₦airaland Forum

Mynd44:
Because the devaluation in 1984-85 was not the same as the one that caused that of 2014.

The results of the Oil price crash in 2014 is what is still being felt now. Now run along

@bolded...Last warning... I won't ignore you next time...

I ask again what triggered 1984-85 naira depreciation?

Mynd44:
To answer these questions, the OP needs to put in the post above what led to the Naira depreciating from 154/156 in November2014 to 196 in December 2014 first.

When you do that, we can then start to track the primary factors and how we can tackle the strength of the Naira viz-a-viz the price of goods in the market.

To take this issue from the events of May 2015 is just you attempting to put squares pegs in round holes.

lol
Wen Buhari took over in fact during campaign it was 200+
Buahri was not expected to tackle 154/dollar

barcanista:
Is the value of the Naira really appreciating in the real sense or the CBN and the FG are playing pranks on Nigerians? Why are commodities still high in the market?

Ideal Situation
Ideally, customers operating domiciliary accounts will go to the banks, deposit their dollar and through that account they do whatever transaction that they deem necessary. The Banks inturn will take the dollars(and other foreign currencies) to the CBN.

The Buhari/Emefiele Situation
1. The CBN has stopped receiving dollars from banks, as a result the banks has stopped accepting dollars at the counter because their vaults are full.

2. Because of the restriction at 1(above) the demand for dollar reduces in the BDC. The BDCs seek every means to trade the currency including reducing the cost at the black market. The CBN will go to the press to scream "NAIRA IS APPRECIATING."

3. As a result of 1(above) the banks also refuse to request dollars from the CBN's foreign exchange reserve. The CBN will then come out to scream "RESERVE IS GROWING".

Is that the best way to manage the naira?

Salient Question and Effects:
1. What happens to a businessmen with domiciliary account seeking to deposit dollars and transfer to their partners abroad after buying the dollar from BDC or Bank?

2. The bank's refusal to accept dollar deposit means business transaction on that will be halted. Because no domiciliary account holder will be willing to withdraw from his account when he knows that he won't be able to make further deposit due to the CBN's policy except if his intention is solely for converting the dollar to naira for local transaction.

3. Instead of doing transactions from domiciliary account, businessmen will be left with no choice but to operate domiciliary account in neighbouring countries where they will be making transactions or resort to wiring money via Western Union in neighboring country.

4. As a result of 3(above) the cost of commodities will go UP because businesses will make up for the extra expenses. Also, that will mean reduction in business activities in the banks.

5. Should the above persist it will get to a certain point where there will be scarcity of the dollar in the market. When it get to that point, the dollar rate is astronomically shooooooot up in the market because demand will outweigh supply. At this point, the naira problem will be worse than it was.

Is The Naira Really Appreciating?
Make no mistake, the naira-dollar rate is yet to appreciate in the international market. As at May 29 the naira/$ rate was N199 in the market. The rate as at today Aug 5, 2015 is still N199. You can't appreciate a currency via the backdoor. Even the black market rate cannot be regulated through the back door.

What "Sane" Countries Does:
The CBN Governor Godwin Emefiele made it look like one can't deposit foreign currencies in cash in another country. This is contrary to the facts on ground. No country will shut down foreign currencies transactions in banks. Let me give two instances...

On February 27, 2015, the Central Bank of Egypt instituted a new policy to help the Egyptian pound. As part of the policy, Individuals and businesses are allowed a maximum of $10,000(or equivalent) deposit daily and $50,000(or equivalent) monthly. The measure would stop companies from buying large amounts of dollars from the black market and then depositing them briefly in banks in order to open letters of credit for imports.

In China the maximum daily deposit/withdrawal of foreign currencies is $10,000(or equivalent).

Is it not better to place a transactional limit for foreign currencies than discourage deposit completely(that will solve nothing)?
We don't produce, we import, we have no policy to promote local production nor infrastructures in place toencourage manufacturers, yet we expect the naira to appreciate. That is no done anywhere.


I will be glad to get the views of others.


God Bless Us All

Here is a chronicle of events.... I hope it makes sense to anyone who reads it.

The truth is that the disparity between the exchange rates between the inter-bank window and the black market being very high is not healthy for the economy - the manufacturers, the working force, the cottage industries, etc who cannot access FX via the official channel will be greatly affected in a negative way. This is so mostly if the rate is not a true representation of its value.

We actually brought this on our own. In the market lately, after Sanusi's hammer on Bank CEO's and the exposure of bank's health spiking reforms in the entire banking sector, most of these bankers laid off, resorted to establishing BDCs - which initially was meant to meet the growing need of FX to fund imports - imports not covered in the non-prohibition items as Nigeria is heavily import-oriented. Fortunately, the price of crude oil was high earning us huge FX earnings boosting our external reserves (foreign exchange component) and meeting our import demands.

