chloee:
Do you have a business that depends on import?

AhmadMind:

[size=18pt]
@barcanista
@teeowl
@lastpage
@MizMyColi
@mickey45
@jomoh

AND ALL OTHERS [/size]

[size=19pt]
DOES IT MEAN THAT CBN must Now back ALL the Naira purchases done online ?

DOES IT MEAN THAT CBN must Dip into its Forex Reserves to back ALL legitimate demands for school fees etc?

What happens when all Forex is snapped up by Traders from other neighbouring countries

What happens when dollar in circulation out side banks becomes very scarce

I put it to you that its not 'speculators' .....but sensible Nigerians that converted their Naira to ensure they held unto the value of their money long term/.[/size]

AhmadMind:

[size=18pt]
@barcanista
@teeowl
@lastpage
@MizMyColi
@mickey45
@jomoh

AND ALL OTHERS [/size]

[size=19pt]
DOES IT MEAN THAT CBN must Now back ALL the Naira purchases done online ?

DOES IT MEAN THAT CBN must Dip into its Forex Reserves to back ALL legitimate demands for school fees etc?

What happens when all Forex is snapped up by Traders from other neighbouring countries

What happens when dollar in circulation out side banks becomes very scarce

I put it to you that its not 'speculators' .....but sensible Nigerians that converted their Naira to ensure they held unto the value of their money long term/.[/size]

teeowl:
Sensible Nigerians? You mean salary earners that dont have any business opening a domicilliary account? Or the ones that dont really bother about whether dollar falls or rises? the people converting Naira to dollars are the speculators and burea de change guys...

teeowl:
Sensible Nigerians? You mean salary earners that dont have any business opening a domicilliary account? Or the ones that dont really bother about whether dollar falls or rises? the people converting Naira to dollars are the speculators and burea de change guys...

sizl:
I think it is better to do a thorough research before writing up an opinion piece. A little research on the net would have yielded answers to the questions raised. I will try and explain the devaluation of the Naira to the best of my knowledge and the reasons why there is an appreciation in the parallel market

It is no secret that Nigeria's major source of income is from the sale of crude oil. I will paint a scenario. Nigeria produces crude oil. The country exports this crude oil and is paid in USD for this in the international market. The CBN (as the bank to the federal government) receives this USD from the federal government and gives the federal government a naira equivalent. This USD the CBN receives is what is currently kept in our 'external reserves'. (This is the reason why the FG cannot simply ask the CBN to give it some of the funds in the country's external reserves, that will be asking for money it has already received). Now, the country being in a net import position, i.e. the country imports more than it exports, need this USD to pay for items brought into the country or to convert NGN earned by multinationals to USD so these companies can repatriate their earnings. The CBN sells this USD to importers etc via commercial banks at the RDAS market. The price of oil in the international market thus has a direct effect on the levels of the external reserves in the country. The higher the price, the higher the level and the corresponding ability of the CBN to keep the naira pegged at the then exchange rate of 160 NGN/USD. This the CBN does by ensuring that demand for USD at the RDAS market are 'reasonably met' at the stated rate. So if demand on a certain Monday is for instance $1 billion, and the CBN has $30 billion in reserves and feels it has adequate funds in reserves, the CBN can easily sell for 160 NGN/USD thus keeping the rate at that band. This formula was hugely successful during the Jonathan era as oil prices hit unprecendented heights as much as $150 per barrel.

Fast forward to today, oil prices hover at around 55$ per barrel with a low of about 40$ per barrel this year so far. what is the effect on the country's reserves? We have a situation where internal demand in the country is increasing for USD while supply (income from oil sold) is reducing. Corresponding effect is that the country's external reserves decline at a rapid rate. Now imagine you are a father (The CBN in this case), the food (USD) to feed your family (the nigerian public) goods is now a scare commodity and very difficult to replace and you have 10 food items on your shelf and you currently need these 10 items to last you a year and previously, you used 4 food items per month...are you going to continue at the rate of 4 food items per month or are you going to adjust to the realities on ground and manage the food to last you for the year?

