RabbiDoracle:


China had been in lockdown since late 2021 yet no pullback.

Crypto had been falling since early this year yet no pullback.

I believe this is a structural change. And it is happening globally. Many countries will get onboard this in 2023.

USD needs to be badly devalued globally. It is not a Nigerian problem, it is a global problem.

US, EU and other developed markets need severe austerity to get rid of their excess unfunded liabilities. Poverty is coming to developed nations.

Till China puts its foot down and stop subsidizing the dollar, the dollar will remain bloated. The questions now are
* Will China ever strengthen the Yuan against the dollar ?
* What is stopping China from doing it or how is China planning to do it (or can execute it) without shooting itself in the foot ?

I think this dollar overvaluation stories have been on for years if not past a decade.

RabbiDoracle:


When very high inflation comes, you don't hold money (no matter the form). You hold real assets or stocks of companies that sell real assets.

As regards naira - dollar events we see, and in my opinion, we are entering the phase of full digital naira (e-naira). In this phase, there could be too few notes available for circulation.

If there are less naira notes, those with dollar (hoarders, illicit businesses) would want to exchange their paper dollar with new naira notes and they will see that notes are no longer available. Naira notes will now be very scarce. So you either go to to the bank to open a naira account (if they don't have one) or you get stuck with the paper dollars. When hoarders (not genuine businesses holding forex in their books) are tired and need e-naira to use for day to day transactions, they will approach traditional BDCs or banks to change their paper dollars. These institutions will only issue them digital naira. Nothing more!

What will cause exchange rate to collapse faster?

From above, as more hoarders see that they can't transact business using local naira notes, they will be force en masse to go into BDCs or banks to change their useless paper to e-naira. This will cause a severe crash of the $-NGN rates. This will bring convergence of official and parallel market rates.

What if I mask my sales of paper dollar via peer to peer transfer as just a harmless transfer to a friend/family while selling the paper dollar higher to them?

Except your friend/family intends to travel abroad where they still use paper dollar, in most cases everyone will reject the paper dollars. Many countries have started their digital currencies transactions. Starting from 2023 lots of other countries will come onboard to use e-currencies.

That way speculative attacks on any nation's currencies will be eliminated or reduced.

And when these paper dollars reach banks, they will exchange at CBN official rates. Traditional BDCs will reject dollars because they know the game is up since exchange rate convergence is coming . Those who buy higher and can't sell will have to take a loss as they grudgingly walk to the bank.

Till tomorrow you still need naira (and not dollars) to buy tomatoes in nigerian market.

What about the importers that need dollars for import?

How will they source dollars.

I believe that it is our importation that is driving the fall of the Naira.

Paying for schools fees abroad is also importation as Education is being imported.

Lots of nigerians are going to canada, uk and US schools more than ever before

BabsO2:


Till China puts its foot down and stop subsidizing the dollar, the dollar will remain bloated. The questions now are
* Will China ever strengthen the Yuan against the dollar ?
* What is stopping China from doing it or how is China planning to do it (or can execute it) without shooting itself in the foot ?

I think this dollar overvaluation stories have been on for years if not past a decade.

Yes, any country can strengthen once people start buying your bonds. Bond market is the real currency.

Once China Internationalizes her bond market and becomes transparent, countries will start buying their bonds. Hence the yuan will strengthen against other reserve currencies. America will not like this. This will lead to direct confrontation with them.

Since the USD was the currency of choice for trades, it means that trade surpluses made by countries will be in USD and to invest these surpluses, central bankers invest them in US treasuries. This will strengthen the US bond market and also strength the USD against other pairs.

But with recent events leading to confiscation of central bank reserves, many countries will have to divest as fast as possible. This will cause serious funding issues in the US as most of their finances are funded by borrowing via the bond market. No willing country to buy treasuries leads to inability to fund lots of programs.

Something broke if you merge the charts of DXY (dollar index) and TLT (20 year treasury bond prices). These two charts have almodt closely correlated each other since 2008. As TLT prices rise, DXY rises as well and vice versa. But in December 2021, it broke the correlation. So as TLT prices fall rapidly, DXY rose rapidly.

