MID-WEEK ESSAY: Defending The Naira, Nigeria's Currency - Some Thoughts
by
Mobolaji E. Aluko, PhD
Burtonsville, MD, USA
Wednesday, April 25, 2001
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Let me start with a disclaimer: I am an engineer, not to be confused with
a trained economist or a banker, but I know that our Nigerian currency the
Naira is sinking fast - and that should not be!
So here goes some lay man's observations.....
I have watched Alan Greenspan of the US Federal Reserve and his
predecessors here time and again - including Greenspan's surprising prime
interest rate cut last week - and all they do seems to be a constant
juggling act between:
(1) interest rates;
(2) money supply
on the one hand, while determining snapshots of:
(3) dollar exchange rate against leading world currencies and;
(4) the nation's productivity and inventory stock;
(5) consumer savings and debts;
(6) trade deficit.
on the other hand. What really determines what remains nebulous to me and
I am sure to many, but it appears that Greenspan and his colleagues have a
"secret" analytical formula which enables a determination of interest
rates from all these other factors, while all the time trying to keep an
eye on the strength of the dollar, thereby "fixing" the exchange rate
within an acceptable range.
Thus, it is clear that the "independent" Federal Reserves (quite
independent to a large extent) assists the US government in "market
control" while giving an appearance of merely reacting to the market.
Thus, after trying to "understand the sentiments (expectations) of the
market", Greenspan and his Federal Reserve gremlins "control" interest
rates FROM THE FEDERAL RESERVE by "fixing them" at certain values.
However, they have no control over (i) banks who are FREE to determine
their own margins from there on, or over (ii) the psychology of consumers
or businesses who may decide to buy or not to buy, or to be more
conservative in their inventories, or over (iii) foreign market reactions
to their moves.
When Greenspan believes that the dollar is TOO WEAK or TOO STRONG compared
with a basket of foreign currency, which might be a result of a
combination of (i) changed domestic productivity, (ii) changed foreign
productivity or (iii) deliberate revision of foreign currency strength, he
then HOPES that CHANGING the US interest rate would spur or hold back
productivity and/or stimulate/hold back domestic citizens' savings etc..
All self-respecting Central Banks of countries should do take these
actions in the interest of their own countries.
What about Nigeria? Some of President Obasanjo's economic and financial
advisers must know this game - or don't they? - but whether they can
participate in it, or Obasanjo has the capacity to follow their logic,
proclivity to listen to advice or whether he cares beyond this hollow
"nationalism" persuasion remains a question.
One major concern with Nigeria, however, is whether we even have the
reliable and timely data to do all of these calculations.
The other problem with Nigeria is that quite frankly our economic advisers
and central bankers don't have the luxury of a whole lot of parameters to
work with. Our domestic savings profile is very low, our productivity is
abysmally low (and falling) and our debt profile ($28.5 billion at last
count) is outrageous. The direction that we want ALL OF THEM TO GO are
therefore SET (no up or down, just UP for savings and productivity and
DOWN for debt etc.). Hence we have little or no room for flexibility.
Yet we have a monoculture of oil which is virtually our ONLY foreign
income earner - a price determined not by us but by the OPEC oil cartel -
with cash crop cocoa's international price rising and falling whimsically.
Allowing our foreign exchange rate to FLOAT so freely in an economy so
dependent on IMPORTS therefore promotes UNCERTAINTY in business planning
and hence short term, speculative tendencies and their attendant capital
flight.
That is why I believe we must FIX our foreign exchange for reasonable
length of times, or at least let it FLOAT only within a very tight pre-set
margin, while EXPENDING money on those infrastructures that sap the energy
of otherwise productive entities in the country. Just as Greenspan uses
interest rates as the rudder of his market control, Nigeria should
determine its own rudder - I support the exchange rate - thereafter doing
everything fiscally and monetarily possible to ensure its success as such,
using progressive development policies.
The bottom line is the following: WE DO NOT HAVE THE LUXURY OF THE
SAME PARAMETERS TO PLAY WITH WITH THE DEVELOPED ECONOMIES, so our
whole-sale free-market economic policies simply will not work, and we
will have to use the fixing of the exchange rate to "work towards the
answer." When in fact certain infrastructures are in place, then our
economy will benefit from greater liberalization and western-style
fiscal and monetary policy management, otherwise it will remain
subject to wild speculations.