That is what the CBN has done. To reduce pressure on the country's external reserves, the CBN devalued the naira. This will reduce demand as you need more naira to get USD (simple law of demand and supply) and adjust the exchange rate to the market realities. The CBN also in a bid to stop commercial banks from hoarding dollars bought at the RDAS market and selling for profit at the interbank market closed the RDAS market completely. This was in a bid to narrow the spread between the interbank and parallel markets...and this worked for a while, the spread was small...until...well, demand was still high. The CBN took a further step, 41 items were listed as being ineligible for FX in the interbank market i.e. these items cannot be funded via USD purchased in the interbank markets, you have to go black market to purchase USD to fund these items. This led to a sudden spike in black market rates, now speculators stepped in. Due to the spike in blackmarket rates, people that had no business buying USD started buying and keeping in the hope that the rates will increase further and they can sell for a profit. This was the primary cause of the 240 USD/NGN rates we saw recently. Banks realised that they were getting a lot of cash deposits in people's dom accounts i.e. people were buying and keeping to sell at a higher rate thus denying the companies and people that really need the USD access to the funds. so what did the banks do? They stopped accepting dollar cash deposits. Now lets say John bought $100,000 in the black market to keep...he goes to the bank to deposit it and all the banks turn him back...John has to thus keep the cash under his mattress at home, but John is afraid of rats eating his USD or his neighbours son breaking into his come to steal his cash...so what does John do? John sells it back to the mall am, takes his naira and deposits it and sleeps happily. Suddenly, there's USD for sale, demand is matching and outstripping supply. Speculators that kept USD in their dom accounts hear of the crashing rates and rush off to sell too thus the rates keep coming down. This is the primary cause of the Naira gaining in the last week.

Now this trend may or may not be sustained, this trend will only highlight the extent to which speculators have affected the exchange rate. the root cause of the problem is the falling oil prices and the fact that Nigeria's major export is oil. Until we diversify our economy, we can expect to continuously affected by fluctuations in the international oil price

barcanista:
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

lastpage:


Some parts of your post are not true ...or let me just say they are "plain naive"!
I will just summarise that l was at a bank in Lagos late last year, to be specific, it was GTBank at Around Adeniran Ogunsanya area.
I wanted to buy some forex to make an offshore payment for a vehicle l bought in the USA.
The Bank staff, told me they cant sell Dollars to me, despite my request that l have proof of the transactions and it is legit and l have the naira equivalent.
Funnily, and this is where it really gets funny, the Head of the forex desk at that GTBank branch, directed me to a "Mallam' who was lurking nearby and told me "That Mallam can help you".

I went to Mallam and told him what l want.
Mallam said no problem, he would sell to me but the price was about #30naira per Dollar higher than the bank rate!

I went back to the GTBank Staff and asked him why he thinks l should buy it at that rate when all they needed do what use my Form-M to bid on my behalf with CBN?
GTBank staff just looked at me and said Oga, if you really need it, that is how we can help you get it.

Meanwhile, as l was there "speaking grammar", Mallam has sold Dollars to a few people who dont give a hoot!
And the scary part of it was that l saw with my own eyes as the GTBank staff was transferring the Dollar (which they bought officially at a lower rate from CBN, to the Mallam), and l assume they all share the 'extra' on top.


The juiciest part of all these is that I HAVE EVERYTHING CAPTURED SECRETLY ON VIDEO.
I am torn between exposing this scam (and probably ending the career of those involved) or holding onto it and thus allowing such scam to be ongoing.
As someone who have worked in various banks in the late 90's and early 2000's, l have seen it and l can tell you authoritatively that the scam is sanctioned by the Management of every Bank, right from the M.D., to the "trusted" head of Forex Dept in every bank.

so, if anyone should be held responsible for this scam, it should be the "big fishes" (from the Managers, to the M.D's,), not just the "small fries" who man the forex desk.
Welcome to Round-tripping 2.0!

We are still on a "long Tin".

Thanks for relating your experience. These are the demons that have been hunting our economy. Barcanister sees nothing wrong in this. Typical GEJ mentality.
Lastpage!

AhmadMind:


@barcanista
@teeowl
@lastpage
@MizMyColi
@mickey45
AND ALL OTHERS

DOES IT MEAN THAT CBN must Now back ALL the Naira purchases done online ?

DOES IT MEAN THAT CBN must Dip into its Forex Reserves to back ALL legitimate demands for school fees etc?