December 2021 was when Russian troops were amassed on Ukrainian border and were ready to storm. The usual correlation was broken then. So this looks like a turning point in the global financial market.

We will see what happens going forward.

Dum20:


What about the importers that need dollars for import?

How will they source dollars.

I believe that it is our importation that is driving the fall of the Naira.

Paying for schools fees abroad is also importation as Education is being imported.

Lots of nigerians are going to canada, uk and US schools more than ever before

The current system :

If a Nigerian wants to buy a shoe in China, he changes its naira to dollar first and then back to yuan to buy the shoe. Naira, dollar then yuan. 3-ways system..

If a European wants to buy a shoe in China, he changes his euro to yuan and pays for the shoe. Euro to yuan. 2-way system.

I believe the global payment system should be a 2 way system where banks in one nation will interact with the other banks there without intermediary.

For this 2-way system to be achieved, you don't need a dollar/euro or whatever currency to buy a good in China. You should source dollar if you are buying goods in the US. The same way Americans will source naira if they are buying goods in Nigeria. It is then that you will see that these dollar demands may not be for US/EU goods but could be Chinese goods or Turkish goods.

In my opinion, if a 2 way system is to be achieved, it means that global central banks will keep lots of other nations currencies to effect seamless transactions. And I think that is where digital currencies come in for ease of posting into accounts.

Because why would I want to buy something from Benin Republic that is at my backyard and I will have to make a transaction to United States of America that is thousands of miles away from me, then I get the currency and subsequently cross my backyard to go and buy the goods in Benin Republic. It is like wanting to go to Togo and I fly Air France that takes me to Paris first and later bring me back to Togo.

I want to believe it will happen in this decade.

Good morning bosses... please, is Livestock a good stock to buy now considering its diminishing direction

RabbiDoracle:


The current system :

If a Nigerian wants to buy a shoe in China, he changes its naira to dollar first and then back to yuan to buy the shoe. Naira, dollar then yuan. 3-ways system..

If a European wants to buy a shoe in China, he changes his euro to yuan and pays for the shoe. Euro to yuan. 2-way system.

I believe the global payment system should be a 2 way system where banks in one nation will interact with the other banks there without intermediary.

For this 2-way system to be achieved, you don't need a dollar/euro or whatever currency to buy a good in China. You should source dollar if you are buying goods in the US. The same way Americans will source naira if they are buying goods in Nigeria. It is then that you will see that these dollar demands may not be for US/EU goods but could be Chinese goods or Turkish goods.

In my opinion, if a 2 way system is to be achieved, it means that global central banks will keep lots of other nations currencies to effect seamless transactions. And I think that is where digital currencies come in for ease of posting into accounts.

Because why would I want to buy something from Benin Republic that is at my backyard and I will have to make a transaction to United States of America that is thousands of miles away from me, then I get the currency and subsequently cross my backyard to go and buy the goods in Benin Republic. It is like wanting to go to Togo and I fly Air France that takes me to Paris first and later bring me back to Togo.

I want to believe it will happen in this decade.

these are the reasoning's of saddam Hussein Mummur Gafdafi of libya that got them into the bad books of the western powers

if you make these statement in any international form like quora the FBI and CIA will monitor you for some time

Ishiewo:
Good morning bosses... please, is Livestock a good stock to buy now considering its diminishing direction

buy GTB

Redoil:

these are the reasoning's of saddam Hussein Mummur Gafdafi of libya that got them into the bad books of the western powers

if you make these statement in any international form like quora the FBI and CIA will monitor you for some time

Not really, d so called "3-way" system is more efficient than "2-way" system. Imagine the headache if we had to source all different kinds of currencies when we want to do international transactions, the standardization problems that will come up. Except Africa can replace dollars with unified currency doing 2-way with all ur neighbors is not a great option.

RabbiDoracle:


The current system :

If a Nigerian wants to buy a shoe in China, he changes its naira to dollar first and then back to yuan to buy the shoe. Naira, dollar then yuan. 3-ways system..