Thus, I believe that at this point in our countries level of
development:
(1) our currency should not float; ie we should fix our exchange
rate at say N80 to 1 dollar, and set targets at the end of
every six months to one year to revalue it upwards by say 10%
each time. After all, there is no IMMUTABLE standard in the
world for fixing exchange rates.
(2) the government should deposit money in banks which voluntary set
interest rates to say 10%, and then lend a certain fraction of
their money to citizens for productive use for an agreed
reasonable margin of profit. The kinds of high interest rates
that we currently have (17 - 25%) on short-term money lending
militates against long-term investments which the country
needs, discourages small-time businessmen from borrowing
from banks, and encourages "round-tripping" in currency
speculation from abroad.
(3) set HIGH TARIFFS on imported conspicuous consumption items,
and ZERO TO LOW TARIFFS on intermediate technology tools and
implements industries. As much as possible, importers
and exporters should be allowed together to finance
their commercial dealings through private means without
our government being the sweet deal-maker. That way,
as one observer recently put it, (paraphrasing now)
our "earned petrodollars will not simply continue to be
recirculated into the world economy through the hands of
private sector importers."
(4) sharply revise the national budget to invigorate agriculture
and infrastructure development, promote massive employment, even if
it means certain other things must suffer for a while. Strict
insistence on transparency and accountability will also reduce
corruption and its attendant high cost of transactions in the
country.
Our currency crisis is grave, and patriotism is certainly not enough
to shore our currency up.
END
_________________________________________________________________
Some related information:
On The US Federal Reserve Latest action
http://washingtonpost.com/wp-srv/business/shoulders/fedratepopup.htm
When Rates are Raised
How A Fed Rate Increase may affect consumers, business and markets
http://www.washingtonpost.com/wp-
srv/business/shoulders/fedratetimeline.htm
Rate Changes Federal fund rates beginning with the latest and ending
with
July 1990, the month the last recession began.
http://www.federalreserve.gov/boarddocs/press/General/2001/20010418/de
fault.htm
Federal Reserve Press Release
Release Date: April 18, 2001
http://washingtonpost.com/wp-
dyn/business/specials/federalreserve/A32700-2001Apr
18.html
Fed Surprises Market With Half-Point Rate Cut
By John M. Berry
Washington Post Staff Writer
Wednesday, April 18, 2001; 12:54 PM
US Newspaper Reactions
ttp://www.washingtonpost.com/wp-dyn/articles/A47160-2001Apr21.html
Did Fed Hit the Brakes Too Hard, Too Late?
Greenspan Defends Policy Against a Chorus of Criticism
By John M. Berry
Washington Post Staff Writer Sunday, April 22, 2001; Page H01
http://www.washingtonpost.com/wp-dyn/articles/A33912-2001Apr18.html
Heeding Economic Danger Signs
By Steven Pearlstein Washington Post Staff Writer
Thursday, April 19, 2001; Page A01
http://www.latimes.com/business/updates/lat_fed010419.htm
Fed Trims Rates in Bold Move to Avoid Recession
LA Times
http://nytimes.com/2001/04/19/business/19ECON.html
April 19, 2001 News Analysis: Is the Fed's Action Just in Time or Too
Late?
http://www.nationalreview.com/kudlow/kudlow041801.shtml
Fed Back from the Dead; Rate cut is a much-needed dose of shock
therapy.
April 18, 2001 4:50 p.m.
Some figures of US Interest rates
Treasury 4/18/01 Week Ago Year Ago
Three-month bill 3.75% 4.13% 5.79%
Six-month bill 3.82% 4.18% 5.99%
One-year bill 3.83% 4.22% 6.06%
Two-year note 4.24% 4.44% 6.36%
Five-year note 4.80% 4.85% 6.23%
10-year note 5.28% 5.25% 5.99%
30-year note 5.79% 5.68% 5.83%
Source: Bloomberg News via Washington Post
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--
I would like to respond in part to the reactions Bolajis proposals have attracted.
First Joshua Gogos provisional comments betrays an apprehension of stepping into uncharted territories (more on this later). What are his alternatives (status quo?)
