₦airaland Forum

SmartPolician:
Okay, thank you for your explanation. However, I am intereted in what happened before Year 2000. You see, the IMF and other international lending agencies advised Nigerian leaders to devalue the naira.

Devaluation, in this contest, means reducing the original value of your currency. For instance, one naira exchanged for one dollar at some point when it was new. Those agencies advised Nigerian leaders to devalue naira and they did.

This means that if 10 cubes of Maggi sold for #1, after the devaluation, 10 cubes of Maggi started selling for #10. My point is, why did they agree? I am asking this question because I have watched videos of late Audu Ogbeh accusing those agencies of wrongly advising Nigerian leaders to devalue the naira and they did.

I will be frank with you, I can'r remember the IMF advising Nigeria to devalue its currency in 2000.

But note this, if the IMF advises you to devalue your currency, they must have a reason.

Let me give you an example. Imagine the official exchange rate is $1-N1,500 and the black market rate is $1-N3,000, and the IMF advises the government to devalue its official exchange rate, is it wrong? The government said it does not want people to suffer and refuses to do so. Who is right and who is wrong? Is the IMF wicked?

To know what is right, if your uncle sends you $500, where will you change it? Will you use the official exchange, or go to the black market? Be honest. Or if they say the money was meant for your father, where will you change it if you don't want to be disowned or be called a thief or idot?

The very people who the government does not want to suffer really support i? Would it be wise for the currency to be devalued or not?

Lamido Sanusi said that the difference between the offical rate and black market should not be more than 3%. The World Bank even said 5%. Any differential higher than thise will lead to a lot of corruption and also distortions in the economy. During Buhari's tenure, there was a differential at a time of about 150%. There was too much roundtripping- that is purchasing forex at the official and immediately selling it at the black market rate.

Another way to know if your currency needs to devalue is the rate at which your foriegn reserves is either increasing or reducing.

For instance, if at $1- N200, your foreign reserves is reducing by $500m a week and you have $10bn in your foreign reserves, that means at that rate, your reserves would empty in 20 weeks. What if at $1-N250, the reserves are increasing $100m a week. Which of the two exchange rates should be devalued?

The stronger your exchange rate, the greater the demand, and vice versa. So, if your foreign reserve are depleting fast, would it be prudent to devalue?

These are some reasons why the IMF will advise you to develue. The signs are already there.

For instance, the foreign reserves were depleted by the time Emefiele left office. There was only $3.99bn in the net foreign reserves. This is not the gross foreign reserves. This is the actual forex that the CBN has access to, and not the encumbered one. It was also owing buyers of forex $7bn. Why? They had sold forex below its market value, and there was excessive demand the CBN could not. Thsi led to severe fx scarcity that forced GSK, Shoprite, Emirates to leave the country.

Now, Audu Ogbeh made some allegations. Were they true and factual?

During the Babangida era, the Naira was depreciating fast every year. He was right to a very good extent about that. But was it caused by outside agencies like the World Bank or IMF giving bad advice?

I was either in secondary school or university during the Babangida years. So, why was the Naira depreciating yearly?

It was due to reckless spending by the Babangida government. Under a Structural Adjustment Programme, the country must live within its means. There must either has to be a low budget deficit, or a balanced one, or even a budget surplus.

Due to Babangida's reckless spending, and a resort to Ways and Means to fiance the recklessness, that was why the Naira kept losing value. Ways and Means is when the federal government request the central bank print money and lend to it. This is very inflationary. So, lets say there's N10trillion cash in the economy and there's $10bn, the exchange rate will be $1- N1,000.,Assume the central bank now prints N5 trillion to lend to the government, that makes N15trillion cash in the circulation and it is still $10bn in circulation, the exchange rate is now $1-N1,500. You can now see why Ways and Means is discouraged. Buhari used this excessively, and that's why the Naira fell so badly during his time in office.

During Abacha's tenure, from 1995 to 1998, the exchange rate stayed at around $1-N80. Abacha was fiscally prudent. When Babagida left office, the foreign reserves had only $500m. By the time Abacha died in office, it had increased to $8bn.

Quest7777:
This Present Generation will never believe this once happened in Nigeria.

Can't believe that interest on saving account has remained unchanged for decades. 5%

This was 1983. Then a bag of rice was not even up to N200 but yet Nigerians were hungry. Hunger is not about fuel subsidy or floatation of naira! Hunger is about being lazy.

