DONADAMS:
your fourth question,,I've always wondered why,,,cos its not even the highest currency sef

@ donadams,
No it's not but most international transactions are done in USD then you look at their economy and government spending internationally then it balances out to where it is against the GBP and the Euro.
@ aaronson,
The writer tried as much as possible to state his own opinion as well as demystify some common misconceptions. That it is jargons, I beg to differ.
Furthermore, would you be kind enough to answer your questions? They seem to be rhetorics after all. Thanks!

Kennisch:


@ donadams,
No it's not but most international transactions are done in USD then you look at their economy and government spending internationally then it balances out to where it is against the GBP and the Euro.
@ aaronson,
The writer tried as much as possible to state his own opinion as well as demystify some common misconceptions. That it is jargons, I beg to differ.
Furthermore, would you be kind enough to answer your questions? They seem to be rhetorics after all. Thanks!

tnks very much...tho l'm still not very cleared

seunmsg:
Very revealing article. I agree with most of the arguments of the author except the issue of importation not being a problem and devaluation not resulting in serious inflation.

The level of importation in Nigeria today is not sustainable considering the inadequate foreign exchange earnings. Again, if we are serious about creating jobs and becoming a major global economic player, we need to reduce our over dependence on importation and stimulate our manufacturing industry. China and India did not become the second and third largest economy by importation, they achieved the feat by manufacturing almost all their local needs and still manufacturing enough for exportation to other countries. He identified exportation as a problem but the fact is, we can't export when we are not even producing enough to meet local needs. We need to discourage importation to stimulate local production.

The argument that devaluation does not cause serious inflation is just weak. The truth is, the real rate of inflation that the people contend with is not really reflected in the inflation figures that the NBS comes up with. When we devalue, the first thing that will go up is the cost of fuel importation and that is what the present administration can't afford. In calculating the inflation rate, NBS takes a lot of items into consideration and so, the real effect of the increase in petroleum products is watered down in the overall rate.
Again, minimum wage of workers has remain the same since 2011 and inflation has risen by over 5%. Adding another 1-2% to the inflation rate as a result of devaluation without increasing workers salary is wickedness.

China is one of the worlds biggest importers, they import almost everything into their country especially from Germany and Australia.
But what they do with what they import is the big question. while China transforms the huge imported raw materials to exportable finished products here in Nigeria we consume them and exports virtually next to nothing in return except crude oil. So our export has a concentration risk in crude whose fluctuation mirrors our economy almost immediately.
This is the same problem Finland experienced in the past 10 years when they exported only Nokia phones. Now their economy is in shambles as Nokia went out of market.
Export diversification is the key to any strong economy and China has capitalized on that.

seunmsg:
Very revealing article. I agree with most of the arguments of the author except the issue of importation not being a problem and devaluation not resulting in serious inflation.

The level of importation in Nigeria today is not sustainable considering the inadequate foreign exchange earnings. Again, if we are serious about creating jobs and becoming a major global economic player, we need to reduce our over dependence on importation and stimulate our manufacturing industry. China and India did not become the second and third largest economy by importation, they achieved the feat by manufacturing almost all their local needs and still manufacturing enough for exportation to other countries. He identified exportation as a problem but the fact is, we can't export when we are not even producing enough to meet local needs. We need to discourage importation to stimulate local production.

The argument that devaluation does not cause serious inflation is just weak. The truth is, the real rate of inflation that the people contend with is not really reflected in the inflation figures that the NBS comes up with. When we devalue, the first thing that will go up is the cost of fuel importation and that is what the present administration can't afford. In calculating the inflation rate, NBS takes a lot of items into consideration and so, the real effect of the increase in petroleum products is watered down in the overall rate.
Again, minimum wage of workers has remain the same since 2011 and inflation has risen by over 5%. Adding another 1-2% to the inflation rate as a result of devaluation without increasing workers salary is wickedness.

No nation on earth can do without importation and no nation has comparative advantage in all products. what you are encouraging is like telling a small family to grow every food they eat, sew every cloth they wear, make every furniture in the house, build their house with their hands, educate their siblings themselves. You this strategy would ensure they minimize outflow and boost their family economy right?
Theory of comparative advantage, specialization and division of labor improves everyone and reduces poverty more than absolute self sufficiency.

acadollar:
Clueless because you fail to talk about the government increasing minimum wage as regards to the inflation so that citizens will not suffer

And you also forget that importers will suffer it the most

Go and find out why Switzerland is world most stable economy... The government tried to increase minimum wage at a time to score cheap political point but the people rejected it in a referendum. They understand why fighting inflation is everyone's business

Y would u devalue the currency of a consuming economy.... We dont produce anything we only consume....




