it(the situation) 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 will astronomically shooooooot up in the market because demand will outweigh supply. At this point, the naira problem will be worse than it was.
www.nairaland.com/2501718/naira-appreciation-why-nigerians-should

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

LRNZH:
Eiya.... Econs-101 lecture is strongly advised.

The simple relationship between a commodity based mono-economy and the impact of low commodity prices is too difficult for the OP to comprehend.

TonyeBarcanista:

I believe you can comprehend. Read the OP again and the post after it to get the message. This is NOT the first time there will be oil slump in case you don't know.

TonyeBarcanista:

I believe you can comprehend. Read the OP again and the post after it to get the message. This is NOT the first time there will be oil slump in case you don't know.

Elosky20:

why is the same oil slump affecting the economy of saudi-arabia and venezuela then or is buhari the president there.

LRNZH:
Eiya.... Econs-101 lecture is strongly advised.

The simple relationship between a commodity based mono-economy and the impact of low commodity prices is too difficult for the OP to comprehend.

otokx:
You should have also suggested a solution in your write up.

Elosky20:

why is the same oil slump affecting the economy of saudi-arabia and venezuela then or is buhari the president there.
http://oilprice.com/Latest-Energy-News/World-News/Oil-Crisis-Prompts-Venezuela-To-Hike-Fuel-Price-Devalue-Currency.html

LRNZH:


LOL .... Yes oil price slump happened in the 80s under Shagari.... Happened in the 90s under IBB. And in 2014 before GEJ left office.

All these 3 presidents listed lost power largely power because of this. It is not new.

The blame lies at the doors of presidents who could not diversify the economy during surpluses in their tenure.

Your post is exposing GEJ's failures but you don't know. If GEJ's government saved enough money, there would have been a buffer. Go check how the Saudis are using their massive foreign reserve now. That's why I recommend you understand economic fundamentals before laying blames at the wrong door.

Yyeske:
Please try educate the OP better, so amazed at the nonsense he wrote up there. He never said anything about the increase in imports and reduction of our exports, not saying anything about our not having any buffers to cushion this melt down, increase in our population and reduction in income was not addressed by him. Educate him more.

LRNZH:


LOL .... Yes oil price slump happened in the 80s under Shagari.... Happened in the 90s under IBB. And in 2014 before GEJ left office.

All these 3 presidents lost power largely power because of this. It is not new.

The blame lies at the doors of administrations who could not diversify the economy during surpluses in their tenure.

Your post is exposing GEJ's failures but you don't know. If GEJ's government saved enough money, there would have been a buffer. Go check how the Saudis are using their massive foreign reserve now. That's why I recommend you understand economic fundamentals before laying blames at the wrong door.

TonyeBarcanista:

Vanezuela's currency didn't just crash like ours, it was devalued. These are two different issues. Ours is yet to be devalued and it crashed by 80% between Aug 2015 and Feb 2016.

NB: Our Currency is yet to be officially devaluated

TonyeBarcanista:

1. Shagari lost power through coup and even won re-election. It has nothing to do with oil slump.

2. IBB lost power through demand for democracy. In fact, after devaluating the Naira through SAP, he squandered whatever came of it. It has nothing to do with oil slump.

3. GEJ lost power because people were fed up with his handling of the economy. However, his government Deliberately devaluated Naira from 155 to 167 in 2014, and later to 199 in early 2015. However, the Open market rate didn't exceed 230/$. It has nothing to do with oil slump.

For the record, oil price crashed in 2008 December and 2009 February to $30pb without killing the Naira.


This astronomic fall has nothing to do with dollar...

Elosky20:

venezuela's currency was devalued because of oil price crisis. we failed to save in the raining season, rather we chose to eat up our money, venezuela have to devalue their currency because it contributes 80% of their revenue just like nigeria. we have to stop decieving ourselves by blaming buhari, vanguard made mention of this as at 2011, pls check it out.
http://www.vanguardngr.com/2011/01/petroleum-imports-shame-of-a-nation/
.
http://www.vanguardngr.com/2015/07/oil-glut-rages-no-market-for-nigerian-crude/

TonyeBarcanista:

1. Shagari lost power through coup and even won re-election. It has nothing to do with oil slump.
2. IBB lost power through demand for democracy. In fact, after devaluating the Naira through SAP, he squandered whatever came of it. It has nothing to do with oil slump.
3. GEJ lost power because people were fed up with his handling of the economy. However, his government Deliberately devaluated Naira from 155 to 167 in 2014, and later to 199 in early 2015. However, the Open market rate didn't exceed 230/$. It has nothing to do with oil slump.
For the record, oil price crashed in 2008 December and 2009 February to $30pb without killing the Naira.
This astronomic fall has nothing to do with dollar...

