergate#127237817

While I agree the overall strength of a country's economy is important, the issue is not just that we import refined products. So many countries in the world import all their refined products because many do not even have crude and yet their currencies are relatively stable and not on a constant downward spiral. Government regulation is a major factor in what happens to the currency

It's very easy to help the currency.. Take out 1000 and 500naira out of circulation.. Make 200naora the highest denomination and see money hoarding dive down.. People will use more of banking and money laundering with slash by over half which will in turn prop up the naira.. There is too much cash outside the bank stored by evil people..

sholatech:
You sound very patriotic to to be honest. But many of your suggestions are at cross purposes. If you ask CBN to close people's usd accounts due to speculations and convert to naira, you will have huge Forex flight out of the country and exporters will now keep their fx outside the country. Wale Edun and Cardoso have brought better plan for this. Get attractive fx investment bonds that will move these huge bank Fx deposits into income yielding Govt bonds. Think deep about this, it will keep Fx funds 8within the country and reduce speculators powers.

IMPRACTICABLE AND CORRUPTION LADEN IDEA.

Closing domiciliary accounts is imperative at this critical time.

We can't be spending and saving in dollars in Nigeria

BRING BACK KEMI ADEOSUN AS GOVERNOR OF CBN.

CARDOSO DOESN'T KNOW DEBITS AND CREDITS; ASSETS AND LIABILITIES; INCOME AND EXPENDITURE AND THAT BANKING IS ESSENTIALLY BOOK KEEPING AND ACCOUNTS.

NIGERIA'S ONLY SOVEREIGNTY OF VALUES; WANTS AND BARTER IS NAIRA.

Convert remittances from diasporan to naira
Stop importation of all consumables except for five stars hotels and upper scale restaurants
Medical tourism except where no such facilities exists here.
Foreign education abolished except where the programs are not offered here.
Foreign travels by government officials cancelled
All luxury items importation and furnitures ends
All fairly used importation should be reviewed

Let's do this for 18 months and see the result

KINGSWAYS IS FAIRLY PATRIOTIC. WE ALL HEARD CHIEF(OBA) OLU FALAE SPOKE YESTERDAY ON CHANNEL TV. HE WOULD HAVE PINNED NAIRA TO DOLLAR AT N50 : $50.
JONATHAN PINNED NAIRA AT N180:$1. EMEFIELE DISOBEYED AND DEVALUED IT TO THE PRESENT LEVEL. EDUN AND CARDOSO ARE EVEN BUNGLING NOW.

WHATEVER HAPPENS TO PRESENTMENT OF IMPORT CUSTOMS LICENSE BEFORE PAYMENT.

KINGSWAYS IS FAIRLY PATRIOTIC. WE ALL HEARD CHIEF(OBA) OLU FALAE SPOKE YESTERDAY ON CHANNEL TV. HE WOULD HAVE PINNED NAIRA TO DOLLAR AT N50 : $50.
JONATHAN PINNED NAIRA AT N180:$1. EMEFIELE DISOBEYED AND DEVALUED IT TO THE PRESENT LEVEL. EDUN AND CARDOSO ARE EVEN BUNGLING NOW.

WHATEVER HAPPENS TO PRESENTMENT OF IMPORT CUSTOMS LICENSE BEFORE PAYMENT.

GOVERNMENT SHOULD STOP MEDICAL TRIPS ABROAD, FOREIGN EDUCATION AND ALL OTHER UNNECESSARY FOREIGN GALIVANTING.

TINUBU SHOULD PIN NAIRA AT N500:$1 NOW NOW NOW AND REGULATE PRICES OF PETROL, KEROSENE ETC.
WE ALL WORK FOR POSTERITY. WE ARE ALL BORN SOMEHOW AND FROM SOMEWHERE BASIC, FROM WHERE WE SPRING INDIVIDUALLY TO BE "AIKI SOLDIERS" FOR LIGHT, GOODNESS AND LIFE.
FOREIGN INFLATION IS ALREADY RESIDENT IN NIGERIA WITH US.
WE MUST BEGIN TO EXPEL IT NOW AT N500:$1 NO MORE EVEN AT THE BLACKEST MARKET.
NIGERIA DON SUFFER FROM BUHARINOMICS.

