tuale4u:


Just try ur best and read. the guy made a lot of sense

trillville:
It seems there are two economies within nigeria, one for the rich and the other for poor.

the rich need the fg to devalue the naira to entice foreign investments into the country. this will make the naira stronger than it currently is in the black market, enabling the rich to purchase dollar denominated goods at cheaper prices.

the poor need the fg to maintain the current official value of the naira. any increase in the official rate would lead to increases in the price of fuel and electricity within nigeria, and in turn, increases in the cost of locally produced food, thereby making life harder for the poor.

the rich can afford to pay for increases in food cost, but the poor can not.

do we devalue or not?

baralatie:

No he did not!
He actually turned the history books on economics the other way round

1freshdude:


Tell us your version of the history of economic development.




#criticism is the easiest task of knowledge

baralatie:

Like someone said the easiest way to win a battle against an African is to hide it in a book
The most critical importance of foreign exchange is the effect on the external balance of trade/balance of payment. The bigger the deficit in balance of trade the greater the problem of the Country. Therefore the important countries of the World used all methods at their disposal to restrict imports and encourage exports so as to ensure favourable balance of trade which would also enhance productivity and employments. Some closed their economy completely in what is called autarky. Japan, China and Britain etc used autarky to curb and developed exports behind protective walls."

I don't want to post the other but technicalally the naira is already devalued the issues are that the CBN/fg policies on the market breeds irregularities itself

tuale4u:


Autarky as used by the writer is not in absolute sense. You are missing his point. He is using autarky in a partial sense. which is with respect with semi closed system to import.

989900:


What do you propose?

omohayek:


And what is the point of exporting without ever importing? The entire point of exporting in the first place is to buy imports! The notion that the key to prosperity is to import little but export a lot is nothing more than the old mercantilist fallacy

https://mises.org/library/mercantilism-lesson-our-times

and what export surpluses actually amount to is that your country is sending capital abroad, giving foreigners goods today in exchange for nothing more than promises to be paid back at some point in the indefinite future. Anyone who has studied international trade theory will know that this is an accounting identity: current account balance + capital account balance = 0 by definition.

What sense would it make for a poor country like Nigeria to be sending capital abroad, when we don't even have enough domestic capital to invest in basics like well-maintained roads and functioning railways?

1freshdude:


Are you joking? you copy the writers words verbatim and present them as your own? Its a criminal offence called plagiarism.
Secondly you claim he turned history upside down yet you copy his text word for word and blab about the Naira been technically devalued and how you dont want to post..lol..you ended up saying nothing, probably because you have nothing to say...you should have kept quite from the onset.
Do you even understand the implications of having a wide gulf between the official exchange rate and the market rate

tuale4u:
We should support whatever promote local production

1freshdude:


You are in hole bro, stop digging already! What do you mean by in exporting you are sending capital abroad? So by importing toothpick and pencils from China we have been receiving capital from China? Did you take Economics at all? some of this things are even intuitive...you should know that some commodities are demanded for production and not for immediate consumption while others like your designers shoes, jeans and toothpicks.

989900:


What do you propose?

baralatie:

Have you considered that local production is still hinged on some dollar raw material purchases

homosapien:




So you think he has any solution? The best they do is to give unreasonable criticism.

baralatie:

Let me make a straight enough talk
1,Japan,China,Asian trade block used devaluation as weapon for economic growth,I.e they have cheap exports and relatively very very expensive imports
2,japan ,China pursued a clear development plan through private investors,(Japan) and technicology transfer (China),the Asia window used FDI.
3.Nigeria is battling with balance of trade to finance its energy needs and other imports but it does nor have enough dollar reserve
4.the CBN split its dollar requirement into two
Group a,one for the fg
Group b,the other for other items
The "b" group are allowed to sort for its dollar needs outside govt reserve and govt dollar proceeds which means the "b" group market is a demand and supply market(the price is hinged on the availability of dollar in that market) but......
The CBN has pegged the price for group a and that of group b is not allowed access its own dollar needs by an ceiling of CBN thereby "forcing" the devaluation of the naira in that market

omohayek:


Thank you. This is something important so many of the anti-imports brigade completely miss - that it is virtually impossible to have any export industries without imported inputs, and raising exports in the long-run may even require imports to heavily surpass exports in the short-to-medium term.

omohayek:


I point out an accounting identity that you can find in any introductory economics textbook, and you tell me to "stop digging" A simple Google search would have shown you that I am in the right on this matter. Here, read for yourself:

https://en.wikipedia.org/wiki/Balance_of_payments

As for "intuitive", that is not an adequate substitute for rigorous thinking based on reasonable axioms and mathematical models. Comparative advantage is hardly "intuitive", but no one who understands economics would deny its correctness. Conversely, lots of terrible ideas are "intuitive".

omohayek:


Work on boosting per capita productivity, by increasing public and private capital investment (in roads, rail transport, electricity), and by putting a lot more money into higher-quality, universal primary and secondary education (not universities). Remove as many regulatory barriers as possible, and streamline the process of starting and running businesses, so entrepreneurs don't have to spend so much time chasing down permits and bribing officials. Reform the judicial process, so that business disputes can be settled much more quickly and predictably, at much lower cost.