Countries like japan, south africa.... Dont just consume they export their products as well

aaronson:
What is the op writing? CRAP to the intellectuals. Educative to the dummies.

Have you ever made research as regard why you have the Federal reverse?

Have you ever made research as regard why money supply gets surplus and retracts within the shortest period of time?

Have you ever inquired why the dollar has to be the exchange rate against other currencies?

Ever wondered how the country debt gets paid and how?

Ever wondered modus operandi to getting world bank/IMF loan?

Do you think your country really owns the central bank/Federal reserve?


Well those are questions to ponder about to know why you a slave till you die in debt and your children continues the payment till they pass it down to their next generation.

Its not really about the Nigeria economy not viable it's about the hands that regulate the economy.

Give your alternative(s) there are many school of thought on economics!

abbey621:


Good points but all these things work hand in hand. Diversification is a starting point in order to reduce our over dependence on oil which ultimately contributes to our importation syndrome. Infrastructure comes next with the stabilization of electricity and a more reliable transportation system, this will attract local and international companies to invest more in talents capable of delivering the technologies of tomorrow. For what's the use of training our university students in the latest technology when electricity, hunger, poverty and so on limits their potential

devaluation is the immediate Remedy to forex regime stability. That will then ensure true diversification via complementary fiscal policy.

Ahmed3rdjuly:

Go and find out why Switzerland is world most stable economy... The government tried to increase minimum wage at a time to score cheap political point but the people rejected it in a referendum. They understand why fighting inflation is everyone's business

So do you mean that less than $100 minimum wage in Nigeria is okay for citizens even if the naira is devalued?

tuniski:
devaluation is the immediate Remedy to forex regime stability. That will then ensure true diversification via complementary fiscal policy.

Just one question, the Naira was devalued in 2014 what was the outcome? If you can answer truthfully then you would realize where I'm going!

please poster be more practical......just listing reports. @oduastates was more of points #gbam

abbey621:


Just one question, the Naira was devalued in 2014 what was the outcome? If you can answer truthfully then you would realize where I'm going!

stability and economic growth!

tuniski:
stability and economic growth!

So you mean since 2014 when the Naira was devalued, it became stable and we experienced economic growth? Come on now, even you realize this is silly

abbey621:


So you mean since 2014 when the Naira was devalued, it became stable and we experienced economic growth? Come on now, even you realize this is silly

U simply looking for who to agree with you. Our GDP growth has been steadily growing since the manyy devaluation but, has now been on an all time low cos we have a leadership, who doesn't get it cheered on by fans!

tuniski:



U simply looking for who to agree with you. Our GDP growth has been steadily growing since the manyy devaluation but, has now been on an all time low cos we have a leadership, who doesn't get it cheered on by fans!

Once again you are making me laugh. I operate on facts not sentiments. Look at the image below and tell me our GDP annual growth rate increased since 2014 devaluation of the Naira:



I'm sure you can't argue with facts, from September 2014 to May 2015, you can see the outcome of your desired devaluation scam!

This is the type of thinking I like. Presenting numbers and using it in the thoughts. Thanks for helping me articulate what I have been thinking all this while.

Our problem is not being export oriented. Once we improve our exports and believe in our productive capacities and abilities, we will be fulfilling our destined potentials. This will eventually lead to production of locally demanded products, further pushing down the import: GDP ratio.

Enough of the ignorance.

Seriously i see a silver lining here

abbey621:


Once again you are making me laugh. I operate on facts not sentiments. Look at the image below and tell me our GDP annual growth rate increased since 2014 devaluation of the Naira:



I'm sure you can't argue with facts, from September 2014 to May 2015, you can see the outcome of your desired devaluation scam!

hypocrisy is distortion! Your submission negates. U took a part of history as the picture of the whole! Devaluation isn't 2014 and 2015 isn't a bit part!

tuniski:
hypocrisy is distortion! Your submission negates. U took a part of history as the picture of the whole! Devaluation isn't 2014 and 2015 isn't a bit part!

Mr. genius, when was the last year the Naira was devalued significantly? Olodo! The Naira had been devalued twice since the drop in global oil prices began, first in November 2014, when the central bank lowered the midpoint of the official peg by eight per cent to 168 per dollar.

