plaetton:


I am sorry for your naivety in thinking that it is the government's job to sustain the value of the Naira with commensurate dollar supply. Nothing could be more foolis on the part of the government, and guaranteed to always fail.

The government's job is providing and maintaining policy initiatives that stimulates local productivity and that boosts confidence im the economy and the Naira. A nation's currency is a default measure of per capita productivity, not how much dollars it can sell to banks per week.

Haven't you heard of the forces of demand and supply ?
If it was as simple as you paint it for the government to sustain the value of the Naira through forex sales, then from what they have sold over the years, the dollar and naira should be at parity.

I don't understand why some of you who should know better choose to continually cast blames on invisible speculators ?
Who are these invisible speculators that you conveniently scapegoat for ad-hoc policy failures of the government ?

First of all, there are speculators in every currency.
That's why it is call the Forex MARKET.

It is a $6tr daily market that every country and every financial institution participates in.

Now, in the case of Nigeria, the government's haphazard, flip flop, schizophrenic policies create huge GAPS that inevitably attract and invite currency arbitrage, from the street malams, the businessman, the government officials and Banks, all seeking profit and self-preservation. That is the rule of the marketplace.

knowyaself2:


The govt is just trying to remove artificial dollar scarcity, created by the activities of currency speculators, which I think is appropriate and timely. I think it's wrong to assume their action will create unsustainable artificial value of naira. Their short term policy, as I see it, is to create a level ground for market forces to interact and set the real market - determined rates for the currencies in play, while their long term policy should be to curb demand for hard currencies by improving per capita productivity and non-oil exports.

Truth234:


No, not the recent intervention. It is not from our foreign reserves but oil revenue generation. People should know the difference.

Here is a link to CBN foreign reserves statement https://www.cbn.gov.ng/IntOps/Reserve.asp?MoveDate=3/2/2017%2011:44:07%20PM

zomoears:


Very true.
Venezuela is down to $10bn reserves and most of it is in gold. They didnt know when to cut off subsidies,and it is haunting them now.

The Nigerian govt was right by removing subsidy on petroleum products. Else d fight would have been too multi faceted for d govt to cope.

Try balancing subsidy on petroleum products with defending d naira amidst high borrowing cost for govt (14% mpr)...govt would have had a much worse crisis by now.

A country like Nigeria needs reserves in d region of $35bn.

kjhova:
All this talk of a mythical reserve threshold of $30B to $35B is nothing when the economy is falling to the dogs. For this reason, the CBN is right to intervene in the market now rather than wait to shore up our reserves. Anyone abising Emefiele probably has shallow knowledge of economics.

The forecast is that oil prices will likely continue to push upwards, albeit marginally, in 2017 and this is good as the current price is already higher than our budget benchmark. It is also reasonable to assume that militancy in the Niger Delta will remain in check permitting continued crude production above the 2mbpd mark.

Since our economy is still very much import dependent, it makes sense for CBN to pay heed to the exchange rate of the principal currency of importation, which is the greenback. The apex bank will be able to intervene in the FX market while concurrently building up our reserves.

porozhniy:
I believe a short term intervention by the CBN is the way to go since crude prices are above the 2017 budget benchmark.
Let's all hope that Dangote's refinery comes on stream by Q2 2018, else we are screwed.

ISTANDWITHBUHAR:



You get sense jare no mind those thinking it won't work not knowing it has been a plan of the Govt to start selling dollars immediately our reserve hit $30billion and that start now..

plaetton:

[s]
It is quite stupid for the CBN to be defending the Naira with our foreign currency reserves. No matter seemingly affective it appears at this particular time, the measures are ad-hoc and the reprieve temporary.

For how long will the CBN continue to do this? With what unlimited funds, and most importantly, for whose ultimate benefits ?
For example, with 5 different exchange rates, who benefits from these periodic CBN dollar subsidies ?

Certainly not the average Nigerian by any stretch.

With the weak Naira, Nigeria's balance of trade has reportedly improved, with non- oil exports leading the way.
This export momentum is exactly what Nigeria needs desperately to sustain.

This government seems to be operating a schizophrenic economic and monetary policies, where one is working against the other.

The government , no, the Nigerian public should have no obligation to subsidize any foreign exchange based business or lifestyle for anyone or group.
Your needs should match your means[/s].

sholatech:
I[s] think CBN should have waited till Reserves are up to 36/38 Billion USD before they struck.

Unmet demand is at least 2bn USD. Within one week, Cbn brought out 530 million USD from Reserves to defend the currency. More or less subsidising foreign Travels & foreign education. And some 'Forwards'. And you see, the banks were not even liquid enough to take all that the Cbn offered.

Last week, most people did panicked sales. Now, demand is picking up. Where you have 2bn USD demand & 530m USD supply, what happens[/s]?

oxytech:


Curiously, in 1999 when Obasanjo came in, Oil was $17, Reserve was $5.4billion, rate was N92!
You know why?

Sentiments (shortlived "goodwill", plays the primary key role in your exchange rate (the demand or not for your Naira!). Buhari messed up, by sending a signal that he was statist, non-market oriented and fx controls freak.

Once sentiments is negative, others follow and hit you hard: balance of payments to inflation, to interest rate, to Debt, to stock market, to speculation....in that order!

ONLY Solution: go back and correct the sentiments, or...."change"

ISTANDWITHBUHAR:


Sure they can even more than that, We are generating about $127.600.000 daily so you should calculate what we can generate in a week and pumping half of that into the market won't affect our reserve. beside They will only sell and get back the money n Naira and will be use to finance the budget..

kjhova:


Your suggested cause of the FX rate increase and inflation is reasonable however it will be worse than simplistic to assume that this alone was the reason for the recession.