I understand why so many Nigerians wish acquiring prosperity were as simple as telling foreigners to sell us things at an exchange rate we've chosen unilaterally, but the only way to greater wealth is by actually producing more, not by playing tricks with the Naira. If we are going to produce more, we will need to attract huge sums of foreign investment to make up for what we are too poor to save up ourselves, and that requires an environment that is welcoming to FDI, one aspect of which is being able to move funds in and out of a country without hassles. The only alternative to FDI is to resort to government-imposed forced savings, and is that really something we want to impose on the already suffering Nigerian masses?

sunkoye:
Brilliant writeup. Govt intervention goes a long way to shape demand and supply. Which is the ultimate means to the end.

989900:


But you've just technically roughly repeated 75-80% of what the humble Dr. just ordered (going forward).
I've personally written numerous posts and topics about same.
Basically the same thing this administration is trying to do as evidenced by the president's trips, the projected/envisaged budget (we should know what's up about this in few weeks), the fight against corruption (the TSA, the IPPIS, BVN, recovery of stolen funds, championing a new and more transparent way of doing things), encouraging states to contribute in-lieu of the opposite, and more . . .

And, I feel this is the best way to go. Obviously, we all wish things can be done at a higher tempo, faster pace, and for this I grudge this present administration for it's slow pace -- they could up the tempo considering we're in a 'state of emergency' economically.
However, I can't fault the president and his team's commitment and dedication to turning things in the right direction.
And of course they need help.

As regards the exchange rates and discrepancies, devaluation and all, this is where knowing the local terrain counts. It is largely driven by racketeers, profiteers, speculators and hoarders. While officially, it is largely driven by importation of refined petroleum products (accounts for roughly 40% of our forex demands) and secondly by excess liquidity which is presently being partially curtailed by the TSA.

If we can get around those 2; reduce it to the barest minimum or totally eliminate them, the Naira will firm up at less than N160 in few months! While patronizing our own local products and supporting local manufacturing, coupled with agric/food self-sufficiency and export, throw in mining of other natural resources.

OTOH, devaluation won't guarantee:
Hoarders or racketeers won't play their hand,
Nigerians would suddenly lose their appetite for foreign goods(some of which are actually necessities),
A revamped economy where every one goes back to the drawing board,
It won't make our economic woes go away -- it has never -- and it will never!

Devaluation will guarantee:
Pump prices go up,
Our foreign debt burden increases (the last thing the FG will do) making it harder to meet up with,
Hyper-inflation.
Demand for salary raise (the last thing the FG would want at this times of lower income)
More job losses.
Our stock exchange depreciates by a big chunk of it's worth.
Brain Drain.

P.S. No country would do well . . . "per capita productivity" and all that, when the lending rates are over 20%!

baralatie:

Let me make a straight enough talk
1,Japan,China,Asian trade block used devaluation as weapon for economic growth,I.e they have cheap exports and relatively very very expensive imports
2,japan ,China pursued a clear development plan through private investors,(Japan) and technicology transfer (China),the Asia window used FDI.
3.Nigeria is battling with balance of trade to finance its energy needs and other imports but it does nor have enough dollar reserve
4.the CBN split its dollar requirement into two
Group a,one for the fg
Group b,the other for other items
The "b" group are allowed to sort for its dollar needs outside govt reserve and govt dollar proceeds which means the "b" group market is a demand and supply market(the price is hinged on the availability of dollar in that market) but......
The CBN has pegged the price for group a and that of group b is not allowed access its own dollar needs by an ceiling of CBN thereby "forcing" the devaluation of the naira in that market

1freshdude:


You guys are talking crap! And you know nobody is talking about banning importation of capital goods.And incase you dont know, FX is available at the official rate to the sector of the economy that imports capital products and not your usual tooth pick and designers group.
You two keep talking like you dont know that finished goods account for over 70% of importation into Nigeria. Nigeria is in crisis because of over importation of finished goods and this must be curtailed. This is the point that the writer and every development economist is trying to project.

4Play:


What better way to curtail imports than through the price mechanism - if imports are more expensive, they will become less affordable and the imports of finished goods will reduce.

The problem with a fixed exchange rate regime, not backed by adequate forex reserves, is that it preserves the purchasing power of the Naira for the highly connected and dissuades forex inflow which would have slowed down the rate of currency depreciation.

4Play:


What better way to curtail imports than through the price mechanism - if imports are more expensive, they will become less affordable and the imports of finished goods will reduce.

The problem with a fixed exchange rate regime, not backed by adequate forex reserves, is that it preserves the purchasing power of the Naira for the highly connected and dissuades forex inflow which would have slowed down the rate of currency depreciation.

trillville:
It seems there are two economies within nigeria, one for the rich and the other for poor.

the rich need the fg to devalue the naira to entice foreign investments into the country. this will make the naira stronger than it currently is in the black market, enabling the rich to purchase dollar denominated goods at cheaper prices.

the poor need the fg to maintain the current official value of the naira. any increase in the official rate would lead to increases in the price of fuel and electricity within nigeria, and in turn, increases in the cost of locally produced food, thereby making life harder for the poor.

the rich can afford to pay for increases in food cost, but the poor can not.

do we devalue or not?

1freshdude:


You keep dropping economic jargon's that are uncalled for. Talk about the issue on ground you keep running around...your choice of reference (wikipedia) also shows your academic depth.

tuale4u:


thank u