I want to commend Bolaji (even if he is proven to wrong in his proposals) for doing the job for which he is being paid to do-to think for the nation and the world. If you excel in a certain field and your nation is crippled in that area and you have no suggestions to dig the country out of its hole then theteis something wrong with your qualifications or with you in person.It was the music maestro Bob Marley who sang:'In the midst of plenty the fool is thirsty' in his commanding track ' Rat Race"
Bolajis proposal on the Black Market has bben tried in the UK on the Indian corner shop. I have noticed and argued what has been done to the Indian cornershop since the 90s privately until I watched a documentary on Xmas day
Big departmental stores that operated outside the capital were brought in under the Sunday trading laws and soon every street in the capital has 3 small 'corner shop' branches that drove the Indian cornershops virtually out of existence. The former propietors had to invest their profits in the new legit cornershops properly taxed by govt.
Govt can muscle in on black markets in Nigeria using the same tactics with govt kiosks in identified areas.
Sent from my Samsung Galaxy smartphone.
-------- Original message --------From: Mobolaji Aluko <alukome@gmail.com>Date: 31/12/2016 00:27 (GMT+00:00)To: USAAfrica Dialogue <usaafricadialogue@googlegroups.com >Cc: rotfash@yahoo.com, Ishola Williams <isholawilliams@gmail.com>, vincentotuonye@msn.com, "olakassimmd@aol.com" <OlaKassimMD@aol.com>, Agbor Ike <ikeagbor@yahoo.com>, Mgbajala Eziokwu <NigerianID@yahoogroups.com>, ebohon@dmu.ac.uk, "nebukadineze@aol.com" <Nebukadineze@aol.com>, Michael Adeniyi <mgadeniyi@aol.com>, Abba <abba2007@gmail.com>Subject: Re: USA Africa Dialogue Series - Re: BDC operators' president 'worried and disturbed' as naira plunges to 490/$ | TheCable
--
Joshua Gogo and Ayo Obe:
First, Season's greetings to both of you!
Secondly, I will respond to you together, since you express "fears" about my suggestions.
A/ First, I want to make it clear that I hope that the experience that Nigeria is going through NOW in terms of foreign exchange pangs and pains - which is where we were sixteen years ago, with virtually the same discussions - will result in a more permanent RE-STRUCTURING of the productive capacities of our country, so that in future we will be able to deal with it in a more constructive manner. I remember that during the OPEC crisis, the USA used its bad experience to require smaller, more fuel-efficient cars. Cars have become bigger again, but have remained fuel-efficient. The recent oil crisis made Obama to talk about a more energy-independent USA, and now indeed they are. Our problem in Nigeria is that often once a problem goes away, we return to our bad habits, so that when the problem returns, it returns as seven times seven devils, worse than before.
So the more permanent solution to all of this crisis is decreasing our foreign items consumption (imports), increasing our domestic production (both for domestic consumption and for export), which is related to diversifying our economy and increasing jobs by all means necessary.
So all the devices that I am suggesting below are second-order aspects of solving the problem. If you consider them band-aids, I won't object, but without bandages, wounds can become septic!
B/ Now to my five suggestions: Joe Attueyi, Joshua Gogo and Ayo Obe don't like my Suggestion 5 (ban the Black Market). But if I had written about Suggestion 1 that we should "probe and tax" idle funds in banks - rather than just "tax" them, I believe that at least Joshua would have relaxed a bit.
Here is the issue: suppose you have a person - an individual in Nigeria - who just has N5 billion idle in his bank account. For goodness sake, will you not ask what business made him have such excess fund? How much TAX has he or his business paid to make such a huge surplus? If he or she is probed, and it is shown that it is legitimate money, and he and his business have paid the adequate tax - then no problem. Presumably, the money is fixed in some deposit in the bank, so that the bank is paying some interest to the depositor, in order to use the fund for lending to the real sector - fine - so the fund is not REALLY idle.
