₦airaland Forum

jpphilips:
Where will the money to "pump" come from when Oil is at all time low and creek id!ots are contributing to production cut? Do you have some savings somewhere we can pump?
Have you considered the inflationary consequence of pumping money in a consuming economy?

The only policy we need is what we did before the CBN went gaga, we need to create a forex pool for local manufacturers, lower forex for manufacturers will push in goods into the economy and inflation will be defeated, Mopping up liquidity to combat inflation is one methodology that has proved to be ineffective.

The only challenge here is round tipping forex which is easy to solve, the dollar issuing agency will not issue dollar to anyone but will only make it accessible to their suppliers that way, the dollar must be fixed at 200naira to 1usd.
Where will the dollar come from? part of our Forex reserve must be liquidated to fund this cause. A sustained manufacturing capacity will solve both inflation and unemployment.


Secondly, if the Government can, they should bail out failing companies whose labour contribution are significant

jpphilips:
You can not make money from a commodity you don't have access to, government will not give $$ to anyone but will make it accessible to anyone that is a manufacturer, The 41 banned items on the forex list, have you checked their duty recently?

trillville:
In as much as government uses human beings to transfer the money to manufacturers or suppliers, there is a very high liklihood of round tripping.so far a huge difference exists between the rates.

BoleynDynaSTY:
What makes you think looting stopped?

BoleynDynaSTY:
What makes you think looting stopped?

jpphilips:
Why scrap the policy when EFCC can arrest the persons you mentioned?

kaboninc:
Are you really an analyst? Do you have a background in Finance? Not necessary academic..

I really want to know..

trillville:
http://www.premiumtimesng.com/news/headlines/209699-nigerian-govt-caused-economic-recession-emir-sanusi.html

Since you feel I don't know what I am saying, please read sanusi's submission on the way out of this mess. What I share with sanusi is that we both do not talk from a political angle. We state the solution without much consideration of the effect on a particular individual. Our advice may not always be practical, as we live in a political world, but should never be ignored. Have a good read.

You are 100 percent right.
Consider this, to stabilise the Naira government can do two things:

1. Increase productivity of nigeria thereby making us import less goods. This will lead to less demand for dollars as people wouldn't buy imported goods as much.


2. Reduce purchasing power of nigerians until people no longer desire as much foreign made goods.

This can be achieved in a number of ways:

A. Firing government workers. Less naira in circulation equates to less dollar purchases. Government can then use savings from civil servant salaries for infrastructural development like rehabilitation of all primary schools. Money will be given to poorer people in society who spend most on theit income on locally produced food.

B. Introduce car tax and estate tax. Basically tax richer people, thus reducing their ability to purchase foreign goods.

C. Keep devaluing the naira. Private companies will collapse leading to a decrease in people's demand for foreign goods. (FG's current policy).

Basically, option number 1 is long term, so government needs to focus on option two. There is no easy way out of this mess.

kaboninc:
I have taken my time to go through the submission of Mr. Sanusi. I would have loved to reproduce it here but on a second thought, I think the link will do. I must say that it was very insightful, educative, informative and I recommend it to anyone who is interested in finding solutions to the enormous problems facing us.

However, I asked you that question because I think you were "off" in your submission. Let me reproduce your comment for emphasis.



Firstly, there can never be a "less" demand scenario for dollars because most of the machinery to be used in increasing productivity would be imported and they are also priced in dollars. However, with increased productivity, the demand for dollars will be "channeled" to other areas that would have little effect on what we depend on for survival. That way, our exposure to external shocks will be reduced. Secondly, in a developing country like us, reducing the purchasing power of the people does so much harm than good. It is this consumer spending that helps to stimulate and increase economic activities. More so, it makes no sense to reduce purchasing power in other to reduce the demand for foreign goods. Rather, it is pertinent to note that people go for what entice them. If such goods are produced here in Nigeria, say for example, Rolex Watch, there would not be a need to purchase it from other countries. So you should seek to produce locally and create substitutes to reduce the demand for foreign goods rather than reducing the purchasing power of the people.

Sacking government workers to reduce the amount of naira in circulation which will subsequently reduce the dollar in circulation is at best funny. If you want to reduce the naira in circulation, sacking government workers as a solution is just plain st.pid.ty as there is no relationship between both. Then again, reducing the naira to reduce the dollar in circulation....these were the reasons I asked if you have a background in Finance or basic Economics or even running a business. There is already a short supply of dollar, so to what extent do you intend to achieve by reducing the naira in circulation...i.e supposing that your theory works though? You'd end up literally destroying the company.