Sibrah:
You are missing it. The picture you paint is that of dollars with no where to spend it, but people are ever ready to buy dollar and go shop with it in Dubai and China, if there was saturation of dollar it would av led to it low exchange value and not what we have today.
What is happening now

TonyeBarcanista:

Read the second post on this thread. The CBN's policy as at then was counterproductive. No nation can manage dollar saturation by creating artificial surplus. This is the reason we are in this mess. Egypt employed sane path and today they are enjoying it. The short-cut of Buhari cost us the Naira.

TonyeBarcanista:
Since late 2015 I deliberately barred myself from making any commentary on the state of the naira in particular, and the economy in general despite watching things move from bad to worse. I had reasoned that it was best to observe things in silence and take note of development. Though my silence was interpreted by some of being sympathetic to President Buhari and a "ploy" to return to APC, I still maintained mute, focusing on other aspect of the economy.

Firstly, Crude Oil Slump Not Responsible For Naira Fall
We are all aware that our own currency, the Naira now trade at N403 to the Dollar($). Contrary to the notion that the fall in oil price is responsible for Naira collapse, the painful truth is that the massive fall of the Naira has nothing to do with oil price. If it was, the Naira would have traded at N20 per $1 when crude oil was selling at $120 per barrel in 2012. If the fall in oil price was the cause, the Naira would have fallen to N500 to the Dollar in December 2008 and February 2009 when oil price slumped to $30 per barrel from $147 that it sold in July 2008(but instead the Naira exchanged at N140-N145 to $1). If the Naira didn't fall so fast when crude oil price slumped in mid 2008, if the Naira didn't experience huge growth when the price of crude was at $120 per barrel in 2012, why then should we ascribe the astronomic fall of the naira to crude oil slump in price?

What Is Responsible For Naira Astronomical Fall?
If the oil price isn't responsible for the slump of the Naira from N225/$ in August 2015 to N403/$ in February 2016? Godwin Emefielle and Buhari administration are responsible. I will explain...

Why CBN Gov Emefielle/Buhari Administration?
Recall that sometime in July and August 2015 the CBN Governor Godwin Emefielle introduced a policy in which the apex bank stopped receiving foreign currency from commercial banks. This action prompted commercial banks to stop accepting dollar deposit because their vault was full and they couldn't accept more. The CBN reason was to "stop dollar flow in the economy". As at that time, people started looking for every means to trade-off the dollar while BDCs(Bureau de Change) were looking for every means to dispose the dollar at their disposal. Because the banks were unwilling to accept more dollar, the BDC were seeking to dispose the dollar at their disposal, while holders of the dollar were desperate to exchange to naira, an "artificial" surplus of the dollar was created, and an artificial "naira appreciation" was created. In fact, the naira even fell to N213 at a point to the Dollar and was celebrated by supporters of the government as a "feat".
www.allafrica.com/stories/201508041248.html

However, I warned that the CBN's policy of creating artificial "appreciation" and false picture of "increased reserve" was not worth celebrating in my August 4, 2015 piece titled Naira "Appreciation": Why Nigerians Should Not
Celebrate. In fact, I warned that the effect of the policy will be disastrous and will put our naira/economy to be in worse state that it was in the beginning. I never minced words when I predicted that...


What we are experiencing today is as a result of the skewed policy of CBN under Emefielle and President Buhari. The dollar has become scarce commodity, hence, the rise in price. This is the situation I warned the government against just six months ago. Our dollar wouldn't have been trading at anything close to N270/$ if the government and CBN had not tried to use the short-cut.

The Way Forward...
The truth is that the naira is already down and there isn't wisdom in trying to defend what is already down. The CBN should stop tinkering on the Naira but allow market forces do the job. The government should give funds to manufacturers in form of a loan and fix economic infrastructures so as to encourage local production. High taxes should be placed on imported goods that we could produce locally to give competitive advantage to the locals. There should be quality control so as to encourage quality goods and services to be produced in the economy. These will not only cause for less demand of the naira but will also have positive effect on our gross domestic product and tackle the rising inflation.