I remember some time in the past when former IG Tafa Balogun was being investigated, It was a 70-count charge;
with a summary:
QUOTE
Summary
*N12 million to buy 1,500,000 shares in First Bank (SEIZED)
*N50,050,000 to acquire another 1,500,000 shares in Union Bank (SEIZED)
*N148 million to buy 1,500,000 shares in Guinness Nigeria (SEIZED)
*N500 million to buy treasury bills for Caledonian Telecommunications (SEIZED)
* N350 million for a block of six three-bedroom flats at Olusegun Aina Street, Park View Estate, Ikoyi, Lagos in the name of Ceejay Properties Nigeria (SEIZED)
*Millions of naira to purchase properties (ALL SEIZED)
- Lagos: (i) a five-bedroom detached house at Victoria Garden City; and
- Abuja: (i) two double duplex apartments at Plot II Tunis Street, Wuse Zone 6 Garki Abuja; (ii) Shakur Plaza at Plot 102a Cadastrel Zone A3 Garki, (iii) Yasuha Plaza at 1046 Adeola Adetokunbo Street Wuse II, (iv) two double duplex apartments at Plot 110 Tuius Street Wuse Zone 6, Garki, Abuja
all valued at N13 billion.
Many of the properties are in the names of some of the companies listed on the charge sheet, viz:
(i) Yeboa Investment, (ii) Caledonian Telecommunications, (iii) Renovations Constructions, (iv) Aworo Investment, (v) Olatrade, (vi) Yeboa Nigeria and (vii) Ceejay Properties Nigeria.
UNQUOTE
Tafa Balogun DENIED that he owned many of the bank accounts listed against his name or his companies, but NOBODY ever came forward to claim ownership separate from him. So how does one just have all kinds of monies in banks without anybody knowing who has them?
Also, recently, I understood that because of BVN, there are about 1 million accounts in banks that have not been claimed because of fear that they will have to account for the monies in them. Does that not show some funny business? What about billions of naira of unclaimed dividends?
And so on......
So in our economy that needs money to be invested in our real sector, bank accounts need to be PROBED to see how to free them up for developing our economy....
That is what I am about - and not necessarily a witch-hunt.
Suggestion 2 stems from Suggestion 1 - ensure proper taxes were paid before such an accumulation, and then ENCOURAGE surplus-owners to invest in our Stock Market. If you have suspicions about some companies, then proper advice can be given to those who wish to invest in the market. It should not be seen as punishment (By the way, Lee Kuan Yew of Singapore REQUIRED Singaporeans to SAVE, with such savings being used by banks and others to develop Singapore. Why can't we adapt that?)
Finally, with respect to Suggest 5: yes, I hope that Black Market trading be made "equal, in perception and treatment, to trafficking for prostitution, drug trade and the arm's trade." I remember Margaret Thatcher once saying that it was not just a matter of economics: "A country which loses the power to issue its own currency is a country which has given up the power to govern itself. Such a country is no longer free. And it is no longer democratic - for its people can no longer determine their own future in national elections.To surrender the pound, to surrender our power of self-government, would betray all [that] the past generations down the ages lived and died to defend."
She was an early Brexiter, but when we just say that others can determine the value of our Naira, I feel like Thatcher!
And there you have it.
Bolaji Aluko
On Fri, Dec 30, 2016 at 7:31 PM, Ayo Obe <ayo.m.o.obe@gmail.com> wrote:
--I shudder with dread at recommendation 1! I know so many of us silently applauded when one of the Buhari administration's first actions was to ban the deposit of dollars into domiciliary accounts. We thought it would mean that those who had benefited from President Jonathan's "dollar rain" (and yet had not had the decency to help him win the election) would be caught with their hot money in their greedy little hands.
What did we know? We weren't economists. We forgot that it took Nigerians a lot of time to build up confidence in the domiciliary account system, so that they would keep their foreign exchange in Nigeria, and thus at the nominal disposal of Nigeria, rather than some other foreign nation. We forgot how suspicious we had been when the Dom account made its debut, so sure had we been that at some point our government would just change the rules, move the goalposts ...
But now, with the naira only waiting for the year to actually turn before hitting N500 for one dollar, I think we know better. And that is why I shudder with dread at Bolaji's first proposal.
As for proposal 5 ... good luck with that. The other day the DSS was in the 'black' market arresting forex dealers who were not selling at the govt dictated rate. Remind me again, how (US$1.00 = N490.00), how's that going?