I will stop here and not comment further on your "solutions".

trillville:
First of all, ur ideas though good are highly unrealistic at this point. If this were 2012 or 2013 when oil was still high, government would have been able to invest heavily in refineries, power plants and agriculture to lessen the pressure on our foreign reserves.

Right now everyday is a battle to keep the naira from further falling. Through the 80's to the 90's the naira went from 1 to 1 to the dollar to 80 to 1. This represents an 8000 percent loss in value of the naira. Such an event occuring today would take the naira from 160 to a dollar to 12,800 (160 X 80) to the dollar. Unthinkable right?

If the government focuses solely on increasing productivity without reducing our consumption of foreign things, [s]as it purchases equipment and builds facilities, the naira will keep on falling, increasing the cost of purchasing new equipment and making the cost of finished goods more expensive.[/s] Government needs to stop the bleeding in the currency market first of all. This to me is the most critical thing to do. If buhari had stopped the bleeding last year, companies would not be shutting down now.

My views may be confusing but I will try my best to explain them.

Nigerians use the Naira to Purchase dollars right?

If nigerians had less naira to spend or if the dollar was more expensive (as it is today) nigerians would not be able to purchase as much dollars right?

If the public or private sector were to fire workers, nigerians would have less money to spend right? People who used to receive salaries would no longer receive them right?

Such money used to pay salaries could simply be saved in naira or maybe used for infrastructural development which implies semi-skilled workers who use most of their income for feeding would be employed rather than the highly qualified former staff.

To summarise my argument, nigerians currently spend large amounts on unnecessary foreign goods. To increase productivity by borrowing funds to purchase machinery, without reducing our consumption patterns may spell dome for the naira. We spend 70 to 80 percent of government revenue on recurrent expenditure. This needs to change. Oil prices (adjusted for inflation) may never ever rise to the level it was between 2007-2014, so hoping for a miracle may be in vain. Mr Sanusi spoke about increases in the minimum wage and issues with the wage bill entirely. This supports my view that government must act in the best interest of nigerians in general and not public and civil servants.

I cannot properly address your last paragraph, but I will try to. If government were to offer treasury bills and bonds today to reduce the naira in circulation, what sort of demand will there be to purchase these instruments. We are in an era of falling naira. [s]Buying treasury bills and bonds at this time is highly unlikely to be a profitable investment[/s]. [s]It can be likened to burning up your money cos you would most definitely be losing value in dollar terms.[/s] I should not have to spell everything out.

kaboninc:
The source of the money to be "pumped" into the economy do not necessarily have to come from "oil". We can "borrow" from the international community. These borrowings will be tied to specific infrastructural developmental projects that are viable and capable of generating enough cash flow to repay the debt.

Creating a pool of forex without strong institution, processes and systems will still lead to abuse. Experience has shown that what we need now is not a "pool" of forex but an open market that is regulated by a strong financial institution, supported by solid financial structures.

Bailing out a company that is still productive would not be the best solution. But providing incentives such as tax reduction or suspension, reduction or cancellation of import duty/levy whenever there is an importation of essential machinery, access to finance with low cost, among others are what the government should do.

Your solution to round tripping is really not tenable. The same procedure you outlined is the same as Letter of Credit or other international means of payment. These procedures only create a form of security for parties in a transaction. However, not all international trades are backed by Letter of Credits. Besides, what is the guaranty that I can't arrange with the supplier to bring back the money back to Nigeria?

trillville:
In as much as government uses human beings to transfer the money to manufacturers or suppliers, there is a very high liklihood of round tripping.so far a huge difference exists between the rates.

trillville:
http://www.premiumtimesng.com/news/headlines/209699-nigerian-govt-caused-economic-recession-emir-sanusi.html

Since you feel I don't know what I am saying, please read sanusi's submission on the way out of this mess. What I share with sanusi is that we both do not talk from a political angle. We state the solution without much consideration of the effect on a particular individual. Our advice may not always be practical, as we live in a political world, but should never be ignored. Have a good read.

jpphilips:
Your suggestions are scary, are you by any chance related to Kim Jong -un?
you sincerely think its cool to curb people's taste by incapacitating them?

jpphilips:
Why will a productive company need bailout? didn't you read the emphasis there?

You can not borrow to fund stimulus packages that is the biggest problem Greece has. Your economic state makes you less credit worthy and whatever pushed you into recession becomes the risk determinant for your creditors, even if they consider borrowing to you, the conditions will be strident and the rates will reflect the investment risk.
The consequence is a huge budget deficit over the years.
You either liquidate some forex reserves or use corruption proceeds. Borrowing is a quick fix that wont solve anything in the long run.