If a European wants to buy a shoe in China, he changes his euro to yuan and pays for the shoe. Euro to yuan. 2-way system.

I believe the global payment system should be a 2 way system where banks in one nation will interact with the other banks there without intermediary.

For this 2-way system to be achieved, you don't need a dollar/euro or whatever currency to buy a good in China. You should source dollar if you are buying goods in the US. The same way Americans will source naira if they are buying goods in Nigeria. It is then that you will see that these dollar demands may not be for US/EU goods but could be Chinese goods or Turkish goods.

In my opinion, if a 2 way system is to be achieved, it means that global central banks will keep lots of other nations currencies to effect seamless transactions. And I think that is where digital currencies come in for ease of posting into accounts.

Because why would I want to buy something from Benin Republic that is at my backyard and I will have to make a transaction to United States of America that is thousands of miles away from me, then I get the currency and subsequently cross my backyard to go and buy the goods in Benin Republic. It is like wanting to go to Togo and I fly Air France that takes me to Paris first and later bring me back to Togo.

I want to believe it will happen in this decade.

But this sounds more like wishfull thinking than practical.

I believe the US has foreseen this and is making sure it does not happen.

I believe this is not new knowledge

First, I do not agree with Rabbi's first call that dollar will crash to Naira. I will only begin to take naira serious:
1. when fuel subsidy is removed (then you have a serious economy)
2. Or oil exports is increased to more than 1.5M barrels daily
3. Or when the CBN stops printing new money for the FG to spend (Over 700 billion new nairas in September alone)
4. Dangote refinery is another factor I am looking at that may help the country

For a country that has about $500M Eurobond due in July and has no option but to debit foreign reserves. How can Naira appreciate long term?

Redoil:

these are the reasoning's of saddam Hussein Mummur Gafdafi of libya that got them into the bad books of the western powers

if you make these statement in any international form like quora the FBI and CIA will monitor you for some time

Those US Govt agencies know these. And Russia is even saying it openly. China knows this. Lots of countries do, they are not dumb.

ositadima1:


Not really, d so called "3-way" system is more efficient than "2-way" system. Imagine the headache if we had to source all different kinds of currencies when we want to do international transactions, the standardization problems that will come up. Except Africa can replace dollars with unified currency doing 2-way with all ur neighbors is not a great option.

I agree with this.
Imagine holding Naira as reserves and it is devalued by 50% every few years, lol. Your sweat and hardwork is gone.
The 2-way system will be the end of globalization as everyone will want to maintain trade surpluses with their trading partner.
Maintaining reserves in each of all currencies around the world just sounds chaotic

Dum20:


But this sounds more like wishfull thinking than practical.

I believe the US has foreseen this and is making sure it does not happen.

I believe this is not new knowledge

Definitely, US knows. That is why if you look at what happened in December 2021 till date on TLT - DXY comparison, you will notice it was clearly a war game (currency war). US knew. Russia, China, EU and UK knew.

And it is still on. That is why japenese yen is crushed despite all interventions by the BoJ to sell dollars.

Olaide1295:


I agree with this.
Imagine holding Naira as reserves and it is devalued by 50% every few years, lol. Your sweat and hardwork is gone.
The 2-way system will be the end of globalization as everyone will want to maintain trade surpluses with their trading partner.
Maintaining reserves in each of all currencies around the world just sounds chaotic

Russia is pushing for multipolar order where lots of regions have a say as against unipolar order (where only US calls the shot). With multipolarity comes multiple currencies, multiple powers, choas as each jostle to remain relevant.

US knows that if multiple currencies start, lots of these dollars floating around will need to go back home to US soil. And that will be huge domestic money supply. So they will have no option but to fight all forms of financial acronyms (BRICS, MINTS, SCO or whatever) that are formed.

RabbiDoracle:


Yes, any country can strengthen once people start buying your bonds. Bond market is the real currency.

Once China Internationalizes her bond market and becomes transparent, countries will start buying their bonds. Hence the yuan will strengthen against other reserve currencies. America will not like this. This will lead to direct confrontation with them.