AyoI invite you to follow me on Twitter @naijamaProf,--It would be quite interesting and enriching to read a full articulation of your five-point propositionbelow. Such articulation will greatly avoid misinterpretations and knee-jack response to them. However, knowing you personally, I can say some of the measures you have proposed are strongly at variance with your long perceived belief in economic freedom, liberty, individual responsibility, and economic democracy.Let me express some first thoughts on your propositions:
"(1) idle DOLLAR or NAIRA funds left in banks month-in, month-out or year-in, year-out - eg in the ranges N10-100 million, N100 million to N1 billion, and N1 billion and above - should be taxed, and the tax revenue used as venture capital. (There are many civil servants and others who have stored stolen money secretly in banks.)"
a) This suggests that harding working, value creating individuals and entrepreneurs who drive the economy and create surpluses and growth should be punished just because they do not consume as much as they produce and create. It suggests that we should all just live a subsistence economic life that ensures we don't have surpluses and safeguard. In a society without social security, public health care, income insurance and other social support systems, doesn't such policy become more disastrous than you intend?b) Do you really believe that the banking systems will exist if people do not create and leave long term deposits in the banks, which should be turned around by the banks to perform their financial intermediation functions in transforming these long-term deposits into loans and credits to the productive sectors and enterprises that need them?Should depositors be punished where the Banks (non-banks) have simply failed in doing the work of banks? Have these depositors not been punished enough by the intolerable inflations, depreciations and devaluations that have battered their deposits and that resulted from poor and incompetent economic management?
I agree that taxation, or non-payment of taxes, is a critical problem. However, the tax should be applied at the point of earning. For those who are not able to show how they earned their deposits or if they paid the taxes on the incomes that generated those deposits, as you mentioned, these individuals or corporation should be prosecuted for either tax evasion, or properly taxed, or be granted amnesty under certain conditions that will truly benefit the economy and the people of the country.Just brazenly confiscating deposits will immediately lead to a bank run, banking and economic collapse and untold capital flight, as all those individuals and corporations who produce more than they consume will simply take their monies out of the country as they create it. The Naira this proposition seeks to save will completely be decimated.
"(2) in the alternative, they should be "amnestified" if they invest them in the Stock market.
a) The Nigeria Stock Market is so illiquid, small and vulnerable to rigging and all kinds of brazen malpractices and manipulations, as it also reflects the general corruption and disregard for rules, that it is not even considered a functioning market in global financial and investment conversations. Financial reports submitted by most traded companies are so incorrect and forged that most sane investors will not even consider investing in the NSE beyond in a few global brand names. Quite frankly, when it comes to price discovery and information integrity, a number of investors are more comfortable dealing in Oshodi market than the Nigeria Stock Market. Like I said, the exceptions are for a few companies that have implemented the multinational parents' corporate governance and financial standards, imposed by their MNC parents.Does your proposition (2) above seek to punish hardworking Nigerians simply because they refuse to throw away their hard earned money to conmen who swindle investors with impunity on the NSE? How many companies on the NSE are real companies? And where is the information, with integrity and authenticity, on the traded firms that investors need to invest in the NSE? Have you ever heard, in recent experience in Nigeria, of any insider trading case or any market participant punished/penalized for rigging, manipulation or any form of malpractice?
(3) large withdrawals of currency from banks should be fully discouraged (that is already being done; in developed countries, you are immediately marked down as suspicious if you go in and start withdrawing more than $10,000 at one time.)"
I agree with you on this.
" (4) to periodically mop up excess (illicit?) naira, rather than change the currency notes wholesale, there should be episodic "colour exchange" of currency"
Sure, changing the look and feel of currency Notes is necessary from time to time for security and to reflect technological changes, or even to correct some anomalies in the overall economy. Equally essential are stability, durability and predictability that have their virtues. I agree with you on the need to discourage individuals from hoarding large sums of cash, however, it is not clear how this will in the short and intermediate run help solve the problem of depreciation. This is because the immediate pressure on a local currency when you change it is to drive down the value of all the currency Notes in circulation including those in the hands of hardworking people and poor people, who may not have the means and relationship with the banks to quickly change them out either to the new domestic currency Notes or foreign currency. To the extent we are willing to accept this collateral damage, sure,frequently changing the currency will help discourage currency hoarding.
"(5) Ban the Black Market outright..........work hard to drive it far underground......see below (my article of 2001, where you will see that we were EXACTLY where we are today about fifteen years ago.)."