You just thought like an African on the round tipping issue, go and round tip the reserves of any serious country then come back and tell me those countries have two heads or they use vodoo to get results, anyday you wake up and your mind tells you that what someone else has achieved is beyond your reach, do yourself a favour by committing suicide.

trillville:
Haha ha, very funny.
Whether you directly incapacitate them or not, they are still going to get incapacitated. The naira trading at 420 on the black market now. As the naira falls in value, both public and private workers are getting poorer. Considering government's current policies, this will continue for the foreseeable future.

Einstein defined insanity as doing the same thing over and over again expecting a different result. Nigeria has been in this very position in the past. The naira went from 1 naira to a dollar, to 80 naira to a dollar over a 10 year period. That's an 8000 percent devaluation in the value of the naira.

What caused the event in the 80's? New technology which led to deep sea exploration.

What has led to this event. New technology which has led to horizontal drilling.

Both times we had little or no savings due to the inept governments of Shehu Shagari and Goodluck Jonathan respectively.

In the 80's, we devalued the naira crippling the private sector and privatised government establishments. To this day, we suffer as a result of our actions.

Presently, we are devaluing the naira also crippling the private sector.

Private sector jobs are harder to create than government jobs because a private citizen must have a concrete motivation to start a business, but the government can employ people for whatever reason.

Dunlop left nigeria for Ghana and hasn't come back. How many companies do we have to lose this time?

When a recession occurs in the developed world, it is usually caused by businesses believing that there is more demand for a product or service than truly exist. The common term for this is a bubble. The realisation that demand is much less than anticipated, forces the businesses to reduce their workers and production levels to meet the accurate level of demand.

We have government workers who produce nothing but consumption. Do we keep subsidising their lives at the expense of the private sector. Must both sectors die together?

I guess I am Kim Jung Un. At least, I have the courage to make tough decisions. Tompolo's father's leg was recently amputated to save his life. Unfortunately, he still passed away. By amputating his leg, the doctor gave tompolo's dad a fighting chance at surviving. Such decisions are very tough to make. I guess the doctor is also Kim Jung Un.

PS.
Just read that dangote is advising the fg to sell it's shares in nlgn saying government has no business in business. Seems like the privatisation strategy we started in the 80's. While I admit that there are inherently weaknesses in government owned and runner businesses, this is no solution out of our present predicament.

Firstly, the Chinese government owns lots of businesses, and so far is doing an amazing job at running them.

Secondly, a few months ago, during the hottest period in the venezuelan crisis, the venezuelan government had over $50 billion in its foreign reserve, yet it's currency kept falling.

Having more money in our reserves will certainly help us in the short term but we may be in a period of low oil prices for up to 20 years.

kaboninc:
Is there any 'productive' country or company that does not need a bailout (borrow)? If there are any, it will be less than 3% - that is just to be conservative. Bailouts can come in different forms - borrowing, debt write off (full or partial), etc.



What could possible push us into recession? Recession is a cycle and happens all the time in the life of any nation. It could be triggered by so many factors one of which is a sharp reduction in revenue to sustain consumption (in our own case) or development. What matters most is the duration of the recession.

We are not borrowing to fund 'stimulus packages' which includes 'bailouts' and recurrent spending - increase in wages, etc. We are borrowing to fund 'capital investments'. The odds are for us when it comes to our 'economic state' - growing, strong, dynamic youth population, strong growth population, an untapped middle class, a very large informal sector, etc. These are the variables investors consider before risking their money.

Like I said, you borrow to finance capital expenditures and repayment will be from the cash flow generated by the project. For example, lets say you borrow to build a five lane road that will link two or more states together. By tolling the roads, you generate income which would be used to repay the loan.

Then again, we keep talking of reserves like it is 'something' that can be taken and just spent. The major component of the reserve is owned by the CBN, not you nor I nor the government. People should understand that. The other components (which I believe is not more than $5 billion) could said to be owned by the Federation (and another component which I think is owned by the FG). So the FG can lay claim to less than $3 billion. Most people just think the reserves can be taken and plugged into the economy. It cannot. So when you talk of liquidating our reserves, maybe you should explain more what you mean.

And talking about corruption proceeds, lol......



Oga, people round trip in other countries only that ours is more pronounced, our systems and structures are weak and hence people exploit these weakness for gains. The Central Banks of these countries always intervene to save their currencies either through purchase or sales just to make it very unprofitable for people to exploit. Also note that 'forex trading' as a form of round tripping albeit, more sophisticated.