☝Note that the Ten Kobo of that era
is equivalent to N1000 of today👆

erad:
Why do some of you like living in the past?

Nothing stays the same for a while, let alone forever.

so why are Muslims still living in the past?

SmartPolician:
What is the benefit of devaluing our naira since we don't have any reasonable thing to export aside oil and gas with a set price?

At least many Asian countries like China devalued their currency to encourage exports, why did Nigeria devalue hers?

Please don't reply me if you have no reasonable comment to make.

Tinubu devalued Naira to boost exports (non oil exports have gone up) and make them cheaper for foreign buyers and stimulate the economy. A weaker currency also makes imports more expensive for domestic consumers, encouraging local spending and helping to correct trade imbalances. It can also help reduce the cost of foreign denominated government debt and protect domestic industries from strong foreign competition.

casualobserver:
If Fela did not die then, he won’t die now. Many of you who didn’t live through it don’t appreciate how tolerant of dissent Nigeria is today. All these people talking anyhow, Sowore, Obi, would have gone missing or if they are lucky locked up on trumped up charges. Meanwhile these same people have skeletons in their cupboards but the government allows them to make noise.

and thy didn't allow namdi kanu,mumu

To fulfil a campaign promise.
"I will reduce your purchasing power"
Now Natashakpabio dey tell Nigerians to eat wherever dey see food.
I dey wait January make dem start apply the new tax law and I dey pray make T-kpai add small color for naira like Bubu.
If T-kpai just secure 2027 election, Nigeria population must reduce drastically before 2031 and I trust Nigerians to vote T-kpai massively.
This time around I even want make T-kpai to win in Lagos and the SE.
Let the tribal professors and political lesson givers keep giving lectures.

SmartPolician:
What is the benefit of devaluing our naira since we don't have any reasonable thing to export aside oil and gas with a set price?

At least many Asian countries like China devalued their currency to encourage exports, why did Nigeria devalue hers?

Please don't reply me if you have no reasonable comment to make.

Man, you are offside.
How does currency devaluation reduce the cost of foreign denominated debt? Reduce or increase?
Do you know what you are saying or you copied from Grok?

Protect domestic industries from strong foreign competition?
How? In Nigeria? Or in the Royal Niger company?
In Nigeria all domestic industries get atleast 80% of their raw material through imports including Dangote.
So there will be an increase in the cost of their raw materials by devaluing the currency, making foreign made products to compete favorably with locally made ones.

Ofemannnu:
Tinubu devalued Naira to boost exports (non oil exports have gone up) and make them cheaper for foreign buyers and stimulate the economy. A weaker currency also makes imports more expensive for domestic consumers, encouraging local spending and helping to correct trade imbalances. It can also help reduce the cost of foreign denominated government debt and protect domestic industries from strong foreign competition.

erad:
Why do some of you like living in the past?

Nothing stays the same for a while, let alone forever.

it should not be as bad as it is now!

Quest7777:
This Present Generation will never believe this once happened in Nigeria.

I don't really understand the point here. Like others have noted, 10kobo was not small money then. And even now there are accounts that you open with zero naira!! Yes

So wha the big deal?

erad:
Why do some of you like living in the past?

Nothing stays the same for a while, let alone forever.

"If you don't know where you're coming from, you don't know where you're going to." -Maya Angelou.

No sensible person wants to have a better past.

grandstar:
I will be frank with you, I can'r remember the IMF advising Nigeria to devalue its currency in 2000.

But note this, if the IMF advises you to devalue your currency, they must have a reason.

Let me give you an example. Imagine the official exchange rate is $1-N1,500 and the black market rate is $1-N3,000, and the IMF advises the government to devalue its official exchange rate, is it wrong? The government said it does not want people to suffer and refuses to do so. Who is right and who is wrong? Is the IMF wicked?

To know what is right, if your uncle sends you $500, where will you change it? Will you use the official exchange, or go to the black market? Be honest. Or if they say the money was meant for your father, where will you change it if you don't want to be disowned or be called a thief or idot?

The very people who the government does not want to suffer really support i? Would it be wise for the currency to be devalued or not?

Lamido Sanusi said that the difference between the offical rate and black market should not be more than 3%. The World Bank even said 5%. Any differential higher than thise will lead to a lot of corruption and also distortions in the economy. During Buhari's tenure, there was a differential at a time of about 150%. There was too much roundtripping- that is purchasing forex at the official and immediately selling it at the black market rate.

