dustmalik:

Take your stupidity out of here. You accused him of saying something, and then he asked you to show proof of him saying it. You don't have proof, and then you come back to ask nonsense questions? i repeat, take your stupidity out of here.

PassingShot, ignore him. he doesn't deserve an answer.

PassingShot:
This goes beyond PassingShot's or any other Nairalander's opinion.

Let those who have unbiased mind read and digest. I have highlighted some important areas.

Source: http://www.thisdaylive.com/articles/jp-morgan-index-no-to-devaluation-blackmail/218658/



SUMMARY:
For Nigeria to continue to participate in the BI, the conditions given by JP Morgan are very detrimental to our economy. Nigeria will have to devalue the Naira and possibly will exchange for about N350 to a dollar. This will drive up inflation which means cost of imports and even local goods will go up. Cost of doing business will shoot up and productivity will expectedly drop which will eventually lead to massive retrenchment by the companies.


For those talking trash about the JP Morgan delisting Nigeria, can they or their superior economists somewhere in their enclave put up a similar article to support their position and just stop looking at the small picture of what will be taken out of the economy.

Better still, let them tell us how we have benefitted from being listed in JP Morgan's Bond Index since 2012 that we were admitted.

Lalasticlala Seun Obinoscopy, this is very educative and enlightening. Not so?

hinwazaka:

Keynes, state three theories of economics, what is the Edgeworth boxley diagram, give me a macroeconomic model, tell me three functions of money, who is ML Jinghan, name 3 members of the Classical school of economics, define crowding effect. If you can't answer just 3 of this questions, without the assistance of google, then I suggest you move to the PHONE section, and leave this to those with a degree of knowledge of ECONOMICS.

4Play:
The article is fundamentally incoherent. It claims that the official exchange rate reflects the real value of the Naira but then the article is an ode to the "wisdom" of the CBN's interventionist policy to keep the Naira within the official peg. The whole raison d'etre of CBN intervention is to stop the Naira from reflecting its real value, i.e, a lower exchange rate to the dollar.

This issue has been flogged to death in my previous posts but just for emphasis I would reiterate some salient points. One needs to ask the fundamental question: what purpose does maintaining a higher exchange rate actually serve? 197 Naira to $1 allows us to buy foreign goods and services at a cheaper rate than would be the case at 240 Naira to $1 for instance. Hence, the CBN's policy makes it cheaper to import and one can say that the argument against devaluation is an argument for cheaper imports.

This brings us to the next point: why is it in the national interest for the government to assist in lowering import costs? The usual retort is that this helps maintain a lid on inflation. The argument goes that as Nigeria is import dependent, the government ought to intervene to keep imports cheap. But if the root cause of the problem is import dependency, Nigeria will never be weaned from this dependency if it insists on intervening to keep imports cheap. Higher import costs is the natural way to curb demand for imports. You might say higher import costs will lead to loss of jobs but imports also costs jobs - remember all those textile factories in the North that had to close down due to cheaper imports from China?

This brings me to the practical issue: how would CBN intervention work in practice? The irony is that the CBN's intervention will be ineffective over the long run. If oil prices and, therefore, dollar revenue remain subdued, the Naira will continue facing downward pressure. The CBN's intervention will require either that it depletes the foreign reserves and or restrict access to the dollar. Because foreign reserves are insufficient, it is more likely to restrict access to forex. In doing so, we will see an exacerbation of the divergence between the official and parallel rates a la the Abacha era. During the Abacha era, the CBN's obstinate interventionism to stop the Naira from falling led to the official rate being 22 Naira to the dollar whilst the parallel rate was 85 Naira to the dollar. This nightmarish scenario is about to be repeated because of Nigerians odd proclivity of failing to learn from history.

So in practice the CBN's policy will not actually work and will prove a boon to round trippers and the highly connected. One can purchase $1m with 199m Naira at the official rate and sell the $1m at the parallel rate for 230m Naira. The beauty of Nigeria is that official policy is often designed to aid and abet corruption and nepotism.

The most annoying thing is that the CBN's interventionist policy increases the chances of the Naira falling under further pressure! Remember that the Naira is under pressure due to a shortfall of foreign currency entering into the country due to a fall in dollar oil income. Foreign investment is a way to make up that shortfall but the net effect of the CBN's actions as epitomised by JP Morgan's decision is a reduction in foreign investment. It's no good claiming that this is only portfolio investment as this is highly correlated to FDI.