TINUBU SHOULD PIN NAIRA AT N500:$1 NOW NOW NOW AND REGULATE PRICES OF PETROL, KEROSENE ETC.
WE ALL WORK FOR POSTERITY. WE ARE ALL BORN SOMEHOW AND FROM SOMEWHERE BASIC, FROM WHERE WE SPRING INDIVIDUALLY TO BE "AIKI SOLDIERS" FOR LIGHT, GOODNESS AND LIFE.
FOREIGN INFLATION IS ALREADY RESIDENT IN NIGERIA WITH US.
WE MUST BEGIN TO EXPEL IT NOW AT N500:$1 NO MORE EVEN AT THE BLACKEST MARKET.
NIGERIA DON SUFFER FROM BUHARINOMICS.

iamwai and iamalive.
CURRENT BANK EXECUTIVES ARE TERRORISTS AND CORRUPT.

orisa37:
TINUBU SHOULD PIN NAIRA AT N500:$1 NOW NOW NOW AND REGULATE PRICES OF PETROL, KEROSENE ETC.
WE ALL WORK FOR POSTERITY. WE ARE ALL BORN SOMEHOW AND FROM SOMEWHERE BASIC, FROM WHERE WE SPRING INDIVIDUALLY TO BE "AIKI SOLDIERS" FOR LIGHT, GOODNESS AND LIFE.
FOREIGN INFLATION IS ALREADY RESIDENT IN NIGERIA WITH US.
WE MUST BEGIN TO EXPEL IT NOW AT N500:$1 NO MORE EVEN AT THE BLACKEST MARKET.
NIGERIA DON SUFFER FROM BUHARINOMICS.

I'm trying to understand the issue of penning down the price to an official rate of #500:$1 . When people go to bank and could not get dollar they return to aboki and get it at an higher cost. So it makes no difference then.

orisa37:
KINGSWAYS IS FAIRLY PATRIOTIC. WE ALL HEARD CHIEF(OBA) OLU FALAE SPOKE YESTERDAY ON CHANNEL TV. HE WOULD HAVE PINNED NAIRA TO DOLLAR AT N50 : $50.
JONATHAN PINNED NAIRA AT N180:$1. EMEFIELE DISOBEYED AND DEVALUED IT TO THE PRESENT LEVEL. EDUN AND CARDOSO ARE EVEN BUNGLING NOW.

WHATEVER HAPPENS TO PRESENTMENT OF IMPORT CUSTOMS LICENSE BEFORE PAYMENT.

Pinning a Dollar to N500 without commensurate regulatory actions will not. Supply will not be able to match the demand

tollyboy5:

I'm trying to understand the issue of penning down the price to an official rate of #500:$1 . When people go to bank and could not get dollar they return to aboki and get it at an higher cost. So it makes no difference then.

ABOKI MARKET IS ILLEGAL.

kingsways:

Pinning a Dollar to N500 without commensurate regulatory actions will not. Supply will not be able to match the demand

GO AND READ ANY GOOD BOOKS ON FOREIGN TRADE.
EVEN TRADE BY BARTER IS THE FUNDAMENTAL BASIS OF ALL TRANSACTIONS AND IT IS NOT PROHIBITED BY SILLY REGULATIONS.
OUR FOREIGN RESERVE SHOULD SUPPLY OUR NATIONAL IMPORTS AND REQUIREMENTS.
BUHARI WASTED ALL OUR FOREIGN RESERVE ON MEDICAL. OBASANJO HAD MEDICAL TREATMENT IN BAYELSA. WE HAVE NUMEROUS UNIVERSITIES SPREAD EVERYWHERE IN NIGERIA. ATIKU LOOTED NIGERIA ON AMERICAN UNIVERSITY AND NOW UNABLE TO RUN THE UNIVERSITY. WE MUST GET OUR PRIORITIES RIGHT NOW.

orisa37:


ABOKI MARKET IS ILLEGAL.

But 98% of poor people patronize them.

vanbonattel:


But 98% of poor people patronize them.

Not just poor alone.
Banks are not dishing out dollar. If banks are dishing out dollar at official rate who dares see good and choose evil?

But when aboki are the only source to get dollar and the banks refuse to give out dollar we keep moving in circle cc:orisa37

I propose a very crude but very simple idea.

De-dollarize the streets!

Factually speaking, there is only one legal tender in the country. The dollar is an illegal tender. We do not require any more policies or laws to enforce this. Dollar bills belong in the bank premises and at most 2 mile radii around international airports premises. If they are found outside of these places they should be seized and confiscated. Dollar notes do not belong at parties and ceremonies, not in politicians suitcases, bunkers neither as a means of salary payment. If they must be used for such, these must be and stay electronic.