However, when the price began to fall, the balance of trade tilted against us and CBN had to tamper with the exchange rate. Devaluing it places more naira in meeting most government spending and stimulating growth. Most importantly, there have been strong demands for FX from the CBN and the CBN usually finds it very difficult to meet these demands. Too much demand puts too much pressure on our naira and causes our naira to depreciate (or lose its value) against the dollar.

Being curious, this led CBN to investigate/find out the rationale behind these demands. Were they used to fund items allowed or prohibited? Where they fictitious demands? Were they terrorism financing related activity? Or speculative bidding (whereby individuals mop up the dollar and "bet" against it, and they "win"? The answers to these questions were very important because if the CBN continues to hold/protect the value of the naira against the dollar in international trade using the foreign exchange reserve, some day, not too soon, the reserve will be depleted and that we do not want.

The first move was to close the official exchange window (RDAS and WDAS). This window allows dealers (deposit money banks, BDCs, money transfer companies, etc) to purchase USD at very low subsidized rates (some on behalf of others, like the banks) after which they sell at very high rates to other dealers mostly via the black market. Some of these purchases do not get exhausted. So the purpose is being defeated. The next move was to stop banks from selling USD to BDCs because most demands come through BDCs and in very large volumes. I know that for sure. In fact this where the deposit money banks were complicit.

Then CBN told the banks to ensure that monies purchased must be utilized for that particular purpose else, it must be returned to the bank's (CBN) vault between 48 and 72 hours (even this too, the banks played a fast one on the bank and that was why there was panic-sale as these banks had large sums of USD in their vault). Another step was to ensure that the only currency to be used for payment of goods and services must be the naira; no goods or service must be paid in the USD (exception applies to transactions in the oil industry). All hotel rates, rent rates, school fees, or any other services must be paid in naira.

The CBN also increased their oversight activities on the BDCs - some of them can attest to this. Long ago, the CBN stopped BDCs from transferring USD to offshore accounts using their own (BDC's) accounts because of their easy access to the USD. As at that time, they were not adequately regulated and there was growing fear of terrorism financing. Even now, you can't pay in cash to a non-BDC account and transfer out of the country. Then again, going forward, from the 1st of August, 2015 all BDC transactions must be accompanied with a Bank Verification Number - that is close monitoring of the activities of BDCs.

Having found out some of the purposes for which these FX were being purchased, the CBN issued another directive banning access to foreign exchange for purchase of some commodities (import prohibition list). In Nigeria, there are three official windows to access FX. One is the inter-bank window, the second is the BDC market and the third is the export proceeds. All three must not be used to finance imports on the prohibited items. The CBN earlier restricted the use of dollar denominated debit cards issued by Nigerian banks - including the daily, monthly and yearly limit (for withdrawals via ATM).

Last week, due to CBN's insistence of not reversing their earlier support (and perceived government support) for non-inclusion of these products, the banks and dealers had no choice than to sell off. The speculators have lost. Banks do not accept FX. In fact, CBN stopped them because they must have gotten credible information that there is so much USD in circulation. Big loss for money speculators. Big loss in foreign exchange earnings for banks too. That is why you read in the news that people go to Benin or Ghana to deposit their money and transfer out. I wish they consider the risk. Well high profit, high risk. People look for holes in the system to make a profit.

The whole essence is to protect our local tender, protect our economy and our industries. Protect, very importantly the SMEs as they are the engine for expected growth in the country. Please note that the large corporations and industries source FX directly from the CBN. But there are smaller companies which might find it difficult to access FX due to the nature of their business and to also by-pass the tough and strict documentation required to assess FX. CBN's recent directive is to encourage local growth and development. To challenge us and make us see and exploit the opportunities in our country. Why do we need to import tooth pick? Why import rice? Why import palm oil? Why import poultry products? Even with the various milestones reached in the rice policy. Now we have so much cement in the market to the point of an incident of a glut, yet someone will someday, just wake up and request for FX to finance cement import? These imports hamper the growth of our local manufacturers. These imports causes more pains than gains. We may say the imported products are cheap but should we forsake standards? Should we allow dumping?

We need to consolidate on the gains of the previous administration. The previous administration did a wonderful job at diversifying our economy - the service industry, the agriculture, manufacturing and even the oil and gas industry where we witnessed increased local content participation. That is why we had a single digit inflation figure even at the peak of low ridiculous oil prices. Even when we had no oil imports because government could not re-imburse funds for subsidy due to reduced earnings. Remember the inaugural speech given by Emefiele - a CBN that is committed to inclusive growth and job creation. That is the focus of the CBN's various directives. There are policies to promote local production of goods as seen in the previous administration. The automotive industry, dry season farming, sugar cane production, cassava production and even oil refinery.

Also, rising commodity prices do not always translate to danger in the economy. It could also mean increasing growth in the middle class, expanding economy, increasing spending power by consumers, increasing government spending to stimulate job creation and growth. My concern is that this new administration is yet to give us a direction. That will go a long way at reducing tension and restoring credibility in the system. The restriction on depositing USD in domiciliary accounts will be lifted after the CBN must have found a way around abuse.