Well, only extremely few individuals think the voluntary exchange of assets by law abiding individuals is a criminal activityto be treated as such. Moreover, this is a country where the majority of the individuals (not the individuals with the highest volume of demand) are just trying to source for forex to pay for high quality education and healthcare that are not available in the country, and also trying to import goods and services that Nigerians need but are not available in the country. On the supply side, you have millions of poor people who are trying to find a fair price to change US$ and other currencies sent to them by friends and family, even as the banks seek to swindle them out of these funds using the artificial exchange rates. Given that this very free and democratic market for forex will not disappear because it is of need, the proposal (5) will only expose free, law abiding, hardworking citizens to the resultant risks and criminal organizations that will take over the market from the BDCs that currently operate it. Think of the drug, prostitution, immigration and arm's trades and tell us how being driven underground has not created innocent victims, criminalized the same victims and spawned a lucrative industry for criminal organizations that neither pay taxes from their profit nor have not endangered society further. Yet these are activities (except immigration) at which most would ordinarily frown. Does your proposition (5) seek to make free exchange of currency equal, in perception and treatment, to trafficking for prostitution, drug trade and the arm's trade?
Do we really want to implement these policies proposed above just to ensure incompetent people continue to run the government and we don't want to hold them to account?
I'm sure your articulation of 4 of your 5-point proposition will help inform and change my first thoughts on them, because I know you are an insightful thinker and will sure have a perspective that has escaped me.kind regardsJoshua
I agree wi
On Fri, Dec 30, 2016 at 6:39 AM, Mobolaji Aluko <alukome@gmail.com> wrote:
--
Joe Attueyi:
Let me suggest five "Boyo Solutions":
FOR MONEY IN BANKS:
(1) idle DOLLAR or NAIRA funds left in banks month-in, month-out or year-in, year-out - eg in the ranges N10-100 million, N100 million to N1 billion, and N1 billion and above - should be taxed, and the tax revenue used as venture capital. (There are many civil servants and others who have stored stolen money secretly in banks.)
(2) in the alternative, they should be "amnestified" if they invest them in the Stock market.
(3) large withdrawals of currency from banks should be fully discouraged (that is already being done; in developed countries, you are immediately marked down as suspicious if you go in and start withdrawing more than $10,000 at one time.)
FOR MONEY OUTSIDE OF BANKS:
(4) to periodically mop up excess (illicit?) naira, rather than change the currency notes wholesale, there should be episodic "colour exchange" of currency
<image.png>
eg You can suddenly switch the colour between N1000 and N200, and between N500 and N100 - and hold the colour change steady for two years.
(5) Ban the Black Market outright..........work hard to drive it far underground......see below (my article of 2001, where you will see that we were EXACTLY where we are today about fifteen years ago.).
And there you have it.
Bolaji Aluko
The Black (Parallel) Exchange Market Should Be Banned in Africa
By Mobolaji E. Aluko,
Monday, June 11, 2001
I have never changed money in Nigeria's Black (Parallel) Market, and don't
intend to any time soon. Nevertheless, back in August 2000, on my last
trip to Nigeria, I went with one of my many hosts to an open site in
Ikeja, Lagos State to watch him exchange a few hundreds of his own dollars.
As we drove up to this open foreign exchange market (this was at about 7
pm), quite a number of at least 2 dozen people were sitting around, and
very quickly a Mallam (whose turn it appeared was to attend to the next
customer) came to us to ask quite directly what denomination we had and
how much we were willing to exchange. "500 US dollars" my host said.
"115 Naira" the Mallam said the Dollar to Naira exchange rate (I don't
quite remember the exact amount that he said). "120 Naira or I will
leave," my host said.
Without much further haggling, the Mallam ran into this non-descript White
house just beyond the open yard, and came back with a bundle of Naira
under his Babanriga, and handed the bundle to my host, who counted quickly
and saw that it was N118. He handed all the money back, and we made to
leave, but the Mallam quickly said, "Ah, oga" - and brought the rest of
the money out to give my host. At that point, my host counted quickly
further, then surrendered his 500 dollars, and the quick deed was done.
Just like that.
I know that the Black Market is legal in Nigeria, but when we left the
eerie scene, I had to ask my host again: "Is this legal?" He said "Yes.
Don't you see all newspapers quote parallel market rates all the time?"
"But how do you know that his Naira are real, not fake, and how does he
know that all the dollars you gave to him are not fake?" There was no
immediate response, but I think that there was a matter of faith on both
sides. Certainly, finger-testing $500 (5 $100 notes) could not have been
a big problem for the Mallam, but how my host could so quickly be sure
that all the N60,000 bundle that was handed to him was kosher is still a
mystery to me. [I could relate another situation where all the dollars
handed to a close friend in a similar parallel market exchange were not
kosher - but I won't!]