Even in the United States where the dollar is a legal tender, people rarely have above $100-1000 cash with them. Its unnecessary and besides, there are fiscal laws with regards to how much cash you can keep in your homes.

My solution is simply de-dolarizing the streets.

But then everyone is all guilty. The president, himself, his family and associates, CBN staff and leadership, royal fathers and most politicians probably have hundreds of thousands of dollars stashes so where do we start from?

drawingbook:
I propose a very crude but very simple idea.

De-dollarize the streets!

Factually speaking, there is only one legal tender in the country. The dollar is an illegal tender. We do not require any more policies or laws to enforce this. Dollar bills belong in the bank premises and at most 2 mile radii around international airports premises. If they are found outside of these places they should be seized and confiscated. Dollar notes do not belong at parties and ceremonies, not in politicians suitcases, bunkers neither as a means of salary payment. If they must be used for such, these must be and stay electronic.

Even in the United States where the dollar is a legal tender, people rarely have above $100-1000 cash with them. Its unnecessary and besides, there are fiscal laws with regards to how much cash you can keep in your homes.

My solution is simply de-dolarizing the streets.

But then everyone is all guilty. The president, himself, his family and associates, CBN staff and leadership, royal fathers and most politicians probably have hundreds of thousands of dollars stashes so where do we start from?

What you are proposing is difficult to implement. How many Police Men are going to send to go and be pursuing all the Mallams on streets across Nigeria.

The CBN needs to focus on things they can control like shutting down foreign currency accounts of speculators

kingsways:


While I agree the overall strength of a country's economy is important, the issue is not just that we import refined products. So many countries in the world import all their refined products because many do not even have crude and yet their currencies are relatively stable and not on a constant downward spiral. Government regulation is a major factor in what happens to the currency

Our bad attitude and CBN's corruption are part of it. In Nigeria, all available dollars are bought up by Nigerians, especially politicians for their selfish interests. Qatar and Saudi are not producers but have currencies and economic stabilities, because they have zero tolerance to corruption.

The text book approach that Olu False and IBB used,as advised by Bretton woods institutions in devaluing/destroying Naira won't prop it up.

Why not use an approach that's practical and may not be consumer friendly in the beginning.Textile industries are dead same with cotton farming. Where are the tobacco farmers feeding cigarettes factories? Over 90% of daily needs product are imported as finished products.Protect local industries,service providers and farmers from importation and see Naira grow.

Someone foresaw how devaluation was going to destroy Nigeria and warned in his book against it. Nigerians in solidarity were opposed to IMF loans but IBB and Falae still went for it.If by abracadabra we get $100 billion dollar in Forex today it won't fix the problem. We need an homegrown practical solution to reduce dependent on foreign finished products

tommy589:
The text book approach that Olu False and IBB used,as advised by Bretton woods institutions in devaluing/destroying Naira won't prop it up.

Why not use an approach that's practical and may not be consumer friendly in the beginning.Textile industries are dead same with cotton farming. Where are the tobacco famers feeding cigarettes factories? Over 90% of daily needs product are imported as finished products.Protect local industries,service providers and farmers from importation and see Naira grow.

Someone foresaw how devaluation was going to destroy Nigeria and warned in his book against it. Nigerians in solidarity were opposed to IMF loans but IBB and Falae still went for it.If by abracadabra we get $100 billion dollar in Forex today it won't fix the problem. We need an homegrown practical solution to reduce dependent on foreign finished products

Devaluation is one thing while STABILITY is another. Even if a currency devalues, it should at least have relative stability

Impractical. You want the economy to be at a standstill/crash . Will only make smuggling more lucrative and lead to people keeping their dollars in crypto

kingsways:


Devaluation is one thing while STABILITY is another. Even if a currency devalues, it should at least have relative stability

Is the major Forex earner (crude oil price) stable? An economy that's based on what you hope to earn and not factoring population growth.
We have a huge population to consume our basic needs if manufactured here. We survived COVID. If there is trade embargo,are we not going to find alternatives and live through it.
With every government comes policy changes and you expect stability. Wheat importation got banned and we lost our first business. Years after, Nigeria is getting better on home grown wheat farming.
You won't see me go near any business that is majorly dependent on importation due to my first experience. All shoes factories are dead. Are we not going to patronise neighbourhood cobblers if the imported shoes we buy comes under restricted lists? Let them continue another 37 years with this turenchi the result won't change.
By the way,are you aware tellers anticipate Naira from depositors before paying customers. Naira struggle is now on two fronts