Uncertainty about fiscal direction can impact on economic growth rate but this is often marginal and short termed. The factors of a depleted foreign reserves, falling oil prices, debilitating war, militant disruption of oil production, looting of the commonwealth by government officials etc are more likely to send an economy into downward spiral faster than sentimental views.

udoh2k:
Let's do small math for lay man understanding

daily prod= 2 million barrel per day
cost of oil = 50$

Total per day= 2 x 50 = $100m

Per week (5 working day) = $500m

So CBN rolling out 530m per week is not sustainable. EXCEPT IF DEM DEY SELL CRUDE 7 DAYS A WEEK OR PRODUCTION INCREASE OR CRUDE PRICE INCREASE

oxytech:


Truthfully, Buhari made an already very bad situation he inherited, worse......
When Buhari took office as compared to 1999 (irrespective of the leader then), all the following you mentioned were present (depleted foreign reserves, falling oil prices, militant disruption of oil production, looting of the commonwealth by government officials etc).

NOT Short term uncertainty about fiscal direction can impact on economic growth rate, but this is often NOT marginal, and NOT short termed. Buhari LONG TERM uncertainty, and flip flops are legendary!

Coming back; when the subtly SENTIMENTS (a view or opinion that is held or expressed on Market economy, ETC ) kick in:
"Hot money" (FPI etc) first flies out very very quickly; if not quickly stemmed fast, then FDI's follow slowly. Then international ratings are lowered..... your balance of payments gets hit.

You end up with a current account deficit, which has to be financed with a capital account surplus, from borrowing! This would hit inflation and interest rates simultaneously. If you now add unguarded threats to militants, who increase oil disruption, you then get a full blown economic crisis, as your current deficit is larger.

Getting out of a mathematical Recession is not even the issue as; its just a % comparison between GDP within 2 periods, which militant oil disruption is responsible for the less export component. The problem now looks like STAGFLATION!!!.............

oxytech:


Really?
So how do you do capital projects and develop your infra-structure, if all has been spent to subsidize the dollar.
Of Nigeria's 5 Trillion forecasted budget revenue (not yet met); 60% is on Recurrent expenditure, 32% on Debt servicing. Left 8% (N400m) peanuts is left!..... Wake up!!

ISTANDWITHBUHAR:




So you mean capital project are executed and paid for in dollars? I doubt that.. Beside we seel our stuff in dollars and bring the dollars into the country. As dollars is not our official currency, it will be sell to people that need it for personal use..

kjhova:


Well, at this stage we digress from the original post. Moreso, we are now only dealing in speculative opinions and can only go on and on. We will hopefully have this discussion on another forum.

plaetton:


I am sorry for your naivety in thinking that it is the government's job to sustain the value of the Naira with commensurate dollar supply. Nothing could be more foolis on the part of the government, and guaranteed to always fail.

The government's job is providing and maintaining policy initiatives that stimulates local productivity and that boosts confidence im the economy and the Naira. A nation's currency is a default measure of per capita productivity, not how much dollars it can sell to banks per week.

Haven't you heard of the forces of demand and supply ?
If it was as simple as you paint it for the government to sustain the value of the Naira through forex sales, then from what they have sold over the years, the dollar and naira should be at parity.

I don't understand why some of you who should know better choose to continually cast blames on invisible speculators ?
Who are these invisible speculators that you conveniently scapegoat for ad-hoc policy failures of the government ?

First of all, there are speculators in every currency.
That's why it is call the Forex MARKET.

It is a $6tr daily market that every country and every financial institution participates in.

Now, in the case of Nigeria, the government's haphazard, flip flop, schizophrenic policies create huge GAPS that inevitably attract and invite currency arbitrage, from the street malams, the businessman, the government officials and Banks, all seeking profit and self-preservation. That is the rule of the marketplace.

oxytech:


As a matter of fact, the currency used is not important in the math calculation. As long as you stick to only one currency, the math is the same.

Moreover, there is no money left, just 400million NAIRA. Also, we have a deficit of 2.36Trillion ($7 billion) we intend to borrow; and we have only secured $1.5 billion.....

ISTANDWITHBUHAR:

I don't care about how you see it or if you are praying for all this to fail, All i care about is it's gonna be sustain and your prayer for the Govt to fail won't work..

Truth234:
Amoto94 can you space it?
This is a general misconception, the CBN do not withdraw from the Foreign Reserves and in fact has added about $500 million in the last two weeks -- $75 million this week alone.
For the record, the money the CBN is auctioning is in accordance with 2017 budget provision -- official exchange rate of N305 with the oil benchmark pegged at $44 a barrel. Therefore, it is part of N2.2 trillion stipulated in the 2017 budget to come from oil revenue.
The subsidised rate is still above N305/$ official rate, commercial banks are directed not to sell more than 20% above the official rate, which is about N375/$. This fund is needed to fund capital projects in Naira and not dollars. Hence, the exchange.
So whether we can sustain it or not, 2017 budget must be funded, either through loan or revenue generation. Let just pray militants continued to yield to the agreement.

oxytech:

Above has 56 LIKES!!??..... Una go kill me o, as I comment thus:
....................
Todays Oil production is 1.3mbd and falling; NOT 2.2mbd or whatever propaganda, you are hearing.
2017 forecasted production is 1.5mbd at $53........
.........................
Sadly as Nigerians, their choice is obvious........!!