What happens when all Forex is snapped up by Traders from other neighbouring countries

What happens when dollar in circulation out side banks becomes very scarce

I put it to you that its not 'speculators' .....but sensible Nigerians that converted their Naira to ensure they held unto the value of their money long term.

lastpage:


Some parts of your post are not true ...or let me just say they are "plain naive"!
I will just summarise that l was at a bank in Lagos late last year, to be specific, it was GTBank at Around Adeniran Ogunsanya area.
I wanted to buy some forex to make an offshore payment for a vehicle l bought in the USA.
The Bank staff, told me they cant sell Dollars to me, despite my request that l have proof of the transactions and it is legit and l have the naira equivalent.
Funnily, and this is where it really gets funny, the Head of the forex desk at that GTBank branch, directed me to a "Mallam' who was lurking nearby and told me "That Mallam can help you".

I went to Mallam and told him what l want.
Mallam said no problem, he would sell to me but the price was about #30naira per Dollar higher than the bank rate!

I went back to the GTBank Staff and asked him why he thinks l should buy it at that rate when all they needed do what use my Form-M to bid on my behalf with CBN?
GTBank staff just looked at me and said Oga, if you really need it, that is how we can help you get it.

Meanwhile, as l was there "speaking grammar", Mallam has sold Dollars to a few people who dont give a hoot!
And the scary part of it was that l saw with my own eyes as the GTBank staff was transferring the Dollar (which they bought officially at a lower rate from CBN, to the Mallam), and l assume they all share the 'extra' on top.


The juiciest part of all these is that I HAVE EVERYTHING CAPTURED SECRETLY ON VIDEO.
I am torn between exposing this scam (and probably ending the career of those involved) or holding onto it and thus allowing such scam to be ongoing.
As someone who have worked in various banks in the late 90's and early 2000's, l have seen it and l can tell you authoritatively that the scam is sanctioned by the Management of every Bank, right from the M.D., to the "trusted" head of Forex Dept in every bank.

so, if anyone should be held responsible for this scam, it should be the "big fishes" (from the Managers, to the M.D's,), not just the "small fries" who man the forex desk.
Welcome to Round-tripping 2.0!

We are still on a "long Tin".


Lastpage!

Let's go back to CBN's directive. The CBN woke up and realise the sanity behind what some people has been shouting that BDCs and Speculators are destroying the economy in more ways than one. It is encouraging Money laundry, corruption, distabilisation of the currency(because the CBN don't know the amount of dollars in circulation) e.t.c.

lastpage:


Some parts of your post are not true ...or let me just say they are "plain naive"!
I will just summarise that l was at a bank in Lagos late last year, to be specific, it was GTBank at Around Adeniran Ogunsanya area.
I wanted to buy some forex to make an offshore payment for a vehicle l bought in the USA.
The Bank staff, told me they cant sell Dollars to me, despite my request that l have proof of the transactions and it is legit and l have the naira equivalent.
Funnily, and this is where it really gets funny, the Head of the forex desk at that GTBank branch, directed me to a "Mallam' who was lurking nearby and told me "That Mallam can help you".

I went to Mallam and told him what l want.
Mallam said no problem, he would sell to me but the price was about #30naira per Dollar higher than the bank rate!

I went back to the GTBank Staff and asked him why he thinks l should buy it at that rate when all they needed do what use my Form-M to bid on my behalf with CBN?
GTBank staff just looked at me and said Oga, if you really need it, that is how we can help you get it.

Meanwhile, as l was there "speaking grammar", Mallam has sold Dollars to a few people who dont give a hoot!
And the scary part of it was that l saw with my own eyes as the GTBank staff was transferring the Dollar (which they bought officially at a lower rate from CBN, to the Mallam), and l assume they all share the 'extra' on top.


The juiciest part of all these is that I HAVE EVERYTHING CAPTURED SECRETLY ON VIDEO.
I am torn between exposing this scam (and probably ending the career of those involved) or holding onto it and thus allowing such scam to be ongoing.
As someone who have worked in various banks in the late 90's and early 2000's, l have seen it and l can tell you authoritatively that the scam is sanctioned by the Management of every Bank, right from the M.D., to the "trusted" head of Forex Dept in every bank.

so, if anyone should be held responsible for this scam, it should be the "big fishes" (from the Managers, to the M.D's,), not just the "small fries" who man the forex desk.
Welcome to Round-tripping 2.0!

