₦airaland Forum

queenzibah:
I love this guy , he sabi book wella , not dat APCs wailers

I love Queenszibah

kaboninc:
Truth is that cash deposits cannot be wired out.

If outflow is seriously restricted (the physical cash is baseless), please, kindly enlighten us how CBN intends to resolve the short term needs of businesses that need access to external facilities... I really want to hear this.

barcanista:
The problem with Nigerians is that we are too emotional. People are blinded by the short term rise in the value of naira in the BDc but forget that the so-called value is useless and will not affect anything all because the so-called rise was as a result of backyard policy and not due to the market forces. They also forget that the policy will create scarcity of the dollar in the market on the long run which in-turn will skyrocket the dollar value in the market. I have NEVER seen where this pattern was adopted in the whole world.

Waiting for your thread on this useless measure this is going to backfire big time by Christmas warn themooo!

I don't understand why anyone in their right mind would support this measure that's it's sole intent is to hurt small and medium enterprises. A lot of businesses (import and export), directly or indirectly, are active participants in the exchange market. I can understand not depositing $$$ in a domicile account, but also restricting outflows, that's simply ridiculous.

manny4life:
You say it's a temporary/short-term measure, if this is the case, what are the economic implications of such measures?

Foreign exchange is a strong component of the economy, small and medium enterprises rely on easy and quick foreign exchange to transact business. Please enlighten us the economic impact of this measure? If you want scenarios, I'd be more than glad to give you some.

Thank you!

Am running out of time but I just wrote something. Please take time and scroll up the page. You will find it.

Secondly, yes foreign exchange is a strong component of the economy but it is best used when it is held outside the country as you just cannot afford to allow your own currency to compete with a foreign one most especially when our economy is like ours. You need strong, solid fundamentals before you can even think of it. Chinese external reserves is held in USD. They have the largest economy by Purchasing Power Parity. The Japanese too. All in the USD but in these countries, the USD cannot compete with their local tender nau.

Thirdly, as for the economic impact, there are some companies that will need to import some goods and by virtue of the products, they either may not be able to access the FX from the CBN or want to avoid strict documentation. So they resort to the black market (any other source). And if they acquire this at exorbitant rates, prices will increase. That's the immediate economic implication.

barcanista:
Domiciliary accounts use is beyond just transactionary purpose-though it is one of the ways to effect transactions.


This is the problem with people. What the CBN does is to collect the dollar and give to banks on requests. This dollar is is called Foreign Exchange reserve. Where do you think BDCs get their dollars from? Where do you think banks get their dollars from after emptying their vault?


Like I said above all these can't replace dom account. It will be silly to discourage savings account just because their is current account".


there are variables that influences demand and supply. For the fact that we still rely on import, our goods and services will keep on the high side. For the fact that businesses make financial transactions from neighbouring countries just to import, it means we'll continue to bear the extra cost-hence, increase in commodities. There are no backdoors here.


If you agree that dollar will skyrocket in the market on the long run, then I see no reason for your argument above.


This is the crux of the matter.


My brother, I don't know why you are saying this. The way to curtail corruption is by putting mehanism in place to ensure strict adherence and not to put up "silly policy".


It $10,000 daily maximum www.onestop.globaltimes.cn/can-i-deposit-my-savings-in-non-chinese-currencies-within-china/

Thanks for agreeing with the concluding part. Ciao

let me ask u OP..please explain to me if Nigerians are allowed to operate a Dom acct in the united states. If YES..is such transactions done with the NAIRA. If NO? What's ur argument..

kaboninc:
Yes. That's the "alternative" source CBN was referring to in their circular.

Note that every inflow into the country has a tag or label or ID and it is being monitored.

Ok,take for instance i have an inflow of $100k and i want to change that to Naira but i decide not to make use of the bank but rather to wire the funds out to a party that is willing to credit me Naira which of course will be more favorable compared to using the bank. Will there be a penalty for doing this?

manny4life:
If outflow is seriously restricted (the physical cash is baseless), please, kindly enlighten us how CBN intends to resolve the short term needs of businesses that need access to external facilities... I really want to hear this.

The cash sold by the BDCs were actually intended to be used for PTA, BTA, medical fees, etc. These are light funds (less than $10k) which you can easily transport out of the country without any hassle from the customs.

There are other means of channeling funds out of Nigeria - (Money Transfer agents like the Western Union and Money Gram and what we call inflows) but sadly, I do not intend to go into other such details online.

However, if you have a legitimate need for USD, approach your bankers or me .

Eyop:
Ok,take for instance i have an inflow of $100k and i want to change that to Naira but i decide not to make use of the bank but rather to wire the funds out to a party that is willing to credit me Naira which of course will be more favorable compared to using the bank. Will there be a penalty for doing this?

If you do have it, send me a PM.

We'll talk about it.