African and Non-African Countries: Relative approaches to the Black Market
I relate this encounter in preparation to asking the question: should the
Black Market in Nigeria be so openly and legally done, and has it not
considerably hurt the value of our Naira over the years? Should it not be
BANNED once and for all NOW and a concerted effort be employed to run ALL
of its operators out of town? Can a country be so helpless about controls
of its own currency for even the government to appeal to its parastatals
not to engage in changing money in the Black market any longer, as
president Obasanjo was recently reported to have "appealed", or more
accurately "banned" such activity? Or when the governor of our Central
Bank makes optimistic statements about the appreciation of the Naira in
the parallel market? Why must our president unilaterally ban government
officials from patronising a market if it is legal? Otherwise, why is
legislation not enacted to BAN it right away, hence making government
patronage of such an activity a moot point?
Why do I ask these? For one, trading in the Black Market in Europe, Asia
and most Latin American countries is completely ILLEGAL and has been so
for as long as we know. It must be for good reason. If we look at the
foreign exchange rates of their currencies, they have largely not had
large mood swings, and if they had, certainly not due to the parallel
market, but due to occurrences such as wars, etc..
Table 1 below shows this for 30 non-African countries between 1980 and
1999, none of which closes its eyes to ANY Black market within its
borders. On the other hand, Table 2 also shows the historical trend for
both official and parallel market exchange rates for 30 African countries.
Table 3 shows the historical trend specifically for Nigeria.
------------------------------
------------------------------ -------------
Table 1: Official Exchange Rates Per USA Dollar ($) in selected
non-African Countries
------------------------------
------------------------------ ------------ Country Currency 1980
1990 1994 1995 Mid-1 999 Ratio* (1)
(2) (3) (4) (5) (6)
------------------------------
------------------------------ ------------
Austria Shilling 20.7
14.5 12.1 11.0 13 .3 0.643 Denmark Kroner 6.5
5.8 6.8 6.2 7 .2 1.108 France Franc 5.1
5.1 5.4 5.0 6 .4 1.255 Germany Deutschemark 2.8
2.2 1.7 1.6 1 .9 0.679 Greece Drachma 30.0 175.6 296.0 242.0 314
.0 10.467 Sweden Kronor 4.8
4.5 8.5 7.5 8 .5 1.771 Switzerland Franc 1.8
1.7 1.5 1.3 1 .6 0.889 UK Pound 0.4
0.55 0.68 0.66 0 .63 1.575 Russia Rouble 1.3
1.5 1231.0 3232.0 24 .3 18.692 USA Dollar 1.0
1.0 1.0 1.0 1.0 1.0 Argentina Peso 0.25
0.25 0.99 0.99 1.0 4.0 Brazil Real 405.5
650.6 0.85 0.8 1.8 ? Canada Dollar 1.05
1.05 1.34 1.38 1.4 8 1.41 Mexico Peso 1.01
2.5 3.1 3.5 9.5 9.41 Venezuela Bolivar 4.5
4.0 102.0 170.0 607.0 134.9 Australia Dollar 0.89
0.88 1.62 1.31 1.5 1.69 India Rupee 8.0
15.0 31.1 33.8 43.4 0.417 Japan Yen 290.0
150.5 109.0 99.0 121.0 0.42 Malaysia Ringgit 0.6
1.2 2.6 2.5 3.8 6.33 Phillipines Reso 2.6
3.6 27.3 23.8 38.0 14.6 Singapore Dollar 1.0
1.0 1.6 1.5 1.7 1.7 Indonesia Rupiah 1.25
1.3 2102.0 2267.0 6875.0 55 00 Iran Rial 0.6
1.0 1.35 1.4 1.8 3 Iraq Dinar 0.06
0.06 0.25 0.30 3.7 5 62.5 Saudi Arabia Riyal 2.5 3.4
3.7 3.8 3.8 1.52 South Korea Won 260.0 350.0
808.0 795.0 1158.0 4.45 China Yuan 3.75
4.45 5.79 8.68 8.2 5 2.2 Taiwan Dollar 7.75
8.25 26.7 26.3 32.3 4.17 Thailand Baht 7.9
8.4 25.4 25.0 36.9 4.67 UAE Dirham 5.01
3.75 3.68 3.68 3.7 5 0.75
*Ratio = (5)/(1). A ratio lower than 1 implies an appreciation of the
currency relative to the dollar over the years stated
------------------------------
------------------------------ ------------------
Table 2 Historical foreign exchange rates for 30 African countries
------------------------------
------------------------------ ------------ Country Currency 1980
1990 1993 1994 1999 Ratio* (1)
(2) (3) (4) (5) (6)
------------------------------
------------------------------ ------------
1. Off
icial exchange 2. Par
allel (Black) market exchange rate
CFA Count's* CFA Franc 1. 211.3 272.3 283.2 555.2
620.0 2.93 14 countries) 2. 209.5 281.8 288.0 586.4
625.0 2.98
Botswana Pula 1. 0.8 1.9 2.4 2.7
4.6 5.75 2. 0.