Lastly, this is a monetary policy intervention to protect the economy. We need the fiscal component to support this policy and this is where Mr. Buhari's Ministry of Finance should come in. And yes, the CBN is indirectly regulating the black market.

It is instructive to note that other countries will do everything to also protect their currency, their economy and industries. Look at China. Everyone goes to China for cheap labour, cheap production cost and make stupendous profit from it. Yet the country's currency is protected as the exchange rate is not the true value. So they earn huge foreign exchange against the dollar. Look at the policy of the US government towards rice export to countries like Haiti. Same with the European Union and Russia.

Later in the year or early next year, Iran will begin to ship oil (if the negotiations sail through and sanctions are lifted) and her government will do everything to protect their interest. The foreign investors in the capital market just know when and how to exit the market. They feel our currency is highly overvalued. Even at 199 to 1 USD, they think the currency still needs to be devalued. To tell you, they do not have our interest at heart.


Long one!

MizMyColi:
[size=14pt]*iGnored*[/size]

barred hypocrite

4play can you comment on this plz?

modath:
Just knew Barcanista was gonna wail about this too..

He performs on cue.

Barcanista, its not the 199.5 that is the problem, ( we all know that is a product of your hero & PDP's 16yrs molestation of the nation's commonwealth) it is the speculative marketers, hoarders & round trippers that drove the parallel end to almost 250 that are the problem, but trust you to highlight the negative...

How you get anything done beyond this write ups beg the question " you nor dey tire" ?

Another dullard with their theme song



PDP 16yrs of this
PDP 16 yrs of that

neurologist:
stop making fool of yourself...u have lost the respect I have for you for the past few weeks.. I think u nid to go on a break

Like ur respect will put food on barcanista table

Mcheeew

barcanista:
The question is "why are prices of goods still high(and even goin high)"?

but sir you ve not answered my question

helpee:
@ barcanista, thanks for the analysis. kindly disregard those that have nothing to contribute except shouting wailing wailers. But i disagree with you. naira actually depreciated against the dollar because of excessive speculation. As you know, due to the ban on 41 products importers from accessing forex at the official rate, they had to source it from the parallel market. The excessive demand for forex by these importers from the black market at first created a scarcity that pushed the dollar up temporarily. speculators then cashed on that and started hoarding dollars thinking the dollar will keep rising against the naira especially since the new govt has no concrete plan in place. i was almost caught up too. i was advised to change most of my daily sales to dollars and then deposit in my DOM account in speculation of a further weakening of the naira. therefore, the banks were flooded by speculators with dollar deposits and many of them under the disguise of importation are laundering the money abroad via transfer. so, by refusing to accept the dollars, the CBN is playing a very smart move aagainst speculators. many people are therefore caught with dollars which they cant transfer or even deposit except to convert it to naira. therefore, the economy is flooded with dollars and demand is less than supply so the dollar must come down.
IS IT SUSTAINABLE/
Yes but we will temporarily suffer in sacrifice for a prosperous naira. importers will be temporarily caught unaware. the CBN will only create a bereaucratic bottleneck that will make it difficult for anybody except importers to access forex. BVN is one of the them. money launderers that used to access forex and transfer via DOM account will be cut off by the bottleneck. speculators will not find it attractive to hoard dollars because unless they ggenuinely need the dollars, they wont be able to get value for it since they cant spend it locally, cant transfer and cant even deposit. what do you need a useless dollar for?
it is not easy to open domicilliary account in neigbouring countries like you suggested unless you are a citizen or permanent/legal resident so few will be able to divert import activities to the neigbouring countries. therefore, even without increasing local production of imported stuffs, the naira will still stabilise against the dollar at a favourable position cos the most damage done to the naira usually comes from speculators. once we only access just the dollar we need for importation, school fees and other legal business abroad, we will stop speculating with the naira .
Even if things are temporarily expensive, we youths should take up the challenge and start producing. you can start with toothpick for example cos it is part of the products banned from accessing forex officially. the bottomline is that if it will be sustainable we must support the CBN in this quest. this is the first policy of this govt/CBN that i support.

This post should put and end to this thread.

You crystallized it.

Kudos!


THREAD CLOSED!

The CBN has stopped receiving dollars from banks, as a result the banks has stopped accepting dollars at the counter because their vaults are full.

i watched NTA this morning and watched them discussing this same issue,all i did was to shake my head.we are in a serious poo

Mynd44:
The thing is that they don't know why the Naira fell to 200 in one month while the government sat down unable to do anything....

Barcanista should go and put those reasons in the OP and he will have made sense and we know we are all looking for a solution.