This brings me to the political issue. I have to say that I read Passingshot's posts with amusement. He keeps harping on that if not for CBN intervention, the Naira will fall to 350 Naira to $1. Months ago and before Buhari became president, I told him that if he believed the gargantuan sums which it is claimed the GEJ regime stole - the $20bn within 18 months being the most famous - and that Buhari will prove an effective anti-corruption fighter, it will follow that Buhari will recover much of that money. In such a scenario, huge sums of money will be repatriated back to Nigeria and the Naira will not fall to 350 Naira to $1. This in a nutshell embodies the limits of propaganda and the sheer incoherence required to attempt to rationalise the dissonance between reality and propaganda.

hinwazaka:

Keynes, state three theories of economics, what is the Edgeworth boxley diagram, give me a macroeconomic model, tell me three functions of money, who is ML Jinghan, name 3 members of the Classical school of economics, define crowding effect. If you can't answer just 3 of this questions, without the assistance of google, then I suggest you move to the PHONE section, and leave this to those with a degree of knowledge of ECONOMICS.

Ioannes:

professor we have seen you. u can now clap for yourself and maybe in the process show us that you didnt just go look those up.
lol. people proving needless book levels on nairaland, looking for relevance.

Bevista:
One benefit of being on the index is that it suddenly makes our sovereign bonds to attract more interest from foreign investors. More interest (demand) means higher prices for those bonds, and since bond prices are inversely proportional to yield, this provides our government the opportunity of borrowing or refinancing at relatively lower interest rates. So, therefore, in the prevailing circumstances, the government may have to borrow at higher rates.

In macro economics or monetary policies, there is always a trade off, and the authorities will take a decision based on their priorities and NET benefits. For instance, if CBN increases interest rate to fight inflation, there will be those who will complain (rightly so) that the higher interest will affect business borrowing.

For the record, I support the CBN on their position in this situation, since acting otherwise would have more grave consequences. JP Morgan has the right to act in the best interest of its investors, just like CBN also has the right to act in the best interest of its local economy.

989900:


3 questions:

1. Is the exchange rate obedient to the law of demand and supply?

2. If yes, what is the average (%) drain the importation of refined petroleum products and commodities such as rice, chicken, turkey, palm oil, sugar exert on our monthly forex demand?

3. Do you think these are products that we should be importing that much of, if at all?

BTW, pls. kindly take your time to go through the links below:

https://www.nairaland.com/2573929/poison-further-devaluation-naira

https://www.nairaland.com/844884/solution-fuel-subsidy-wahala-look

P.S. Let's let this stay strictly apolitical.

TonyeBarcanista:
It is very unfortunate that some section of Nigerians, particularly supporters of the Buhari government don't understand the benefit of this trusted JP Morgan index. Some don't even understand what our bonds stand to lose/is losing since the announcement. On this issue, any sane mind will be against the clueless stand of FG. Let us be sincere, JP Morgan is very right. We want foreign investors but we don't want to play to the rules. For the umpteenth time, nobody asked us to devalue our currency. We were only asked to stop fx manipulation and the absence of fiscal policy.

TonyeBarcanista:
It is very unfortunate that some section of Nigerians, particularly supporters of the Buhari government don't understand the benefit of this trusted JP Morgan index. Some don't even understand what our bonds stand to lose/is losing since the announcement. On this issue, any sane mind will be against the clueless stand of FG. Let us be sincere, JP Morgan is very right. We want foreign investors but we don't want to play to the rules. For the umpteenth time, nobody asked us to devalue our currency. We were only asked to stop fx manipulation and the absence of fiscal policy.

4Play:


Re your first question, assuming no government intervention, exchange rates are a product of demand and supply. The Naira is facing pressure because there is less forex coming in due to the fall in oil prices. The CBN's actions ensure that even less forex will come in and, therefore, makes matters worse. When the supply of anything is low, if demand does not adjust immediately, that thing becomes more expensive. By becoming more expensive, demand is forced to adjust. If the government intervenes to ensure that the scarce thing is obtainable at a fixed price, demand would not adjust easily. Of course, there are no free lunches in economics so the government can only fix price at great costs to it and,usually, with the by-product that a booming black market is created. Hence, the divergence between the official Naira rate and the parallel Naira rate, the latter is the black market and will grow bigger the longer the government maintains its attempt to fix a price.