All your comments are always laced with 'na only me know pass', insults and worst of all, ignorance.

trillville:
Haha ha, very funny.
Whether you directly incapacitate them or not, they are still going to get incapacitated. The naira trading at 420 on the black market now. As the naira falls in value, both public and private workers are getting poorer. Considering government's current policies, this will continue for the foreseeable future.

Einstein defined insanity as doing the same thing over and over again expecting a different result. Nigeria has been in this very position in the past. The naira went from 1 naira to a dollar, to 80 naira to a dollar over a 10 year period. That's an 8000 percent devaluation in the value of the naira.

What caused the event in the 80's? New technology which led to deep sea exploration.

What has led to this event. New technology which has led to horizontal drilling.

Both times we had little or no savings due to the inept governments of Shehu Shagari and Goodluck Jonathan respectively.

In the 80's, we devalued the naira crippling the private sector and privatised government establishments. To this day, we suffer as a result of our actions.

Presently, we are devaluing the naira also crippling the private sector.

Private sector jobs are harder to create than government jobs because a private citizen must have a concrete motivation to start a business, but the government can employ people for whatever reason.

Dunlop left nigeria for Ghana and hasn't come back. How many companies do we have to lose this time?

When a recession occurs in the developed world, it is usually caused by businesses believing that there is more demand for a product or service than truly exist. The common term for this is a bubble. The realisation that demand is much less than anticipated, forces the businesses to reduce their workers and production levels to meet the accurate level of demand.

We have government workers who produce nothing but consumption. Do we keep subsidising their lives at the expense of the private sector. Must both sectors die together?

I guess I am Kim Jung Un. At least, I have the courage to make tough decisions. Tompolo's father's leg was recently amputated to save his life. Unfortunately, he still passed away. By amputating his leg, the doctor gave tompolo's dad a fighting chance at surviving. Such decisions are very tough to make. I guess the doctor is also Kim Jung Un.

PS.
Just read that dangote is advising the fg to sell it's shares in nlgn saying government has no business in business. Seems like the privatisation strategy we started in the 80's. While I admit that there are inherently weaknesses in government owned and runner businesses, this is no solution out of our present predicament.

Firstly, the Chinese government owns lots of businesses, and so far is doing an amazing job at running them.

Secondly, a few months ago, during the hottest period in the venezuelan crisis, the venezuelan government had over $50 billion in its foreign reserve, yet it's currency kept falling.

Having more money in our reserves will certainly help us in the short term but we may be in a period of low oil prices for up to 20 years.

jpphilips:
If I know you for anything, you have serious comprehension problem, I thought by now you would have improved on that.
In your little mind you can not make a connection between robust capital spending and stimulus packages, SMH.

Your five lane analogy is ridiculous reason you need to do more on your ability to understand simple things, just to do you a favour, if your Government decide to do a five lane road as a capital expenditure, it in turn becomes a stimulus package not because revenue will be generated from tolling rather the contract is awarded to companies who have other suppliers and sub contractors in their employ, that way the value chain is highly stimulated in the long run that is why robust capital spending is considered a stimulus package.

Repaying the loan isn't the real stimulus package rather it is the value chain effect of such huge contracts, go and read about the US 2008 economy to understand where I am coming from.

Your statement on reserves does not deserve any attention, do yourself a favour, dont just make a comment to increase your number of posts, you must learn how the real world works before making baseless comments so you don't misinform feeble minds.

You have no idea how other countries maintain their forex no need wasting time on that, only a dumb person with an inferior arguement think the other person is claiming to know more, that is the height of inferiority complex, my advise for you is simple, not everyone is in your league.

The FG has every right to liquidate its reserves if it wants to, whether it does it through the CBN or through witchcraft, if the need be, it will.

finally I am not your Oga, I employ better minds than yours.

kaboninc:
Crap!!!!!

As usual. Lol.

I'm really trying hard not to go back to my old ways. I've got people who expect some form of civility from me especially in public. However and sadly too people like you makes it very difficult.

You may employ the best brains but you make useless their efforts. Same blunders you made in the subsidy thread...same blunders you're making now. Maybe you should tell us how the government can liquidate the CBN reserves and give to you.

"You can not borrow to fund stimulus packages"


"We are not borrowing to fund 'stimulus packages' which includes 'bailouts' and recurrent spending - increase in wages, etc. We are borrowing to fund 'capital investments'. The odds are for us when it comes to our 'economic state' - growing, strong, dynamic youth population, strong growth population, an untapped middle class, a very large informal sector, etc. These are the variables investors consider before risking their money."


Yet after using my analogy you called it ridiculous....what can be more ridiculous than you?

You must be daft!

jpphilips:
You are not daft, you have no idea that capital expenditure is a stimulus package for the economy, poor you!!