₦airaland Forum

Nigsrdumb:
Liquidity ..


That's because the economy is not functioning at optimal levels.

Let's take the housing market for example, we all know there's a deficit.

The contractor's are up to their necks in debt's, and that sector is slowing down, whilst property prices are going up.


Let's inject cheap credit and see how the narrative changes.


The construction companies can build faster at cheaper rates, the middle income earner doesn't have to pay in full which means people can buy more house's.

More jobs, more development, and ideally more taxes.

We have literally accidentally solved a multitude of issues by injecting a new variable.

Oga think.

TransAtlanticEx:
You are the one that really needs to think.
Most of the finishing materials for those houses are imported.
When you introduce cheap credit,everyone rushes to borrow,too much liquidity,too much purchases,too much demand for the contractor to import more to finish more houses,too much fx pressure,reserves comes crashing,fx prices goes up,the house becomes superinflated that makes the credit worthless and the housing markets collapse,alongside the naira.
You can talk of liquidity helping the economy if only we had various sectors of manufacturing going on and our demand for import/fx is minimal.
Cc Emmanuelewumi,am i lying?
Cutting MPR will destroy this import dependent economy.

Nigsrdumb:
No it doesn't , how much of the components used in building house's are sourced from overseas?


The labour , materials to a considerable extent are local.

I even heard that the glass material production have been taken over by the Chinese who manufacture right in Nigeria.


They're capitalising on your stupidity for lack of a better word, plus have you ever asked yourself how they do it?


The solution is industrialisation and cheap credit, the missing link is the knowledge gap, read all the economic books you like.

It would confirm my thoughts.


Spend to expand

TransAtlanticEx:
I don't read books,pure market experience.
You don build house before?
Honest question.Because if you don build proper house,you will know most of the FINISHING MATERIALS weh na em dey carry money are imported.
How much is skeleton?
Answer this so that I can start pointing to you which and which materials are imported.

Nigsrdumb:
Let's take the housing sector for example, we all know there's a deficit.


Oga think.

maishai:
Oga this system is dead on arrival in Nigeria, Next Common entrance examination of your kids to secondary schools...... go there and witness the legendary level of malpractice that is going on................Go to WAEC, JAMB, NECO,A-LEVEL, POST JAMB, GRADUATE AND POST GRADUATE and witness extra legendary levels of malpractice and someone is suggesting Nigerians Write exams to obtain positions of service

Kill this idea it wont work

9jatriot:
When people say the bolded, do they mean affordability or availability, because if it is availability, I have never seen anyone who has money in his pocket that didn't get a house. Most of these UN induced slogans and statistics are not reflective of our realities.

Nigsrdumb:
I'll just drop a hint, I'm no economics guru but i studied economics as an undergraduate, im also not one of those people who read to regurgitate .

I read, observe to interprete.


Don't bother me with the same line of argument i used to defend my stance on devaluation because I literally raised those concerns first.

What I'm doing now is giving you a different perspective .

jedisco:
In virtually every country you pay tax at the point of purchasing good and services. That tax is used by the government in funding critical infrastructure including health.

TransAtlanticEx:
You don dey do who raise concerns first like boys weh dey fight for who go first Bleep the new ashawo who just come for brothel
I also didn't study economics,I did engineering which I didn't even finish
All of the things I tell you are from experience gotten from being relevant in the international trade scene.
And also,you did not raise any concerns that is similar to mine so no need for the "I said so first" stuff.
I support devaluation,not depreciation.
You seem to be very clueless that the two are very different things.
Depreciation is what kills a currency or economy,while devaluation doesn't since it is a controlled process.
This my funny friend

Lazyyouth4u:
Nigeria has a national health insurance scheme. Contributions for health insurance are deducted from employee’s paychecks. Even the informal sector is covered. This is how health insurance works globally. No country mandates its citizens to make contributions at the point of purchasing goods like recharge cards. Also, no country mandates profitable companies to contribute its profits for citizens’ health insurance after the companies have paid taxes. This is 2020.

Nigsrdumb:
Define depreciation and devaluation.

Expand on how depreciation and devaluation defers and it's affects the economy.

TransAtlanticEx:
Your phone no get google?

maishai:
Sounds like some people enjoy paying taxes in Nigeria..........As for me I don't and look for all means to evade it, for the sole reason that it would be embezzled by who knows whom

TransAtlanticEx:
I am talking credit you are talking debt market?
What's the correlation?
For the fact that there is so much liquidity out there due to low tb rates,don't you see how weak the naira is?
Does that not tell you mopping up naira is also a means to strengthen the currency without intervention?
Cheap credit helps our fx position in what way?

awesomeJ:
Trans, are you in a trance?

credit = debt now?

The cheap credit helping our FX position is straight forward.

How much naira did you get buying 10m T-bills in 2018? about 1.8m

How much today for thesame 10m just 94k based on the last auction result.

so you could take that 1.8m to chase USD in2018, today your 94k exerts much lower pressure.

same with bank lending, banks that didn't want to lend at 27% in 2017 cos there was free 23% OMO, are now looking for customers at 15%.

Most large corporates are issuing CPs at sub 7%

When you mentioned that cheap credit may also lead to excessive consumption thereby increasing FX demand, that's almost true just that the issue there isn't the cheapness of the credit but rather easy access.

If you give 10m to someone who knows it's secured with his salary of future retirement benefits, he's more likely to first think very carefully before accepting, even if the interest is just 10% pa. And he'll eventually utilize it well if he chooses to take it.

But when you say anyone should just dial a code on their phone and they can get up to 6m instantly with no paperwork involved, that's the type that'll go into unproductive ventures like buying Benz. Even if the credit is priced at 30%.

maishai:
Sounds like some people enjoy paying taxes in Nigeria..........As for me I don't and look for all means to evade it, for the sole reason that it would be embezzled by who knows whom

awesomeJ:
Asking as someone who wants to know, how does NHIS cover folks in the informal sector. motorists and market traders for instance.