Since the USD was the currency of choice for trades, it means that trade surpluses made by countries will be in USD and to invest these surpluses, central bankers invest them in US treasuries. This will strengthen the US bond market and also strength the USD against other pairs.

But with recent events leading to confiscation of central bank reserves, many countries will have to divest as fast as possible. This will cause serious funding issues in the US as most of their finances are funded by borrowing via the bond market. No willing country to buy treasuries leads to inability to fund lots of programs.

Something broke if you merge the charts of DXY (dollar index) and TLT (20 year treasury bond prices). These two charts have almodt closely correlated each other since 2008. As TLT prices rise, DXY rises as well and vice versa. But in December 2021, it broke the correlation. So as TLT prices fall rapidly, DXY rose rapidly.

December 2021 was when Russian troops were amassed on Ukrainian border and were ready to storm. The usual correlation was broken then. So this looks like a turning point in the global financial market.

We will see what happens going forward.

To keep this analysis very simple. At the end of 2021 you noted above $1 = 6.3 Yuan
That is dollar was at is relative weakest point to the yuan since 2018 by end of 2021. But has since strengthened back to $1 = 7.1 Yuan today.
That is a 12% increase in one year.
Why did China weaken its currency this year relative to the dollar. Which to me looks like China is propping up the dollar. I believe China is doing this deliberately to make Chinese products very competitive in the world. And price out any global competition. I think China will continue doing this distortion even if 1 to 1 digital currency trades should ever be established between currencies in the world.

RabbiDoracle:


The current system :

If a Nigerian wants to buy a shoe in China, he changes its naira to dollar first and then back to yuan to buy the shoe. Naira, dollar then yuan. 3-ways system..

If a European wants to buy a shoe in China, he changes his euro to yuan and pays for the shoe. Euro to yuan. 2-way system.

I believe the global payment system should be a 2 way system where banks in one nation will interact with the other banks there without intermediary.

For this 2-way system to be achieved, you don't need a dollar/euro or whatever currency to buy a good in China. You should source dollar if you are buying goods in the US. The same way Americans will source naira if they are buying goods in Nigeria. It is then that you will see that these dollar demands may not be for US/EU goods but could be Chinese goods or Turkish goods.

In my opinion, if a 2 way system is to be achieved, it means that global central banks will keep lots of other nations currencies to effect seamless transactions. And I think that is where digital currencies come in for ease of posting into accounts.

Because why would I want to buy something from Benin Republic that is at my backyard and I will have to make a transaction to United States of America that is thousands of miles away from me, then I get the currency and subsequently cross my backyard to go and buy the goods in Benin Republic. It is like wanting to go to Togo and I fly Air France that takes me to Paris first and later bring me back to Togo.

I want to believe it will happen in this decade.

It is actually a two way system here. Naira is easily convertible to CFA at major points (Abokis, Seme, Idi-Iroko, and many markets in Benin). You can even pay for some things in Naira there. Same goes for other Countries using CFA as their legal tender. Naira can also be directly exchanged for Ghana Cedi and SA Rand.

However, it is a black market rate people will be given for the conversion.

RabbiDoracle:


Russia is pushing for multipolar order where lots of regions have a say as against unipolar order (where only US calls the shot). With multipolarity comes multiple currencies, multiple powers, choas as each jostle to remain relevant.

US knows that if multiple currencies start, lots of these dollars floating around will need to go back home to US soil. And that will be huge domestic money supply. So they will have no option but to fight all forms of financial acronyms (BRICS, MINTS, SCO or whatever) that are formed.

I will take the hint what you are saying has taken off once I see a steady weakness in the amount of Yuan a dollar can buy. Something below historical trends.

Thant is when $1 can no more fetch up to 6 Yuan. And is fetching less and less below 6 Yuan.

And for the Yuan to Naira if it stays steady fine. But the Naira should not depreciate faster than the dollar is depreciating to the Yuan.