We are still on a "long Tin".


Lastpage!

ibedun:


The "sensible Nigerians" therefore became the "speculators"

GerogeI:


Well your concerns are reasonable, but consider that you have not taken the following factors into consideration-
1. The exchange rate of the naira today is highly inflated. Why?
A. The economy is highly dollarised. Infact all major foreign currencies are being treated like legal tenders in Nigeria, when they are not. Rents, even local school fees to secondary schools , and a minimum of 70% of almost all oil and gas contracts, and even Gov. Projects to foreign firms are being paid for in dollars. Businesses demand to be paid in dollars with no fear of being prosecuted.
The govt. officials accent to and justify such contracts and dealings in order to gain foreign currencies which facilitates money laundering, Obadanjo's govt. in focus. Can you imagine a 15 billion naira local private project that was paid for 70% in Euros, and 30% in naira
Contrast that with an African Union Workshop in Adis Ababa, where the Ethiopian officials insists that all payment of honorarium to participant must be in the local currency, else participants must receive payments in their home countries. Participants had no choice but to carry the Ethiopian currency to their home countries for labour that was earned for on Ethiopian soil. Which is right, Ask your-self, what is that thing that makes people from other countries take naira to their countries, hence the need to exchange. Essentially, Nigerians are the only ones needing to exchange, hence end up exchanging only with our govt.

B. The excessive use of BDCs in the economy means that a huge portion of the demand for foreign currencies in the economy stem from speculators? The second job of most Nigerian civil servants is dollar speculation, hence they keep cycling the foreign currency, increasing dollar demand and forcing the naira to lower values. Why are they able to do this? Because of the anomalous use of BDCs in the economy. BDC are suppose to be tools for convenience to tourist visitors to Nigeria, but now they serve importers, serve visitors to Nigeria, and also serve Nigerian visiting other countries, taking the naira burden that countries we visit should have for attracting us, and giving them free dollars instead.

C. The only earners for foreign currency in Nigeria is oil and gas export, since we do not export any other significant thing. So forex earners are basically the Government and the Oil companies. Contrary to notions I have read here, Oil companies earn dollars and not naira. They only auction off some of their dollars to pay for local expenses and local salaries.

So in order words the so called foreign exchange is made up of a single supplier, CBN, and the Oil and gas companies, whom they can control since they are earning foreign currency from same source or even the same transactions split. In 60:40 ratio.

Bottom line is that in th strict sense , the so called forex market is not a market at but a monopoly, since the rest of us are only consumers of dollars, and euros. The price is determined by how much dollars the CBN is willing to supply. Further, who exactly somewhere outside Nigeria gets paid naira. We import everything, and even for the few projects we do, opt to pay in dollars.

Conclusion.
Instead of pretending to be bustling and rustling, since we are not just net importers, but huge perennial importers, we are better off pegging our currency. Even the pounds was pegged for a good part of its history. Countries that export products are the ones that try to keep their currency low to attract buyers, China in Question, consumers like us, keep high value currency in order to gain advantage when making imports. There is really no real exchange market that reflects our economy, we are just arguing about our rate of consumption of our dollar earning, and this can be comfortably fixed by the CBN.

Further the genuine demand for dollars from producers and importers, stripping of illegal local tenders and speculators, will see the naira exchange between 50 and 100 naira per dollar. Any thing extra is just improper regulation, laziness to do the required intellectual work, and also or possibly the northern tribal sentiments that have protected the one man BDCs from being scrapped off a long time ago. I must say kudos to Buhari for considering taking a necessary step that will likely hurt the BDC tuft his fellow northerners have protected for a while. However, if this restriction is done only half heartedly without regularizing the sourcing of forex for import business, we could see increase in price of products. It should be easier for businesses to get forex from commercial banks that it is to buy it from BDCs. Both BDC and their patrons should have a strict limit on the volume of their transactions.

For the post above,
Kindly note that the naira exchange has nothing to do with oil price. Rather it is Fedral Govt. dollar revenue that is affected by oil price. With sovereign wealth funds, No sane country will allow its consumption to be tied to revenue, rather to need. Of course the exception are people who lack capacity to plan like Nigeria.

obi4eze:
You should have created this sort of thread when the Naira depreciated from 150 to 200 US Dollars...