And I think it's wrong to keep saying np country taxed people at the point of purchase of goods. I have cited an example of the gas tax in some US states. That voids that argument already.

awesomeJ:
Trans, are you in a trance?

credit = debt now?

The cheap credit helping our FX position is straight forward.

How much naira did you get buying 10m T-bills in 2018? about 1.8m

How much today for thesame 10m just 94k based on the last auction result.

so you could take that 1.8m to chase USD in2018, today your 94k exerts much lower pressure.

same with bank lending, banks that didn't want to lend at 27% in 2017 cos there was free 23% OMO, are now looking for customers at 15%.

Most large corporates are issuing CPs at sub 7%

When you mentioned that cheap credit may also lead to excessive consumption thereby increasing FX demand, that's almost true just that the issue there isn't the cheapness of the credit but rather easy access.

If you give 10m to someone who knows it's secured with his salary of future retirement benefits, he's more likely to first think very carefully before accepting, even if the interest is just 10% pa. And he'll eventually utilize it well if he chooses to take it.

But when you say anyone should just dial a code on their phone and they can get up to 6m instantly with no paperwork involved, that's the type that'll go into unproductive ventures like buying Benz. Even if the credit is priced at 30%.

Nigsrdumb:
Depreciation is obvious, eg asset depreciation.

I'm assuming you know something I don't, the difference between both is conscious and market induced.

Either way d value goes down.

The credit argument tallies with the taxes.

Taxes put money back into the pockets of the government, keeps the flow of money within the system and everyone benefits, devaluation puts money into the hands of foreigners.

Lazyyouth4u:
You are misquoting me o. Read my comments again please. I said government can increase taxes if they want to. This is basic. But they can’t ask people to make contributions for health insurance when they purchase goods like recharge card. I said contributions o. Not taxes. Think critically about this ridiculous idea and you will see that it is beer parlour talk that only drunk illiterates will applaud.

Please go to the NHIS website to read about how the informal sector is covered. Maybe you can reach out to them to suggest ways to improve the contributions and coverage to that segment of the population.

awesomeJ:
True.

Lazyouth, I learnt folks in Carlifornia, maybe several other US states pay gas tax used for maintaining their roads. The tax is added to the price per gallon folks pay at gas stations.

So when you pay $2.13 a gallon for gas, the actual gas cost which goes to Exxon and the likes may just be $2.01 the 12 cents goes to the road maintenance pool.

So you see Ahib isn't wrong afterall.

TransAtlanticEx:
You see that bolded ehn,roll weed,read am again and see how it sounds
TB at 18% is a means of clearing up free naira in the hands of future speculators.
That person who is buying fx with 1.8m would have bought it with the whole 10m if TBs was not at 18%.
And of course 10m will definitely exert more pressure than 1.8m
Now that TB is low,nobody will want to block 10m for 94k PA,rather there would be so much liquidity now for speculative purposes since the debt market has crashed.
What are you saying bros?
You know what you need?Go Allen avenue go carry the biggest waist weh dey there commot liquid for your body,na em dey make you no dey see well

Lazyyouth4u:
Do you know how health insurance works? Perhaps you should go and read up on that first. Contributions for health insurance is different from taxes my friend.

TransAtlanticEx:
I was talking currency depreciation,haba mana!!!

awesomeJ:
I think you're letting the fact that the suggestion came from Ahib cloud your appraisal of it.

People get taxed, or put another way, they are made to contribute towards their road
maintenance each time they buy fuel into their cars. How much different is that from Ahib's suggestion?

TransAtlanticEx:
You see that bolded ehn,roll weed,read am again and see how it sounds
TB at 18% is a means of clearing up free naira in the hands of future speculators.
That person who is buying fx with 1.8m would have bought it with the whole 10m if TBs was not at 18%.
And of course 10m will definitely exert more pressure than 1.8m
Now that TB is low,nobody will want to block 10m for 94k PA,rather there would be so much liquidity now for speculative purposes since the debt market has crashed.
What are you saying bros?

awesomeJ:
True.

Lazyouth, I learnt folks in Carlifornia, maybe several other US states pay gas tax used for maintaining their roads. The tax is added to the price per gallon folks pay at gas stations.

So when you pay $2.13 a gallon for gas, the actual gas cost which goes to Exxon and the likes may just be $2.01 the 12 cents goes to the road maintenance pool.

So you see Ahib isn't wrong afterall.

Lazyyouth4u:
My brother, health insurance contribution isn’t a government tax. Please go and read how health insurance works and you will understand where I’m coming from. You clearly do not know how it works.

awesomeJ:
You're right in thinking low yields portends the risk of making the 10m available to chase FX. However it's only a risk that may end up not materialsing.

That was why we didn't go from 13% to 0.9% at once.

We knew of this risk, and we crashed gradually watching how things would turn out. Apparently, the risk you mentioned which I also to be accurate, didn't materialize. There were still oversubscriptions. I agree with you the over subscriptions were mostly institutional.

At the retail segment also, funds from T-bills didn't mostly go into chasing or stashing FX.
Folks mostly redeployed to Bonds, mutual funds, equities and properties.

So your point is only a possibility. we watched and it didn't materialize.

On the other hand, continuing with a interest rate regime was not a possibility, it was a certainty.


I mean when you discount 20trn worth of instruments at 20%, You've CERTAINLY created 4trn new naira on a constant FX position.

If you had $40bn in reserves, each dollar in your reserves would support #500

But when you increase your naira position to 24trn via high interests, each dollar would then be able to support #600.

Now, that's the guaranteed devaluation that we have avoided through low rates.