BabsO2:


To keep this analysis very simple. At the end of 2021 you noted above $1 = 6.3 Yuan
That is dollar was at is relative weakest point to the yuan since 2018 by end of 2021. But has since strengthened back to $1 = 7.1 Yuan today.
That is a 12% increase in one year.
Why did China weaken its currency this year relative to the dollar. Which to me looks like China is propping up the dollar. I believe China is doing this deliberately to make Chinese products very competitive in the world. And price out any global competition. I think China will continue doing this distortion even if 1 to 1 digital currency trades should ever be established between currencies in the world.

Deliberate weakening of yuan?

Remember that when inflation struck, many countries were sourcing USD to buy commodities. Basically the rest of the world was in need of dollars. So this could strengthen USD against other countries currencies that require dollar urgently.

And during that late 2021, there were serious issues with China Evergrande as housing issues triggered a liquidity crisis amongst real estate developers in China. This also led to selloff of Chinese RE developers corporate bonds as well as govt bonds. As you selloff yuan bonds, you change to USD, this creates instant wave of dollar demand. This can cascade until ordinary Chinese locals start changing too fearing further devaluation (as could be seen in Nigerian dollar herd effect).

As the Chinese govt saw this, and while Fed was preparing to hike rates, the BoC was easing rates and pumping more money into the economy because Real Estate was stalling and affecting financial centres. More money pumped, more devaluation.

So what is deliberate here?

GreatEko:


It is actually a two way system here. Naira is easily convertible to CFA at major points (Abokis, Seme, Idi-Iroko, and many markets in Benin). You can even pay for some things in Naira there. Same goes for other Countries using CFA as their legal tender. Naira can also be directly exchanged for Ghana Cedi and SA Rand.

However, it is a black market rate people will be given for the conversion.

Then it is good. This is on a small scale.

On a large scale, this will involve ability of anyone or company exchanging huge sums for business setup or transactional purpose anywhere in any nation to be seamless.

ositadima1:


Not really, d so called "3-way" system is more efficient than "2-way" system. Imagine the headache if we had to source all different kinds of currencies when we want to do international transactions, the standardization problems that will come up. Except Africa can replace dollars with unified currency doing 2-way with all ur neighbors is not a great option.

I think it would be great for all African countries or the top 10 biggest economies in Africa, to unite and adopt a single currency that they could be using to transact businesses with the rest of the world (i.e non-African countries).

I believe we can achieve a two way system through this approach or what do you think?

RabbiDoracle:


Deliberate weakening of yuan?

Remember that when inflation struck, many countries were sourcing USD to buy commodities. Basically the rest of the world was in need of dollars. So this could strengthen USD against other countries currencies that require dollar urgently.

And during that late 2021, there were serious issues with China Evergrande as housing issues triggered a liquidity crisis amongst real estate developers in China. This also led to selloff of Chinese RE developers corporate bonds as well as govt bonds. As you selloff yuan bonds, you change to USD, this creates instant wave of dollar demand. This can cascade until ordinary Chinese locals start changing too fearing further devaluation (as could be seen in Nigerian dollar herd effect).

As the Chinese govt saw this, and while Fed was preparing to hike rates, the BoC was easing rates and pumping more money into the economy because Real Estate was stalling and affecting financial centres. More money pumped, more devaluation.

So what is deliberate here?

Okay thanks for insightful reasons for the trend in the last two years.
However based on trends, till $1 starts fetching less than 6 yuans. Things are still in favor of the almighty dollar

By the way is the Chinese asset bubble over ?

BabsO2:


I will take the hint what you are saying has taken off once I see a steady weakness in the amount of Yuan a dollar can buy. Something below historical trends.

Thant is when $1 can no more fetch up to 6 Yuan. And is fetching less and less below 6 Yuan.

And for the Yuan to Naira if it stays steady fine. But the Naira should not depreciate faster than the dollar is depreciating to the Yuan.

Someone ( Olaide) wrote here that multiple currencies means the end of globalization. The US knows this. That is why Janet Yellen was calling for friend - shoring or near-shoring of manufacturing instead of relying on China to buy basic goods. If the Treasury sec can say this, it means something is broken.

As recent as last month, same Janet Yellen was worried over loss of adequate liquidity on US treasuries. You can Google the bold and read. I believe all these are pointing to something that actually did break on December 2021.