Mynd44:

That's why they always call their friends for backup so they can support their distortions.

I know no one will dare go back to November 2014 but interestingly, that's where the issue with the Naira started

PRYCE:
Double standards every where one goes!!!


Your APC friends do the tagging that supposedly doesn't work too but little wonder you keep mum!


Barcanista should not be a threat to even someone of your status!! Just saying...


The best thing is Open a counter thread!

Mynd44:

I don't open counter threads bro.
I'd rather write articles which get published.

PRYCE:
Well his predictions had since had a head on collision with reality!

mickey45:



Yes o! But we also far from going under.
Things shd stabilise soon enough.
Then you can buy those "chicky" wears n high heels from obodo oyibo/Chinko without breaking your "kolo" (mud-bank)

Mynd44:

I don't open counter threads bro.
I'd rather write articles which get published.

barcanista:
The problem with Nigerians is that we are too emotional. People are blinded by the short term rise in the value of naira in the BDc but forget that the so-called value is useless and will not affect anything all because the so-called rise was as a result of backyard policy and not due to the market forces. They also forget that the policy will create scarcity of the dollar in the market on the long run which in-turn will skyrocket the dollar value in the market. I have NEVER seen where this pattern was adopted in the whole world.

helpee:
@ barcanista, thanks for the analysis. kindly disregard those that have nothing to contribute except shouting wailing wailers. But i disagree with you. naira actually depreciated against the dollar because of excessive speculation. As you know, due to the ban on 41 products importers from accessing forex at the official rate, they had to source it from the parallel market. The excessive demand for forex by these importers from the black market at first created a scarcity that pushed the dollar up temporarily. speculators then cashed on that and started hoarding dollars thinking the dollar will keep rising against the naira especially since the new govt has no concrete plan in place. i was almost caught up too. i was advised to change most of my daily sales to dollars and then deposit in my DOM account in speculation of a further weakening of the naira. therefore, the banks were flooded by speculators with dollar deposits and many of them under the disguise of importation are laundering the money abroad via transfer. so, by refusing to accept the dollars, the CBN is playing a very smart move aagainst speculators. many people are therefore caught with dollars which they cant transfer or even deposit except to convert it to naira. therefore, the economy is flooded with dollars and demand is less than supply so the dollar must come down.
IS IT SUSTAINABLE/
Yes but we will temporarily suffer in sacrifice for a prosperous naira. importers will be temporarily caught unaware. the CBN will only create a bereaucratic bottleneck that will make it difficult for anybody except importers to access forex. BVN is one of the them. money launderers that used to access forex and transfer via DOM account will be cut off by the bottleneck. speculators will not find it attractive to hoard dollars because unless they ggenuinely need the dollars, they wont be able to get value for it since they cant spend it locally, cant transfer and cant even deposit. what do you need a useless dollar for?
it is not easy to open domicilliary account in neigbouring countries like you suggested unless you are a citizen or permanent/legal resident so few will be able to divert import activities to the neigbouring countries. therefore, even without increasing local production of imported stuffs, the naira will still stabilise against the dollar at a favourable position cos the most damage done to the naira usually comes from speculators. once we only access just the dollar we need for importation, school fees and other legal business abroad, we will stop speculating with the naira .
Even if things are temporarily expensive, we youths should take up the challenge and start producing. you can start with toothpick for example cos it is part of the products banned from accessing forex officially. the bottomline is that if it will be sustainable we must support the CBN in this quest. this is the first policy of this govt/CBN that i support.

ZKOSOSO:
The Olodo of Daura is just displaying his brain content as usual by applying "buharinomics" or "koboko economics" where you flog the Naira to appreciate against the Dollar by force by fire!!
This crass buharinomics is part of APC lying wonders to deceive the nation that they are working. Meanwhile he has no concrete economic blueprint to follow. No minister to hold responsible while he alone is running the budget of 2015 oil economy with hausafulani brothers.
We are watching.

MizMyColi:
smh.
*Deep Sigh*

Biko where are our inhouse staunch economists cum historians?

Jarus, Israeliairforce, Agabai23

Barcanista has raised valid points...

Let's attack the points raised and reach a valid conclusion concerning our currency appreciation/depreciation and the way forward.

I will be lurking on the sidelines...gleaning from reasonable insights.

datigbogirl:


You speak good English.