In February 2015, the CBN also scrapped its twice-weekly auctions at which the naira was sold at a subsidized rate, a move that resulted in an effective weakening in the exchange rate of the currency by about 15 per cent. Facts are facts my friend, stop arguing baselessly!


http://www.bbc.com/news/business-30196496

http://www.punchng.com/pressure-to-devalue-naira-grows-amid-cbn-resistance/

abbey621:


Mr. genius, when was the last year the Naira was devalued significantly? Olodo! The Naira had been devalued twice since the drop in global oil prices began, first in November 2014, when the central bank lowered the midpoint of the official peg by eight per cent to 168 per dollar.

In February 2015, the CBN also scrapped its twice-weekly auctions at which the naira was sold at a subsidized rate, a move that resulted in an effective weakening in the exchange rate of the currency by about 15 per cent. Facts are facts my friend, stop arguing baselessly!


http://www.bbc.com/news/business-30196496

http://www.punchng.com/pressure-to-devalue-naira-grows-amid-cbn-resistance/

Significantly! U are playing the ostrich. Devaluation is not cherry pick u hear! Anyway, relatively the worst is what we face now! A stubborn president and a cheering followership don't emotional deliver healiing, no they won't!
Let me ask, at what point will this govt devalue? It is never a question of if.

seunmsg:
Very revealing article. I agree with most of the arguments of the author except the issue of importation not being a problem and devaluation not resulting in serious inflation.

The level of importation in Nigeria today is not sustainable considering the inadequate foreign exchange earnings. Again, if we are serious about creating jobs and becoming a major global economic player, we need to reduce our over dependence on importation and stimulate our manufacturing industry. China and India did not become the second and third largest economy by importation, they achieved the feat by manufacturing almost all their local needs and still manufacturing enough for exportation to other countries. He identified exportation as a problem but the fact is, we can't export when we are not even producing enough to meet local needs. We need to discourage importation to stimulate local production.

The argument that devaluation does not cause serious inflation is just weak. The truth is, the real rate of inflation that the people contend with is not really reflected in the inflation figures that the NBS comes up with. When we devalue, the first thing that will go up is the cost of fuel importation and that is what the present administration can't afford. In calculating the inflation rate, NBS takes a lot of items into consideration and so, the real effect of the increase in petroleum products is watered down in the overall rate.
Again, minimum wage of workers has remain the same since 2011 and inflation has risen by over 5%. Adding another 1-2% to the inflation rate as a result of devaluation without increasing workers salary is wickedness.

I think you should do a little research on the import and export data of some of these countries we claim strengthened their nation over night. I mean China, India and the rest.

I don't think there is any country that does not import, even china's import is approximately and sometimes more than their export.

We maybe the giant of Africa thinking exportation will start overnight to balance the $billions that were looted. It's just a wild goose chase. Nigeria is still growing.

There are potentials of exporting in the nearest future but it just can't start immediately. Most small scale businesses rely on raw materials imported for their finished products. When they can't get the forex to get these raw materials how can they even produce for the locals not to mention export. The little they struggle to get at higher cost will be transferred to the consumers.

I have seen made in Nigeria products eventhough the packaging is poor but the products are good.

The fall in naira does not affect businessmen and producers because they will just add the extra cost to their goods and sell whether the dollar is affecting it or not. But What about the salary earners, say civil servants? Is there any increase in their salaries to accommodate for the rise in prices of goods? Cause like it or not items a civil servant bought with 6000naira last year will swallow 10000naira presently and be looking for more. What is the government doing to enable these class of people meet up with the inflation.

I don't think importation is Nigeria' problem cause if it is there must have been a glimpse of light at the tunnel' end since the restriction of forex.

I am a small scale producer and just succeeded in creating demand for my product in neighbouring Cameroon (yes, I know it's not dollar sales but it's a start) , but since I am just introducing the product, I can't buy dollar at this present rate to secure the raw material and double the price of just-known product. I also can't sell at same old price and incur such lost. So my product that has taken me two and a half years to create a real demand for both locally and say internationally is no longer in Stock. In order words I have paused my little production for now and asked my two workers to go home until I see something feasible from the government.

I think the government should instead increase (maybe 5×) the duties, tax and product registration on imported goods that are locally manufactured while reducing the duties on raw materials so as to encourage local production. Anybody that thinks he/she loves foreign products should be ready to pay 5× more.

Easily accessed loans should be made available (but strictly monitored) to small and medium scale producers and certain tax and registrations be reduced for such producers.

tuniski:
Significantly! U are playing the ostrich. Devaluation is not cherry pick u hear! Anyway, relatively the worst is what we face now! A stubborn president and a cheering followership don't emotional deliver healiing, no they won't!
Let me ask, at what point will this govt devalue? It is never a question of if.