Another way to know if your currency needs to devalue is the rate at which your foriegn reserves is either increasing or reducing.

For instance, if at $1- N200, your foreign reserves is reducing by $500m a week and you have $10bn in your foreign reserves, that means at that rate, your reserves would empty in 20 weeks. What if at $1-N250, the reserves are increasing $100m a week. Which of the two exchange rates should be devalued?

The stronger your exchange rate, the greater the demand, and vice versa. So, if your foreign reserve are depleting fast, would it be prudent to devalue?

These are some reasons why the IMF will advise you to develue. The signs are already there.

For instance, the foreign reserves were depleted by the time Emefiele left office. There was only $3.99bn in the net foreign reserves. This is not the gross foreign reserves. This is the actual forex that the CBN has access to, and not the encumbered one. It was also owing buyers of forex $7bn. Why? They had sold forex below its market value, and there was excessive demand the CBN could not. Thsi led to severe fx scarcity that forced GSK, Shoprite, Emirates to leave the country.

Now, Audu Ogbeh made some allegations. Were they true and factual?

During the Babangida era, the Naira was depreciating fast every year. He was right to a very good extent about that. But was it caused by outside agencies like the World Bank or IMF giving bad advice?

I was either in secondary school or university during the Babangida years. So, why was the Naira depreciating yearly?

It was due to reckless spending by the Babangida government. Under a Structural Adjustment Programme, the country must live within its means. There must either has to be a low budget deficit, or a balanced one, or even a budget surplus.

Due to Babangida's reckless spending, and a resort to Ways and Means to fiance the recklessness, that was why the Naira kept losing value. Ways and Means is when the federal government request the central bank print money and lend to it. This is very inflationary. So, lets say there's N10trillion cash in the economy and there's $10bn, the exchange rate will be $1- N1,000.,Assume the central bank now prints N5 trillion to lend to the government, that makes N15trillion cash in the circulation and it is still $10bn in circulation, the exchange rate is now $1-N1,500. You can now see why Ways and Means is discouraged. Buhari used this excessively, and that's why the Naira fell so badly during his time in office.

During Abacha's tenure, from 1995 to 1998, the exchange rate stayed at around $1-N80. Abacha was fiscally prudent. When Babagida left office, the foreign reserves had only $500m. By the time Abacha died in office, it had increased to $8bn.

Blaming exchange rate discrepancies for the need to devalue a currency is quite shallow in my opinion. I mean, where did the black market operators get their FX from? Was it not from leakages in the system? Wouldn't it have been a better approach to plug those leakages instead of throwing out the baby with the bath water?

Devaluation only helps countries with well developed manufacturing and service based sectors. That way, goods and services can be manufactured at cheaper rates thereby encouraging export. China is a case in point.

For an import dependent economy such as ours, devaluation is close to a d**th sentence as cost of doing business (especially manufacturing) rises through the roof. And we haven't even spoken about our infrastructural derth yet o.

By the way, the new tax policy is a nail on the coffin. Taxation discourages production that's why there's something called tax holidays which sensible governments give to manufacturers to encourage production. Growing economies should have no business with taxes. We'll, at least their manufacturing sector.

erad:
Why do some of you like living in the past?

Nothing stays the same for a while, let alone forever.

Mentality of accept whatever come your way

If you don't visit the past, you won't learn from it and you'll repeat error of the past

casualobserver:
I remember the radio jingle. “Federal savings bank, federal savings bank, you can open an account with ten…..” I think it was ten Naira in my time not ten kobo…though I may be wrong.

That was FMB - Federal Mortgage Bank

metallisc:
That was FMB - Federal Mortgage Bank

I remember FMB headed by Chief Falegan . The jingle I remember was federal savings bank.

erad:
Why do some of you like living in the past?

Nothing stays the same for a while, let alone forever.

Wetin be your own wey you de hola. Dem de teach you history, you de spew nonsense 😡

emorse:
Blaming exchange rate discrepancies for the need to devalue a currency is quite shallow in my opinion. I mean, where did the black market operators get their FX from? Was it not from leakages in the system? Wouldn't it have been a better approach to plug those leakages instead of throwing out the baby with the bath water?

Devaluation only helps countries with well developed manufacturing and service based sectors. That way, goods and services can be manufactured at cheaper rates thereby encouraging export. China is a case in point.

For an import dependent economy such as ours, devaluation is close to a d**th sentence as cost of doing business (especially manufacturing) rises through the roof. And we haven't even spoken about our infrastructural derth yet o.