That's not exactly true.

helpee:
@ barcanista, thanks for the analysis. kindly disregard those that have nothing to contribute except shouting wailing wailers. But i disagree with you. naira actually depreciated against the dollar because of excessive speculation. As you know, due to the ban on 41 products importers from accessing forex at the official rate, they had to source it from the parallel market. The excessive demand for forex by these importers from the black market at first created a scarcity that pushed the dollar up temporarily. speculators then cashed on that and started hoarding dollars thinking the dollar will keep rising against the naira especially since the new govt has no concrete plan in place. i was almost caught up too. i was advised to change most of my daily sales to dollars and then deposit in my DOM account in speculation of a further weakening of the naira. therefore, the banks were flooded by speculators with dollar deposits and many of them under the disguise of importation are laundering the money abroad via transfer. so, by refusing to accept the dollars, the CBN is playing a very smart move aagainst speculators. many people are therefore caught with dollars which they cant transfer or even deposit except to convert it to naira. therefore, the economy is flooded with dollars and demand is less than supply so the dollar must come down.
IS IT SUSTAINABLE/
Yes but we will temporarily suffer in sacrifice for a prosperous naira. importers will be temporarily caught unaware. the CBN will only create a bereaucratic bottleneck that will make it difficult for anybody except importers to access forex. BVN is one of the them. money launderers that used to access forex and transfer via DOM account will be cut off by the bottleneck. speculators will not find it attractive to hoard dollars because unless they ggenuinely need the dollars, they wont be able to get value for it since they cant spend it locally, cant transfer and cant even deposit. [/b]what do you need a useless dollar for?
it is not easy to open domicilliary account in neigbouring countries like you suggested unless you are a citizen or permanent/legal resident so few will be able to divert import activities to the neigbouring countries.[b] therefore, even without increasing local production of imported stuffs, the naira will still stabilise against the dollar at a favourable position cos the most damage done to the naira usually comes from speculators. once we only access just the dollar we need for importation, school fees and other legal business abroad, we will stop speculating with the naira .
Even if things are temporarily expensive, we youths should take up the challenge and start producing. you can start with toothpick for example cos it is part of the products banned from accessing forex officially. the bottomline is that if it will be sustainable we must support the CBN in this quest. this is the first policy of this govt/CBN that i support.

I LOOVEEE YOOUU!

You just echoed my position and analysis. You are...a brain!

Read up, I had said just the SAME thing!

We may disagree on whose administration is responsible but you just became my friend!

Thanks for this!

Mynd44:
But was there ever any time they sold petrol for 87? We all know that was all for election campaign na

I like you.

But not everything must be about politics.

Just state your point and those who want a real, constructive engagement will take you up.

helpee:
@ barcanista, thanks for the analysis. kindly disregard those that have nothing to contribute except shouting wailing wailers. But i disagree with you. naira actually depreciated against the dollar because of excessive speculation. As you know, due to the ban on 41 products importers from accessing forex at the official rate, they had to source it from the parallel market. The excessive demand for forex by these importers from the black market at first created a scarcity that pushed the dollar up temporarily. speculators then cashed on that and started hoarding dollars thinking the dollar will keep rising against the naira especially since the new govt has no concrete plan in place. i was almost caught up too. i was advised to change most of my daily sales to dollars and then deposit in my DOM account in speculation of a further weakening of the naira. therefore, the banks were flooded by speculators with dollar deposits and many of them under the disguise of importation are laundering the money abroad via transfer. so, by refusing to accept the dollars, the CBN is playing a very smart move aagainst speculators. many people are therefore caught with dollars which they cant transfer or even deposit except to convert it to naira. therefore, the economy is flooded with dollars and demand is less than supply so the dollar must come down.
IS IT SUSTAINABLE/
Yes but we will temporarily suffer in sacrifice for a prosperous naira. importers will be temporarily caught unaware. the CBN will only create a bereaucratic bottleneck that will make it difficult for anybody except importers to access forex. BVN is one of the them. money launderers that used to access forex and transfer via DOM account will be cut off by the bottleneck. speculators will not find it attractive to hoard dollars because unless they ggenuinely need the dollars, they wont be able to get value for it since they cant spend it locally, cant transfer and cant even deposit. what do you need a useless dollar for?
it is not easy to open domicilliary account in neigbouring countries like you suggested unless you are a citizen or permanent/legal resident so few will be able to divert import activities to the neigbouring countries. therefore, even without increasing local production of imported stuffs, the naira will still stabilise against the dollar at a favourable position cos the most damage done to the naira usually comes from speculators. once we only access just the dollar we need for importation, school fees and other legal business abroad, we will stop speculating with the naira .
Even if things are temporarily expensive, we youths should take up the challenge and start producing. you can start with toothpick for example cos it is part of the products banned from accessing forex officially. the bottomline is that if it will be sustainable we must support the CBN in this quest. this is the first policy of this govt/CBN that i support.

cc chessboard

Ymodulus:
Domiciliary accounts were never designed for such purpose at the onset. They are to use Form A or Form M, or Bill of Collections or Letter of credit.
These are channels designed for international trade. Domiciliary or Western Union or Money Gram were never designed for such. So its time we follow principles as seen in developed countries.