Regarding your second and third questions, I don't know the percentages. I do believe that in an optimal economic environment, we should not import much of those items. However, the CBN's actions make it cheaper to import goods and therefore ensures that we continue to import things we ought not to import. I know the CBN disclosed a list of items it would no longer provide the forex for importers to import. However, such a ham-fisted way of curbing demand creates a lucrative market in contraband goods, excellent if you are transporter in Cotonou for instance. The best way to curb demand is through the price mechanism not by government fiat.

As for your links, I will try and read these later.

As far remaining apolitical is concerned, I have to say that I have been a user of Nairaland for 9 years and its remarkable how it's evolved from a forum where people genuinely demanded better governance to one where partisan posters spend all day making tendentious arguments. My view now is my view for the last 9 years - Nigeria is plagued by a political system that almost guarantees inept political leaders. Buhari will prove to be a bad leader just as GEJ, Yar'Adua, OBJ, et al. Those who can't see this are either being paid to be obtuse or are so desperate to believe that salvation is afoot that they have been rendered utterly delusional.

4Play:


Re your first question, assuming no government intervention, exchange rates are a product of demand and supply. The Naira is facing pressure because there is less forex coming in due to the fall in oil prices. The CBN's actions ensure that even less forex will come in and, therefore, makes matters worse. When the supply of anything is low, if demand does not adjust immediately, that thing becomes more expensive. By becoming more expensive, demand is forced to adjust. If the government intervenes to ensure that the scarce thing is obtainable at a fixed price, demand would not adjust easily. Of course, there are no free lunches in economics so the government can only fix price at great costs to it and,usually, with the by-product that a booming black market is created. Hence, the divergence between the official Naira rate and the parallel Naira rate, the latter is the black market and will grow bigger the longer the government maintains its attempt to fix a price.

Regarding your second and third questions, I don't know the percentages. I do believe that in an optimal economic environment, we should not import much of those items. However, the CBN's actions make it cheaper to import goods and therefore ensures that we continue to import things we ought not to import. I know the CBN disclosed a list of items it would no longer provide the forex for importers to import. However, such a ham-fisted way of curbing demand creates a lucrative market in contraband goods, excellent if you are transporter in Cotonou for instance. The best way to curb demand is through the price mechanism not by government fiat.

As for your links, I will try and read these later.

As far remaining apolitical is concerned, I have to say that I have been a user of Nairaland for 9 years and its remarkable how it's evolved from a forum where people genuinely demanded better governance to one where partisan posters spend all day making tendentious arguments. My view now is my view for the last 9 years - Nigeria is plagued by a political system that almost guarantees inept political leaders. Buhari will prove to be a bad leader just as GEJ, Yar'Adua, OBJ, et al. Those who can't see this are either being paid to be obtuse or are so desperate to believe that salvation is afoot that they have been rendered utterly delusional.

ladyF:
Interesting....Emefiele is trying. If only our economy was not so dependent on oyel, we won't be in this mess.

Diversify, diversify...them no go hear!!! We put ourselves in this mess!!!!

Bevista:
One benefit of being on the index is that it suddenly makes our sovereign bonds to attract more interest from foreign investors. More interest (demand) means higher prices for those bonds, and since bond prices are inversely proportional to yield (Interest rate), this provides our government the opportunity of borrowing or refinancing at relatively lower interest rates. So, therefore, exiting the index means that foreign investors will dump (sell) those bonds leading to lower prices and conversely higher yields. The implication being that government may now have to borrow at higher rates.

Also, banks hold these bonds as Assets on their balance sheet. Lower prices for those bonds will negatively impact banks Capital Adequacy Ratio (CAR) and Reserves position. This will reduce the banks capacity to lend leading also to higher interest rates.

Macro economic or monetary policies are usually a balancing act - there is always a trade off. For instance, if CBN increases interest rate to fight inflation, there will be those who will complain (rightly so) that the higher interest will affect business borrowing. The authorities will typically take a decision based on their priorities and NET benefits to the economy.