By the way, the new tax policy is a nail on the coffin. Taxation discourages production that's why there's something called tax holidays which sensible governments give to manufacturers to encourage production. Growing economies should have no business with taxes. We'll, at least their manufacturing sector.

Are you a qualified economist? What is shallow about what I said. It is tested and it works.

Yours has been tested and it has been proven a colossal failure. That's what Buhari did and it plunged the economy into a sever recession. The forex scarcity was so severe that it led to companies closing down as they could not get fx. The poor economic growth rate during Buhari's termin office was due to the sort of exchange rate policy you endorse. Buhariu hated devaluation and stood his ground.

That was why Tinubu was determined to make the Naira market reflective again. The floating of the Naira has achieved that. From forex scarcity to forex surplus.

There is no economic textbook or journal that will ever state that import dependent countries should not devalue their countries. Please show me a textbook or journal that supports your assertion. It is a common misconception common here on NL.

So, your central bank prints money to cover the budget deficit, and you don't expect your currency to depreciate because it is import dependent? You must have seen pigs fly.

For your info, poor fx management especially ones that refuse to allow their currencies depreciate when things turn south are the nations most likely to turn to the IMF for a bailout. It is when they've burnt through their foreign reserves that they turn to the IMF.

Nigeria needs to raise more money from taxes. The government barely collects revenue equal to 10% of GDP. This is one of the lowest rates in the world.

It is simply not sufficient enough to meet government needs. This poor revenue collection is why salaries for lecturers, doctors remain poor. The money isn't sufficient enough.

Charles Soludo said the minimum level of taxation should be 22% of GDP.

Most Nigerians pay little or no taxes, and this must change. If tax revenue can increase to like 15% of GDP, it would be fantastic.

grandstar:
Are you a qualified economist? What is shallow about what I said. It is tested and it works.

Yours has been tested and it has been proven a colossal failure. That's what Buhari did and it plunged the economy into a sever recession. The forex scarcity was so severe that it led to companies closing down as they could not get fx. The poor economic growth rate during Buhari's termin office was due to the sort of exchange rate policy you endorse. Buhariu hated devaluation and stood his ground.

That was why Tinubu was determined to make the Naira market reflective again. The floating of the Naira has achieved that. From forex scarcity to forex surplus.

There is no economic textbook or journal that will ever state that import dependent countries should not devalue their countries. Please show me a textbook or journal that supports your assertion. It is a common misconception common here on NL.

So, your central bank prints money to cover the budget deficit, and you don't expect your currency to depreciate because it is import dependent? You must have seen pigs fly.

For your info, poor fx management especially ones that refuse to allow their currencies depreciate when things turn south are the nations most likely to turn to the IMF for a bailout. It is when they've burnt through their foreign reserves that they turn to the IMF.

Nigeria needs to raise more money from taxes. The government barely collects revenue equal to 10% of GDP. This is one of the lowest rates in the world.

It is simply not sufficient enough to meet government needs. This poor revenue collection is why salaries for lecturers, doctors remain poor. The money isn't sufficient enough.

Charles Soludo said the minimum level of taxation should be 22% of GDP.

Most Nigerians pay little or no taxes, and this must change. If tax revenue can increase to like 15% of GDP, it would be fantastic.

Firstly Sir, I hope you didn't take my "shallow" remark as an insult because it wasn't meant to be. And if you did, please accept my apology.
That said, one does not need to be an economist to conduct some basic research or test simple economic ideas. A quick online search will give you the answers that you seek.

Now, in case you didn't get me the first time, I am not against taxation. As a matter of fact, the tendency of it increasing Nigerians' demand for accountability and good governance makes it worthwhile. However, in a country where the per capita income is less than $1,000 (not considering the largely inequitable distribution), it will have a very limited effect on revenue generated. Think of it, sir, Soludo's 22% of less than $1,000 per is only about $200 per capita. Also, keep in mind that the lower-income earners will feel the bite harder. A larger income per capita will simply mean larger tax revenues.

Also, I stated clearly that he could have first found a way to improve local manufacturing and export. That's when taxation will become a significant source of revenue.

As regards floating of the dollar, I think he took the easy way out. For a man of President Tinubu's stature and influence, he could have taken the saboteurs head-on and won if he wanted to. That would have made it easier to support local manufacturing, as I said earlier.

At the end of the day, though, it's only my humble opinion. All we want is a Nigeria that works.