President Buhari and CBN Governor Emefielle have ruined the Naira. Time for them to go back to the drawing board and do what is right.

1. ....there are very many commentary on depreciation of ₦ nowadays expecially in parallel market, although parallel or black market can be manipulated by the traders, they either do it on their self interest, so those who doesn't beleive in the prosperity of nigeria can harbour $ as they can on imported goods hereby cause hike!
But in my own point of view the depreciation of ₦ is a great success to this nation if well manage to nigeria situation today. the looted fund is in $ and it must be refunded back in $, so if $1 is ₦198 when the money is looted, then if the money is refund today at $1 to ₦350 the nation has gained ₦152!
imagine if $1=₦1000, the gain is ₦902!
So in conclusion if the government managed to refund the $trillion looted and the refunded money, change it in parallel market, this will reduce the pressure on ₦ and the scarcity of $ in parallel market so the ₦=$.

(take note all the money took out of CBN during jonathan regime were changed in parallel market before ditributed)

you have other opinion?

2. ...2017 budget will beat record... ₦1 quadrillion!, all the social sectors will be substantially finance to trillions ₦, poverty will be completely eradicated and by the end of year 2018 Nigeria will be declared a developed state and classify one of the first three country in the index of human .
I know you will argue on how this can happen with the economics situation of today, low foreign reserve, low oil price, with depreciation of ₦.
yes oil price is down, foreign reserve is dry but we still have foreign looted fund reserve at hand! when recovered and well managed, it won't be problem to have money for this budget!
we can only pray that a $ hit ₦1000 and all $1 trillion looted recovered!
I know for sure that with the determination of this government and the support of foreign nation to help recovered all $ trillion looted it will happen.....$1 trillion recovered and change to ₦ will give us ₦1 quadrillion needed to financ that budget!
year 2017 bye bye to poverty!

3. ....OIL AND LFR
THE TWO MAIN MEANS OF INCOME FOR NIGERIA ECONOMY
.....with the determination of Nigeria president Buhari and the trust of of world leaders toward nigeria, from America, Eroupe, Asia and gulf nation the down price of oil and the rise in $ is not a corse to nigeria but a blessing.
Among the oil producing countries, and OPEC only nigeria have what other didn't, we have oil in common but nigeria have the looters as well, this opportunity raise nigeria above other oil nation and when all this country are frustrated with oil down price, nigeria have turn to her looted fund reserved to keep her economy running.
Nigeria is bless with oil and (LFR) looted fund reserve, when the oil price is down, the rise-up of dollar $ hike the value of our LFR, if government inject the LFR recovered on the economy, it will boot our economy!
at rate of $ to ₦ today if government managed to recovered $1 trillion LFR it will give us:

$1=₦400, $1trillion=₦400trillion!
I hereby challenge the Nigeria economists who insist that rising $ and downwards of oil price is a broke to nigeria economy to come-up for debate!
Note (LFR is looted fund reserve)








May God Bless Us All and Bless Nigeria

TonyeBarcanista:
Like I said, the Vanezuela situation is different from ours. Ours is yet to be devalued but it is crashing. Devaluation of our naira is another subject altogether. What we are seeing is Naira crash and not devaluation.


Read the Op again....

TonyeBarcanista:

Firstly, Crude Oil Slump Not Responsible For Naira Fall
We are all aware that our own currency, the Naira now trade at N403 to the Dollar($). Contrary to the notion that the fall in oil price is responsible for Naira collapse, the painful truth is that the massive fall of the Naira has nothing to do with oil price. If it was, the Naira would have traded at N20 per $1 when crude oil was selling at $120 per barrel in 2012. If the fall in oil price was the cause, the Naira would have fallen to N500 to the Dollar in December 2008 and February 2009 when oil price slumped to $30 per barrel from $147 that it sold in July 2008(but instead the Naira exchanged at N140-N145 to $1). If the Naira didn't fall so fast when crude oil price slumped in mid 2008, if the Naira didn't experience huge growth when the price of crude was at $120 per barrel in 2012, why then should we ascribe the astronomic fall of the naira to crude oil slump in price?

seunmsg:



Very simple, we have enough reserve to defend the naira as at that time and the oil price crash was not as sustained as what we are presently experiencing. You of all people should know this.

Elosky20:

he is good in politics, bt nt an economist