For the record, I support the CBN on their position in this situation, since acting otherwise would have more grave consequences. JP Morgan has a duty to act in the best interest of its investors, just like CBN also has a duty to act in the best interest of its local economy.

MizMyColi:
So what you're saying based on your submissions on this thread is that the GEJ led government was right to have called their bluff in January as have the Buhari government just recently?

mikolo80:
how many bluff has Jonathan ever called in his life

mikolo80:
why must we borrow when it'll only end up in private pockets

mikolo80:
when zenith bank that he was CEO did not provide tractors for farmers or industrial park for manufacturers.now how many such loans has he guaranteed from cbn.
abeg make we hear word.
all these half measures not helping
just postponing the evil day

mikolo80:
why must we borrow when it'll only end up in private pockets

Bevista:
Look at this way.

You have a job that pays you N100k a month,such that over the course of 1 year, you expect to earn N1.2m. Now, let's say your annual rent is N350k and your monthly upkeep takes N40k from your salary every month. To pay your rent, you will need to save N60k for at least 6 months. What if your bank tells you that they can lend you the N300k today and then take N30k from your salary over the next 12 months, would you consider that a good deal?

Governments always have major infrastructural projects to finance, even when they have not earned the revenue yet. So they borrow and then assure their lenders that once they receive taxes or sell crude oil, they will repay.

mikolo80:
chairman, chairman............ chairman
I know how to use other ppls money
but as you said, for major projects that will profit us
I mentioned tractors and industrial parks
not Dubai weddings, Chris aire necklace and gold iPhones
personally I'd stay with a friend or face me I face you till I save enough for... I'd never pay 350 for rent. that's for suckers. there are options but keeping up with the Joneses na im de worry 99.9% of ppl as well as govts

likila:

aaaaah! have you forgotten how he went to dance owigiri in kano? a few days after you bombed nyanya? that was a bluff. and it won him followers like me.

aaaaah!

have you forgotten?
what of the passage of the same-sex criminalization bill. (something, antigay, i do not support by the way). was that not a bluff? Jonathan was like "in your face, obama". while buhari has been begging and grovelling all day before obama, and is now crawling to grovel before hollande.

aaaaah!
how can you ask if Oga Jona has swagger? when incredibly, and against all expectations, he picked up the phone and made a call to buhari, asking him to put on the yoke of Nigeria, sparing miserable lives like yours, and more worthy ones too!

aaaaaah! is it that you are getting old or what?

likila:


dont you think loanees should give reasonable guarrantee of performance before public/shareholder money is entrusted to them?

Bevista:
Look at this way.

You have a job that pays you N100k a month,such that over the course of 1 year, you expect to earn N1.2m. Now, let's say your annual rent is N350k and your monthly upkeep takes N40k from your salary every month. To pay your rent, you will need to save N60k for at least 6 months. What if your bank tells you that they can lend you the N300k today and then take N30k from your salary over the next 12 months, would you consider that a good deal?

Governments always have major infrastructural projects to finance, even when they have not earned the revenue yet. So they borrow and then assure their lenders that once they receive taxes or sell crude oil, they will repay. If government cannot borrow, then sometimes even salary may not be paid.

FreeGlobe:
Excuses for Buhari. I wonder if passingshot would have help this opinion if Jonathan was still the president. demons

989900:


3 questions:

1. Is the exchange rate obedient to the law of demand and supply?

2. If yes, what is the average (%) drain the importation of refined petroleum products and commodities such as rice, chicken, turkey, palm oil, sugar exert on our monthly forex demand?

3. Do you think these are products that we should be importing that much of, if at all?

BTW, pls. kindly take your time to go through the links below:

https://www.nairaland.com/2573929/poison-further-devaluation-naira

https://www.nairaland.com/844884/solution-fuel-subsidy-wahala-look

P.S. Let's let this stay strictly apolitical.

micklplus:
As a country, what do we gain stand to gain?

I understand the strength the listing would give to our bonds as well as the amount we would lose from foreign direct investment but beyond such "carot" , what is the impact of imf, jp Morgan and Co 's benefit on our economy?

From 2012, should we say we have gained anything significantly from the listing by jp Morgan?