The decision, the banks decided to take that line of action because they felt that the level of foreign currency that had in their vaults was above the optimum level that they could manage. Let me put it to you this way: when a bank accepts naira cash and it has excess cash in its vault, what it does is to take it to the CBN and the CBN gives them value for it. But when a bank has excess dollar cash in its vault, what is it going to do with it? If they take it to the CBN, what is the central bank going to do with it? So what you will find is that if they continue to accept it from bank customers, it becomes a useless piece of paper in their vaults because it is a non-earning asset. So that is why you are not going to blame banks that say they have excess foreign currency in their vaults and do not need it again because they don’t have a mechanism through which they can dispose of it and get real value.



Answer same as no1. They can get Form A or M, BTA , Bill of collections, Letter of Credit and other means of international trade.


Wrong ideology. Very wrong am disappointed in you on this, i believe you deliberately twisted this. There are several macroeconomic variables that comes to play to determine the price. In this case the law of supply of dollars and demand comes into effect.

I disagree with you. This will reduce the price. The only problem we have is we ourselves (Nigerian), when naira depreciates we are quick to increase price but when it appreciates we are slow to reduce price.


There is no doubt that one day the dollar will be dried up and it will sky rocket again. but it will be difficult. And that will take a long time.


I agree the naira is not appreciating. what we are seeing now is a psychological prank been played on us by the CBN.


warp analysis. There are several things that works for egypt and cannot work for us. dont be so quick to use their analysis to set as an example for nigeria. Corruption kills us and the currency world is a corrupt world a case of blood money. and since we are yet to uproot the corruption, egypt model should not be set as an epitome block for we to follow.



its $50,000 annually. to exceed this amount you have to fill a form.


funny why i disagree with you on some of your analysis, i accept your conclusion.

This boy, I dey wait for you ni.

ManTiger:
The guy failed to understand that what makes dollar to be surges upward in the parallel market is because of its speculation.

When the official rate is 198 the parallel market should not be 205 or 207.

The CBN has made the right move, the next move is to find alternative to trading using our currency as a benchmark!

We can't continue using dollar indoor and expect our currency to appreciate!

You have defined the problem in just a few lines and rendered this argument useless.

Brilliant !

barcanista:
Thank you for your words...

You talked of speculators, you should know that the only way to beat speculators to their game is by reducing demands by encouraging local production of goods through favorable policies and infrastructure and not this CBN tactics. No progressive country has made such. Even Egypt that had same issue as a rsult of the 2011 Uprising used fine policies to address it. The method of Emefiele is not sound and not even sustainable. Like I said, it will come to a point when we will be looking for dollars in the market.

I am an insider in the system. I tell you, the speculation, no be here. Just trust us when we talk about speculators. CBN did play a fast one on them by refusing to remove the policy prohibiting imports and asking banks to stop accepting USDs. However, I want to correct something (not from you). The banks collects all manner of USD from customers so long as it is geniue and not below a print year of 2006. So the FX in the vaults of the banks are either those issued by the CBN, those brought into the country through passengers and those smuggled (afterall, no form will be filled when making deposits.)

Also, the banks can also send the money to the CBN (CBN will have to repurchase it but at what rate?). Thus these banks do not see it as a sweet venture and worse still, the CBN CONTROLS them. So it was a lose-lose situation for them.

Your final submission that encourages the youths to start production is smart but how will they when banks don't give loans to SMEs and when the economic environment is harsh? Do you think Emefiele beat speculators? No Sir! He's only playing PRANKs. Trust me this won't help! No short-cut to these things.

I will only speak for the previous administration. The previous administration did a lot to encourage local growth through issuance of loans most especially through the Microfinance Banks. There was the industry specific banks like the BOI. I know that for sure. The major problem we have is power and no thanks to vandals and economic saboteurs. Another is double taxation. Another is strict implementation and sustenance of policies. Then we need flexibility in policy development. Then our Justice and Law Enforcement System.

kaboninc:
Here is a chronicle of events.... I hope it makes sense to anyone who reads it.

The truth is that the disparity between the exchange rates between the inter-bank window and the black market being very high is not healthy for the economy - the manufacturers, the working force, the cottage industries, etc who cannot access FX via the official channel will be greatly affected in a negative way. This is so mostly if the rate is not a true representation of its value.

We actually brought this on our own. In the market lately, after Sanusi's hammer on Bank CEO's and the exposure of bank's health spiking reforms in the entire banking sector, most of these bankers laid off, resorted to establishing BDCs - which initially was meant to meet the growing need of FX to fund imports - imports not covered in the non-prohibition items as Nigeria is heavily import-oriented. Fortunately, the price of crude oil was high earning us huge FX earnings boosting our external reserves (foreign exchange component) and meeting our import demands.

However, when the price began to fall, the balance of trade tilted against us and CBN had to tamper with the exchange rate. Devaluing it places more naira in meeting most government spending and stimulating growth. Most importantly, there have been strong demands for FX from the CBN and the CBN usually finds it very difficult to meet these demands. Too much demand puts too much pressure on our naira and causes our naira to depreciate (or lose its value) against the dollar.