Let us see as it plays out

MizMyColi:
This was my reaction when I saw the news of Naira appreciation.



I am stepping out of my work place now.
I will read the OP and draw a conclusion as soon as I'm settled.

*modified*

I have read the OP

Well‎ ‎
*sighs*

Is it that Mr Godwin is simply unintelligent?
Is he under pressure of any kind to perform?‎
Why the cosmetic change?
‎
To be honest, I want to see transformational progressive change, but if Barcanista's ‎writeup is anything to go by, then it means we're still far from anywhere near el-dorado.
Smh really.‎

Barcanista is merely doing what he does best, which is hating. I'm not a Buhari apologist, infact i condemned cbn's action from the onset. But so far, their approach is working. It is not a cosmetic solution as you put it. The rash action is to force a rapid appreciation of the naira. Once the naira appreciates to a significant level, cbn will begin to allow regulated dollar deposits, to forestall any dollar scarcity. This should keep the exchange rate steady for a while, while a stronger manufacturing base gives the naira more fighting power.

kaboninc:
If you do have it, send me a PM.

We'll talk about it.

shap man. You never even answer question,you don dey negotiate

Truth be told this has no bearing on every day Nigerian who does not have a Nigerian passport, talk less of domiciliary account.

The bad thing also is that eventually a way will be found to circumvent the process.

The banks and BDC are most likely to lose. I remember two years ago i tried to import some goods from china, my bank refused to accept naira to be deposited in my DOM account(@ official rate), i had to go to the black market to get the needed dollar and i got it @ a rate 20 percent higher than official exchange rate. ON getting to the bank, my bank imposed different cut-throat charges(@ unofficial rate converted to naira) that would make my goods expensive on the long run. The BDC and the banks operate a rackettering ring that ensures that they make enough profits all the time and the end consumers are the ones at loss. A banker friend of mine told me the BDC exchange the dollars with the banks at a rate that both parties profit. I also learnt that the black market traders have a way of striking juicy deals with the banks when they have clients who are willing to buy large amounts of dollars but are not ready to meet CBN demand (backdoor currency trade). Is this not money laundering? Right now, i am waiting for thr dollar to crash to all time low before i make my order. Op, all you are saying is impractical theory. Where in the world is currency sold in the open? The banks create scarcity, the black markets make profit from speculation and they share profits with the banks. Op, not everyone is a novice on nairaland.

otokx:
Truth be told this has no bearing on every day Nigerian who does not have a Nigerian passport, talk less of domiciliary account.

The bad thing also is that eventually a way will be found to circumvent the process.

It has on the impact on prices in the market. Remember the petrol you and I buy at the pump is imported and the business was transacted with dollar.

[size=18pt]This barcanista of a monkey fails to reveal in his wrote up that it was his IGBO sisters that milked the Nigerian treasury of billions of dollars and that is why Naira is almost 250 today.


So while some of us Nigerians are happy at its appreciation these IGBO sabotages are writing such articles as of Buhari made Naira to be 250.



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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

Seriously your busy body is too much, I just like the fact that he always ignore you.....

kaboninc:
The cash sold by the BDCs were actually intended to be used for PTA, BTA, medical fees, etc. These are light funds (less than $10k) which you can easily transport out of the country without any hassle from the customs.

There are other means of channeling funds out of Nigeria - (Money Transfer agents like the Western Union and Money Gram and what we call inflows) but sadly, I do not intend to go into other such details online.

However, if you have a legitimate need for USD, approach your bankers or me .

Doesn't make any sense, why should receipt from BDC's be actually intended for these reasons? Why can't money be wired electronically to it's destination? Transport how exactly?

How about people who have no access to travel out but have a legitimate reason for foreign exchange, then what? Example, I sent goods to Nigeria, the goods are sold and since I am not present physically, wouldn't it make sense for money to be wired back to me at official exchange rate. In this case, what happens? How do we circumvent the process? If I borrowed funds to transact the business, how do I mitigate a potential loss? Please leave the transfer agents, you know exactly how I mean. Besides, these WT agents don't wire from Nigeria, I could be wrong because I haven't tried it but I know Money Gram DOES NOT accept wires from Nigeria.

MizMyColi:
That's why I mentioned economists cum historians.
Let's assume that it is Barca's intention to deceive us.

I expect that people who are well informed will take time from their busy schedule and set the records straight.

Also, if you ask me, I really don't think it is necessary to dig up archives from the past.
Because, those in that time must have flogged the issue then.

We have heard all too often how the PDP was and allies destroyed our nation.
APC was installed to salvage the situation.
Se grab?

So, I believe it's the reason for the rather topical than historical issue before us.

The big question now is can anyone inform us why this problem persists, and the way forward, if any?

The great economist who I respect on this board are billyonaire and manny4life as well as yuzenzo

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

Unfortunately his predictions will come to pass. Mark my words.
I usually do not take OP seriously, but he is 100% right on the money here. His analysis is stellar.