Would it make any sense to have naira exchanged for about N400 to a dollar?

Shouldn't we start looking to do away with these western capitalists making profits at our detriment?

Wetin we dey export sef apart oyel? Mtshweeeee

TonyeBarcanista:
It is very unfortunate that some section of Nigerians, particularly supporters of the Buhari government don't understand the benefit of this trusted JP Morgan index. Some don't even understand what our bonds stand to lose/is losing since the announcement. On this issue, any sane mind will be against the clueless stand of FG. Let us be sincere, JP Morgan is very right. We want foreign investors but we don't want to play to the rules. For the umpteenth time, nobody asked us to devalue our currency. We were only asked to stop fx manipulation and the absence of fiscal policy.

4Play:
The article is fundamentally incoherent. It claims that the official exchange rate reflects the real value of the Naira but then the article is an ode to the "wisdom" of the CBN's interventionist policy to keep the Naira within the official peg. The whole raison d'etre of CBN intervention is to stop the Naira from reflecting its real value, i.e, a lower exchange rate to the dollar.

This issue has been flogged to death in my previous posts but just for emphasis I would reiterate some salient points. One needs to ask the fundamental question: what purpose does maintaining a higher exchange rate actually serve? 197 Naira to $1 allows us to buy foreign goods and services at a cheaper rate than would be the case at 240 Naira to $1 for instance. Hence, the CBN's policy makes it cheaper to import and one can say that the argument against devaluation is an argument for cheaper imports.

This brings us to the next point: why is it in the national interest for the government to assist in lowering import costs? The usual retort is that this helps maintain a lid on inflation. The argument goes that as Nigeria is import dependent, the government ought to intervene to keep imports cheap. But if the root cause of the problem is import dependency, Nigeria will never be weaned from this dependency if it insists on intervening to keep imports cheap. Higher import costs is the natural way to curb demand for imports. You might say higher import costs will lead to loss of jobs but imports also costs jobs - remember all those textile factories in the North that had to close down due to cheaper imports from China?

This brings me to the practical issue: how would CBN intervention work in practice? The irony is that the CBN's intervention will be ineffective over the long run. If oil prices and, therefore, dollar revenue remain subdued, the Naira will continue facing downward pressure. The CBN's intervention will require either that it depletes the foreign reserves and or restrict access to the dollar. Because foreign reserves are insufficient, it is more likely to restrict access to forex. In doing so, we will see an exacerbation of the divergence between the official and parallel rates a la the Abacha era. During the Abacha era, the CBN's obstinate interventionism to stop the Naira from falling led to the official rate being 22 Naira to the dollar whilst the parallel rate was 85 Naira to the dollar. This nightmarish scenario is about to be repeated because of Nigerians odd proclivity of failing to learn from history.

So in practice the CBN's policy will not actually work and will prove a boon to round trippers and the highly connected. One can purchase $1m with 199m Naira at the official rate and sell the $1m at the parallel rate for 230m Naira. The beauty of Nigeria is that official policy is often designed to aid and abet corruption and nepotism.

The most annoying thing is that the CBN's interventionist policy increases the chances of the Naira falling under further pressure! Remember that the Naira is under pressure due to a shortfall of foreign currency entering into the country due to a fall in dollar oil income. Foreign investment is a way to make up that shortfall but the net effect of the CBN's actions as epitomised by JP Morgan's decision is a reduction in foreign investment. It's no good claiming that this is only portfolio investment as this is highly correlated to FDI.

This brings me to the political issue. I have to say that I read Passingshot's posts with amusement. He keeps harping on that if not for CBN intervention, the Naira will fall to 350 Naira to $1. Months ago and before Buhari became president, I told him that if he believed the gargantuan sums which it is claimed the GEJ regime stole - the $20bn within 18 months being the most famous - and that Buhari will prove an effective anti-corruption fighter, it will follow that Buhari will recover much of that money. In such a scenario, huge sums of money will be repatriated back to Nigeria and the Naira will not fall to 350 Naira to $1. This in a nutshell embodies the limits of propaganda and the sheer incoherence required to attempt to rationalise the dissonance between reality and propaganda.

MizMyColi:
So what you're saying based on your submissions on this thread is that the GEJ led government was right to have called their bluff in January as have the Buhari government just recently?