Being curious, this led CBN to investigate/find out the rationale behind these demands. Were they used to fund items allowed or prohibited? Where they fictitious demands? Were they terrorism financing related activity? Or speculative bidding (whereby individuals mop up the dollar and "bet" against it, and they "win"? The answers to these questions were very important because if the CBN continues to hold/protect the value of the naira against the dollar in international trade using the foreign exchange reserve, some day, not too soon, the reserve will be depleted and that we do not want.

The first move was to close the official exchange window (RDAS and WDAS). This window allows dealers (deposit money banks, BDCs, money transfer companies, etc) to purchase USD at very low subsidized rates (some on behalf of others, like the banks) after which they sell at very high rates to other dealers mostly via the black market. Some of these purchases do not get exhausted. So the purpose is being defeated. The next move was to stop banks from selling USD to BDCs because most demands come through BDCs and in very large volumes. I know that for sure. In fact this where the deposit money banks were complicit.

Then CBN told the banks to ensure that monies purchased must be utilized for that particular purpose else, it must be returned to the bank's (CBN) vault between 48 and 72 hours (even this too, the banks played a fast one on the bank and that was why there was panic-sale as these banks had large sums of USD in their vault). Another step was to ensure that the only currency to be used for payment of goods and services must be the naira; no goods or service must be paid in the USD (exception applies to transactions in the oil industry). All hotel rates, rent rates, school fees, or any other services must be paid in naira.

The CBN also increased their oversight activities on the BDCs - some of them can attest to this. Long ago, the CBN stopped BDCs from transferring USD to offshore accounts using their own (BDC's) accounts because of their easy access to the USD. As at that time, they were not adequately regulated and there was growing fear of terrorism financing. Even now, you can't pay in cash to a non-BDC account and transfer out of the country. Then again, going forward, from the 1st of August, 2015 all BDC transactions must be accompanied with a Bank Verification Number - that is close monitoring of the activities of BDCs.

Having found out some of the purposes for which these FX were being purchased, the CBN issued another directive banning access to foreign exchange for purchase of some commodities (import prohibition list). In Nigeria, there are three official windows to access FX. One is the inter-bank window, the second is the BDC market and the third is the export proceeds. All three must not be used to finance imports on the prohibited items. The CBN earlier restricted the use of dollar denominated debit cards issued by Nigerian banks - including the daily, monthly and yearly limit (for withdrawals via ATM).

Last week, due to CBN's insistence of not reversing their earlier support (and perceived government support) for non-inclusion of these products, the banks and dealers had no choice than to sell off. The speculators have lost. Banks do not accept FX. In fact, CBN stopped them because they must have gotten credible information that there is so much USD in circulation. Big loss for money speculators. Big loss in foreign exchange earnings for banks too. That is why you read in the news that people go to Benin or Ghana to deposit their money and transfer out. I wish they consider the risk. Well high profit, high risk. People look for holes in the system to make a profit.

The whole essence is to protect our local tender, protect our economy and our industries. Protect, very importantly the SMEs as they are the engine for expected growth in the country. Please note that the large corporations and industries source FX directly from the CBN. But there are smaller companies which might find it difficult to access FX due to the nature of their business and to also by-pass the tough and strict documentation required to assess FX. CBN's recent directive is to encourage local growth and development. To challenge us and make us see and exploit the opportunities in our country. Why do we need to import tooth pick? Why import rice? Why import palm oil? Why import poultry products? Even with the various milestones reached in the rice policy. Now we have so much cement in the market to the point of an incident of a glut, yet someone will someday, just wake up and request for FX to finance cement import? These imports hamper the growth of our local manufacturers. These imports causes more pains than gains. We may say the imported products are cheap but should we forsake standards? Should we allow dumping?

We need to consolidate on the gains of the previous administration. The previous administration did a wonderful job at diversifying our economy - the service industry, the agriculture, manufacturing and even the oil and gas industry where we witnessed increased local content participation. That is why we had a single digit inflation figure even at the peak of low ridiculous oil prices. Even when we had no oil imports because government could not re-imburse funds for subsidy due to reduced earnings. Remember the inaugural speech given by Emefiele - a CBN that is committed to inclusive growth and job creation. That is the focus of the CBN's various directives. There are policies to promote local production of goods as seen in the previous administration. The automotive industry, dry season farming, sugar cane production, cassava production and even oil refinery.

Also, rising commodity prices do not always translate to danger in the economy. It could also mean increasing growth in the middle class, expanding economy, increasing spending power by consumers, increasing government spending to stimulate job creation and growth. My concern is that this new administration is yet to give us a direction. That will go a long way at reducing tension and restoring credibility in the system. The restriction on depositing USD in domiciliary accounts will be lifted after the CBN must have found a way around abuse.

Lastly, this is a monetary policy intervention to protect the economy. We need the fiscal component to support this policy and this is where Mr. Buhari's Ministry of Finance should come in. And yes, the CBN is indirectly regulating the black market.