BabsO2:


Okay thanks for insightful reasons for the trend in the last two years.
However based on trends, till $1 starts fetching less than 6 yuans. Things are still in favor of the almighty dollar

By the way is the Chinese asset bubble over ?

No doubt that USD is still the asset to be in but soon DXY will need to collapse to 72. If 72 is broken, it will be a disorderly slide into the 54 to 58 range. Last time it fell so hard was during 2008 financial crash. So it means something worst than 2008 crash will make it reach those levels I mentioned above. And that will drag every global economy (whether healthy or not) with them.

As for the Chinese asset bubble:
Reals estate doesn't deflate once. It takes time.

And their stock market will need to stage a huge comeback with other EMs and DMs that are declining now. It could be a fast comeback. But it is air!

BabsO2:


Okay thanks for insightful reasons for the trend in the last two years.
However based on trends, till $1 starts fetching less than 6 yuans. Things are still in favor of the almighty dollar

By the way is the Chinese asset bubble over ?

I'm not sure that China will allow its currency to appreciate because it would directly impact the pricing mechanism of their goods and services in comparison with other producers of such products and services for the world. Such an appreciation will lead to a decline in demand for their products and a shift towards other competing economies that can produce them.at a cheaper price.

The production of goods and services at significantly reduced prices is where I think Nigeria ought to invest heavily to benefit the people and the economy. Labour is significantly cheap in Nigeria and the potential for creation of production and service hubs is massive.

RabbiDoracle:


No doubt that USD is still the asset to be in but soon DXY will need to collapse to 72. If 72 is broken, it will be a disorderly slide into the 54 to 58 range. Last time it fell so hard was during 2008 financial crash. So it means something worst than 2008 crash will make it reach those levels I mentioned above. And that will drag every global economy (whether healthy or not) with them.

As for the Chinese asset bubble:
Reals estate doesn't deflate once. It takes time.

And their stock market will need to stage a huge comeback with other EMs and DMs that are declining now. It could be a fast comeback. But it is air!

Like an earthquake giving a first warning shot before the major quake.

Abeg, what is going on at WAPCO/LAFARGE o?

Gradually people are understanding what is contained in "valuations" of some assets. Most times, it could be plain air.

Example Sam Bankman - Fried went from $16b to Zero in 3 days. It can be very fast.

dapix:
Abeg, what is going on at WAPCO/LAFARGE o?

Is market opened today?

I thought it was weekend.

Apologies for writing world affairs on Nigerian stock forum.

GreatEko:


I think it would be great for all African countries or the top 10 biggest economies in Africa, to unite and adopt a single currency that they could be using to transact businesses with the rest of the world (i.e non-African countries).

I believe we can achieve a two way system through this approach or what do you think?

This will depend on the significance/volume of intra African trades. I mean in percentage term, how does Nigeria trade with Egypt, SA, Ghana etc compare to her trades with UK, US, Germany, China etc

We have been in austerity since 2009, when will it end? The conservatives know that talk of more austerity will cause commotion but the Chancellor is talking about raising taxes for everybody in his autumn statement.

Wahala!!!

RabbiDoracle:


China had been in lockdown since late 2021 yet no pullback.

Crypto had been falling since early this year yet no pullback.

I believe this is a structural change. And it is happening globally. Many countries will get onboard this in 2023.

USD needs to be badly devalued globally. It is not a Nigerian problem, it is a global problem.

US, EU and other developed markets need severe austerity to get rid of their excess unfunded liabilities. Poverty is coming to developed nations.

ololufemi:


I'm not sure that China will allow its currency to appreciate because it would directly impact the pricing mechanism of their goods and services in comparison with other producers of such products and services for the world. Such an appreciation will lead to a decline in demand for their products and a shift towards other competing economies that can produce them.at a cheaper price.

The production of goods and services at significantly reduced prices is where I think Nigeria ought to invest heavily to benefit the people and the economy. Labour is significantly cheap in Nigeria and the potential for creation of production and service hubs is massive.

Productivity first not bonds(which is a form of debt) makes economy go up.

Housing, stocks etc are derivatives not d main drivers.