There is one fact that most of us fail to appreciate; Nigeria does not produce anything. We are an import dependent country.

Mynd44:
Actually, there are immediate factors and long term factors as there are long and short term factors.

When we raised alarm that Emefiele's using foreign reserves to keep the Naira from falling was wrong, people thought we were crazy but recent events have showed that we can defend the Naira without burning reserves

You mean defending the naira without burning the reserve at the detriment of your import dependent economy.

Eyop:
Ok,take for instance i have an inflow of $100k and i want to change that to Naira but i decide not to make use of the bank but rather to wire the funds out to a party that is willing to credit me Naira which of course will be more favorable compared to using the bank. Will there be a penalty for doing this?

There can be depending on how your bankers manage it. But actually, you'll bear transfer charges. I don't have the exact composition but it depends on a certain percentage as commission, VAT, and telex fee.

manny4life:
Doesn't make any sense, why should receipt from BDC's be actually intended for these reasons? Why can't money be wired electronically to it's destination? Transport how exactly?

How about people who have no access to travel out but have a legitimate reason for foreign exchange, then what? Example, I sent goods to Nigeria, the goods are sold and since I am not present physically, wouldn't it make sense for money to be wired back to me at official exchange rate. In this case, what happens? How do we circumvent the process? If I borrowed funds to transact the business, how do I mitigate a potential loss? Please leave the transfer agents, you know exactly how I mean. Besides, these WT agents don't wire from Nigeria, I could be wrong because I haven't tried it but I know Money Gram DOES NOT accept wires from Nigeria.

Money gram and W/union do now but it's very difficult.

In Nigeria things works in abnormal way. I don't know the reason why somebody must buy dollar b4 doing an international transfer when such person has naira equivalent in his or her account. It makes no sense.

Please, does anyone know if the banks still do Western Union transfers (to the US and Europe) under the current circumstances?

Thanks

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.

Thanks bro.
Bacanista or vucanizar is just blinded ana pained by pdp failure at the polls.
He does not even know that it is a criminal offence to transact in currecies other than dollar in USA or other than pounds sterling in the UK. This a currency magt policy that has worked for them. Our employers have started planning to pay foreign staff in naira. This will reduce pressure. We should rather be encouraged to produce locally and help our economy. Windows for forex to genuine businesses especially those importing spares and machinery is wide open by CBN

Do you have a domicilliary account? If yes, please do you regularly wire money out? if yes, go and ask your banker what I just told you and you would know I am right... this was not really a CBN decision, it was the banks that made this decision and CBN governor just capitalised on it to make himself look good...

The stance of banks was to stop collecting dollars from currency speculators and NOT to punish exporters.

PS: please ask your account officer this question or look for someone with a domicilliary account to ask this question. I am not arguing, i just want you to ask, then you would know I am right. This stuff is about trust, as long as you are NOT identified as a currency speculator or currency changer, your funds can be wired out immediately you deposit the dollars in cash.

You can still receive money into your domiciliary account through dollar cheque deposit and wire transfer. Look at what I am saying as a business tip and not as an argument (APC vs PDP).

kaboninc:
Truth is that cash deposits cannot be wired out.

manny4life :
...

manny4life:
Doesn't make any sense, why should receipt from BDC's be actually intended for these reasons? Why can't money be wired electronically to it's destination? Transport how exactly?

How about people who have no access to travel out but have a legitimate reason for foreign exchange, then what? Example, I sent goods to Nigeria, the goods are sold and since I am not present physically, wouldn't it make sense for money to be wired back to me at official exchange rate. In this case, what happens? How do we circumvent the process? If I borrowed funds to transact the business, how do I mitigate a potential loss? Please leave the transfer agents, you know exactly how I mean. Besides, these WT agents don't wire from Nigeria, I could be wrong because I haven't tried it but I know Money Gram DOES NOT accept wires from Nigeria.

That's the question nobody has been able to answer.

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

Well said my brother. People do not understand what determines the value of their currency. We depend mostly on imports and if this attitude is not changed, we should expect the naira to continue to depreciate futher

MizMyColi:
This was my reaction when I saw the news of Naira appreciation.



I am stepping out of my work place now.
I will read the OP and draw a conclusion as soon as I'm settled.

*modified*

I have read the OP

Well‎ ‎
*sighs*

Is it that Mr Godwin is simply unintelligent?
Is he under pressure of any kind to perform?‎
Why the cosmetic change?
‎
To be honest, I want to see transformational progressive change, but if Barcanista's ‎writeup is anything to go by, then it means we're still far from anywhere near el-dorado.
Smh really.‎

oga b4 the op mis-lead you! Remembered that 41 items was ban from importation! So this op know pass the cbn boss!

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!

Nice one!

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

barcanista the chief wailer