It is instructive to note that other countries will do everything to also protect their currency, their economy and industries. Look at China. Everyone goes to China for cheap labour, cheap production cost and make stupendous profit from it. Yet the country's currency is protected as the exchange rate is not the true value. So they earn huge foreign exchange against the dollar. Look at the policy of the US government towards rice export to countries like Haiti. Same with the European Union and Russia.

Later in the year or early next year, Iran will begin to ship oil (if the negotiations sail through and sanctions are lifted) and her government will do everything to protect their interest. The foreign investors in the capital market just know when and how to exit the market. They feel our currency is highly overvalued. Even at 199 to 1 USD, they think the currency still needs to be devalued. To tell you, they do not have our interest at heart.


Long one!

Thank you Sir

Firefire:
You see...

Waiting for 1dollar=1 naira

kaboninc:
This boy, I dey wait for you ni.

My oga wetin I do?

barcanista:
I encourage people to check out the history of the naira rate www.exchangerates.org.uk/USD-NGN-exchange-rate-history.html


iPrinz20 Aprokoman, Whynotthetruth, Dearpreye, Firefire, Francizy, Biafranqueen, Mogidi, Mizmycoli, IsraeliAirforce, Candyrain, Ambivert, Rose2014, Provacateur, Opiaoku, NDPVF, Anonimi, Engineerboat, Talktimi, ahaika23, coolestrogue APCSucks Emperortj93 DebateNigeria Wasquad and all patriots

Always quick to wail the wailing wailers.

Sweetlemon:
Why the sidelines? What happened to your liver?

Are you invariably saying I should be ashamed of my expression of interest to learn more on this topic of discussion?‎
‎
As you move on in this journey called life, my dear, you will realize that there is wisdom in silence while learning, especially in areas where you're not well versed.

The young need to grow.
We are the hope of this nation.
We must start getting our priorities right.‎

Mynd44:
More like desperation to criticize

I concur, but you just have to admired the guys resilience, even when he's spewing hogwash.

SeverusSnape:
Woman wrapper...Always chasing after Miz*MyColi.

The Half Blood nitwit. The said moniker isn't worth my attention. Besides, ever tasted bitterleafsoup?

[quote author=AprokoMan post=36600960][/quote]NNPC filling station Alakuko, Mobil filling station Alakuko. The last time I bought petrol, they sold it at 87 Naira.

MizMyColi:

Are you invariably saying I should be ashamed of my expression of interest to learn more on this topic of discussion?‎
‎
As you move on in this journey called life, my dear, you will realize that there is wisdom in silence while learning, especially in areas where you're not well versed.

The young need to grow.
We are the hope of this nation.
We must start getting our priorities right.‎

The embolden is why I always say your common sense is just too common!.

helpee:
@ barcanista, thanks for the analysis. kindly disregard those that have nothing to contribute except shouting wailing wailers. But i disagree with you. naira actually depreciated against the dollar because of excessive speculation. As you know, due to the ban on 41 products importers from accessing forex at the official rate, they had to source it from the parallel market. The excessive demand for forex by these importers from the black market at first created a scarcity that pushed the dollar up temporarily. speculators then cashed on that and started hoarding dollars thinking the dollar will keep rising against the naira especially since the new govt has no concrete plan in place. i was almost caught up too. i was advised to change most of my daily sales to dollars and then deposit in my DOM account in speculation of a further weakening of the naira. therefore, the banks were flooded by speculators with dollar deposits and many of them under the disguise of importation are laundering the money abroad via transfer. so, by refusing to accept the dollars, the CBN is playing a very smart move aagainst speculators. many people are therefore caught with dollars which they cant transfer or even deposit except to convert it to naira. therefore, the economy is flooded with dollars and demand is less than supply so the dollar must come down.
IS IT SUSTAINABLE/
Yes but we will temporarily suffer in sacrifice for a prosperous naira. importers will be temporarily caught unaware. the CBN will only create a bereaucratic bottleneck that will make it difficult for anybody except importers to access forex. BVN is one of the them. money launderers that used to access forex and transfer via DOM account will be cut off by the bottleneck. speculators will not find it attractive to hoard dollars because unless they ggenuinely need the dollars, they wont be able to get value for it since they cant spend it locally, cant transfer and cant even deposit. what do you need a useless dollar for?
it is not easy to open domicilliary account in neigbouring countries like you suggested unless you are a citizen or permanent/legal resident so few will be able to divert import activities to the neigbouring countries. therefore, even without increasing local production of imported stuffs, the naira will still stabilise against the dollar at a favourable position cos the most damage done to the naira usually comes from speculators. once we only access just the dollar we need for importation, school fees and other legal business abroad, we will stop speculating with the naira .
Even if things are temporarily expensive, we youths should take up the challenge and start producing. you can start with toothpick for example cos it is part of the products banned from accessing forex officially. the bottomline is that if it will be sustainable we must support the CBN in this quest. this is the first policy of this govt/CBN that i support.

Gbam....................what more can i say? you've said it all.

The policy is a welcome development

barcanista:
Is the value of the Naira really appreciating in the real sense or the CBN and the FG are playing pranks on Nigerians? Why are commodities still high in the market?