Oh now I get you, you are not clamoring for devaluation because it has merit but because you feel the president is doing a bad job of running the country. If I had known this earlier there wouldn't have been any need to go analytical, I would have simply

omohayek:


The problem is that under this policy, bureaucrats and politicians get to decide what is "essential", rather than letting the market decide. This results in absurdities like Buhari and Emefiele banning chopstick imports as "non-essential", though such imports may be absolutely essential to top-tier tourist resorts that can draw in foreign dollars. Just because something doesn't seem "essential" to layman doesn't mean it's not essential to important domestic businesses.

Leaving aside questions of economic efficiency, the other problem with such policies is that they create the very scope for the corruption that we all love to complain about. Who is more likely to have access to artificially cheap dollars, a struggling small or medium-sized manufacturer in Ibadan or Onitsha, or well-connected monopolist billionaires who already benefit from import waivers and convenient bans on competitors' inputs? We cannot say we want less corruption while giving politicians and civil servants the very tools to engage in it.

D market deciding wld nt curb importation because as long as dere is demand 4 d goods/services & importation seems lyk d easier option in d short term, pple wld still import eg in d chopsticks matter u gave, doesn't Nigeria have d resources 2 produce dem? Yes it might take having 2 get few Asian expatriates 2 gain d manufacturing skills bt it can still b locally produced. Importation shld only b restricted 2 raw materials & technology dt can't b locally sourced. Granted, D repercussions may b painful @ 1st bt in d long run wld benefit our economy if properly applied. Allowing d private sector free rein in economic policies is always d best of actions. D govt needs 2 regulate strictly 2 prevent sharp practices.

Topeakintola:
Good points

However, the writer failed to mention that devaluation of a currency when it is not accompanied with increase in wages leads to a fall in Purchasing Power Parity which means that consumers have to be pay more for goods and services.

I also disagree with his notion on imports. He has made a lot of assumptions that are unproven i.e. the exact amount of total imports when we factor in unrecorded import activities. We have an import problem and curtailing them through restrictions while encouraging domestic production will solve the export problem he rightly identified.

He is right and you are wrong. Sorry

Topeakintola:


On imports you mean?

I do understand your skepticism. Japan embarked on a series of devaluation of the Yen in other to make its exports cheaper, while that policy worked, it created another problem. It led to stagnation in the domestic economy and they have not recovered after so many years. Right now, the Japanese economy is bleeding heavily and its market suffering losses in value

On the other hand, in theory, devaluation can help to stimulate the export economy, my problem is how it is managed in Nigeria.

Your analysis of Japan is wrong. Japans problem is that there is too much regulations are in the economy that stifle business. Unless it deregulates and liberalises its economy, it is doomed to low growth.

The Japanese are very conservative, risk averse and very resistant to change.

While it took a year for US to address its recent bank crisis, it took the Japanese over 10years before they started to address theirs.

JAZES:
Good piece but i disagree with the part that says devaluation of the currency
vis a vis an import dependent country like ours doesnt fuel inflation.

read the article again.he didnt say devaluation wont fuel inflation,but that to an extent it wont be as damaging as people think.

[b]....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?[/b]

omohayek:


The problem is that under this policy, bureaucrats and politicians get to decide what is "essential", rather than letting the market decide. This results in absurdities like Buhari and Emefiele banning chopstick imports as "non-essential", though such imports may be absolutely essential to top-tier tourist resorts that can draw in foreign dollars. Just because something doesn't seem "essential" to layman doesn't mean it's not essential to important domestic businesses.

Leaving aside questions of economic efficiency, the other problem with such policies is that they create the very scope for the corruption that we all love to complain about. Who is more likely to have access to artificially cheap dollars, a struggling small or medium-sized manufacturer in Ibadan or Onitsha, or well-connected monopolist billionaires who already benefit from import waivers and convenient bans on competitors' inputs? We cannot say we want less corruption while giving politicians and civil servants the very tools to engage in it.

fantastic post.

Emefiele said he was giving all the support in terms of the foriegn exchange needs to Dangote in building his enormous refinery.

Dangote is a man who can acquire the needed funds overseas at 2% above libor. He does not need a cent from the foriegn reserves.

How can you claim forex is scarce yet choose to sell all at the cheapest price? Makes no sense.

Nigerians shouting "Devalue devalue devalue Naira".

All those people shouting devalue have stacked up foreign currency.

The FG has announced that anybody who shouts devalue again will have their property and

accounts investigated by the EFCC with immediate effect .