Ideal Situation
Ideally, customers operating domiciliary accounts will go to the banks, deposit their dollar and through that account they do whatever transaction that they deem necessary. The Banks inturn will take the dollars(and other foreign currencies) to the CBN.

The Buhari/Emefiele Situation
1. The CBN has stopped receiving dollars from banks, as a result the banks has stopped accepting dollars at the counter because their vaults are full.

2. Because of the restriction at 1(above) the demand for dollar reduces in the BDC. The BDCs seek every means to trade the currency including reducing the cost at the black market. The CBN will go to the press to scream "NAIRA IS APPRECIATING."

3. As a result of 1(above) the banks also refuse to request dollars from the CBN's foreign exchange reserve. The CBN will then come out to scream "RESERVE IS GROWING".

Is that the best way to manage the naira?

Salient Question and Effects:
1. What happens to a businessmen with domiciliary account seeking to deposit dollars and transfer to their partners abroad after buying the dollar from BDC or Bank?

2. The bank's refusal to accept dollar deposit means business transaction on that will be halted. Because no domiciliary account holder will be willing to withdraw from his account when he knows that he won't be able to make further deposit due to the CBN's policy except if his intention is solely for converting the dollar to naira for local transaction.

3. Instead of doing transactions from domiciliary account, businessmen will be left with no choice but to operate domiciliary account in neighbouring countries where they will be making transactions or resort to wiring money via Western Union in neighboring country.

4. As a result of 3(above) the cost of commodities will go UP because businesses will make up for the extra expenses. Also, that will mean reduction in business activities in the banks.

5. Should the above persist it will get to a certain point where there will be scarcity of the dollar in the market. When it get to that point, the dollar rate is astronomically shooooooot up in the market because demand will outweigh supply. At this point, the naira problem will be worse than it was


Is it not better to place a transactional limit for foreign currencies than discourage deposit completely(that will solve nothing)?
We don't produce, we import, we have no policy to promote local production nor infrastructures in place toencourage manufacturers, yet we expect the naira to appreciate. That is no done anywhere.

Great observation.

Point number 1 attracts point number 3 and the rest is history

By the time this govt is done with this lame attempt at appreciating naira, N500 will equal $1
Atimes I wonder if these guys understand economics at all or they got into their positions through the back door

Mynd44:
You people on NL always need back up as you cannot argue on your own else I wonder what the tags are for.

It is not like they will see the mention sef

Sorry to disappoint u dear, I got the mention

Whynotthetruth:
Thank you Sir

You're welcome.

neurologist:
stop making fool of yourself...u have lost the respect I have for you for the past few weeks.. I think u nid to go on a break

Why am I not surprised you went on to attack the op instead of countering him with facts


It will do you guys a lot of good to pick out the points raised by the op and help Buhari's administration than watch the him crumble the already crumbling economy

obi4eze:
You should have created this sort of thread when the Naira depreciated from 150 to to 200 US Dollars...

Barcanista is a BDC operator ...

udemejack:
but sir you ve not answered my question

answer my question first..there lies your answer

kaboninc:
I am an insider in the system. I tell you, the speculation, no be here. Just trust us when we talk about speculators. CBN did play a fast one on them by refusing to remove the policy prohibiting imports and asking banks to stop accepting USDs. However, I want to correct something (not from you). The banks collects all manner of USD from customers so long as it is geniue and not below a print year of 2006. So the FX in the vaults of the banks are either those issued by the CBN, those brought into the country through passengers and those smuggled (afterall, no form will be filled when making deposits.)

Also, the banks can also send the money to the CBN (CBN will have to repurchase it but at what rate?). Thus these banks do not see it as a sweet venture and worse still, the CBN CONTROLS them. So it was a lose-lose situation for them

Firstly, banks made it very clear that they are not accepting dollar deposit. This position was re-echoed by CBN. Do you beat speculators with this? If you read my OP I did not dispute the fact that speculators hoard the dollar for a gain, my position is that stopping deposits altogether is a big FLOP! I have never heard of a country that beat the speculators like that. I gave instance of Egypt and how they control the blackmarket price. That policy is very sustainable and a positive step...add to the fact that Egypt produces some stuffs unlike Nigeria that is 100% import. What we will exprience in the short run is hike in commodity of goods and on the long run we'll experience dollar scarcity (as explained in my OP). When that time reaches then you will understand that speculators weren't "beaten" but only given a major lifeline.

I will only speak for the previous administration. The previous administration did a lot to encourage local growth through issuance of loans most especially through the Microfinance Banks. There was the industry specific banks like the BOI. I know that for sure. The major problem we have is power and no thanks to vandals and economic saboteurs. Another is double taxation. Another is strict implementation and sustenance of policies. Then we need flexibility in policy development. Then our Justice and Law Enforcement System

As explained here we have no mechanism in place to see growth in local production at the same time we are implementing a "laughable policy". See the long run we will understand that there is no short cut to this.


Thanks!