8 1.9 2.8 2.9 6 .6 8.25
South Africa Rand 1. 0.8 2.6 3.3 3.6
6.1 7.63 2. 0.
9 2.7 3.5 3.8 4 .8 5.33
Zimbabwe Dollar 1. 0.6 2.5 6.5 8.2
38.3 63.8 2. 1.
1 3.3 7.7 9.4 16 .0 14.5
Kenya Shilling 1. 7.4 22.9 58.0 56.1
70.3 9.5 2. 8.
2 23.3 91.7 66.8 70 .0 8.54
Zambia Kwacha 1. 0.8 30.3 452.8 669.4
2388.0 2985 2. 1.
3 121.2 531.0 805.4 - 619.5
Uganda Shilling 1. 0.1 428.9 1191.0 979.4 1454.8 1454
8 2. 75.
7 685.8 1515.8 1292.8 1230.5 16.3
Ethiopia Birr 1. 2.1 2.1 5.0 5.5
7.9 3.76 2. 2.
8 6.0 13.3 12.0 8 .0 2.86
Ghana Cedi 1. 2.8 326.3 649.1 956.7
2647.3 945.5 2. 15.
9 360.8 665.7 976.4 2700 .0 169.8
Nigeria Naira 1. 0.5 8.0 22.1 22.0
92.3 184.6 2. 0.
9 9.3 56.8 71.7 105 .0 116.7
Guinea Franc 1. 19.0 660.2 955.5 976.6
1105.0 58.2 2. 41.
7 693.3 1156.9 1074.1 1150.5 27 .6
Liberia Dollar 1. 1.0 1.0 1.0 1.0
41.9 41.9 2. 1.
1 5.5 40.0 45.0 60 .5 55
Libya Dinar 1. 0.3 0.3 0.3 0.3
0.4 1.33 2. 0.
5 1.0 1.7 1.6 2 .3 4.6
Egypt Pound 1. 0.7 1.5 3.4 3.4
3.4 4.86 2. 0.
8 2.6 3.4 3.4 - 4.25
Algeria Dinar 1. 3.8 9.0 23.3 35.1
66.6 17.5 2. 10.
9 29.8 106.8 128.7 135 .0 12.4
Mauritius Rupee 1. 7.7 14.9 17.6 18.0
25.2 3.27 2. 7.
8 15.7 18.3 18.4 24 .0 3.08
*The CFA countries (the 14 members of the CFA Zone were: Benin, Burkina
Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Cote
d'Ivoire, Equatorial Guinea, Gabon, Mali, Niger, Senegal and Togo.
Guinea-Bissau became the 15th member on August 1, 1997) have their
currency pegged to the French Franc, but in January 1994, the CFA franc
was devalued by 50 per cent to CFA Fr100 to the French franc
Sources for Tables 1 and 2:
1. African Development Indicators 2000; World Bank, DC, USA
2. London Economist Intelligence Units World in Summary
------------------------------
------------------------------ ------------
Table 3: Average Naira Exchange Rates (1970 - 2001)
------------------------------
----------------------
Year $1 = Naira BP1 = Naira Head of State
----- ---------
-- ----------- ----------- 1970 0.7143
1.7114 Gowon 1971 0.6955
1.7156 " 1972 0.6579
1.6289 " 1973 0.6579
1.6289 " 1974 0.6299
1.4795 " 1975 0.6159
1.3678 Go won/Mohammed 1976 0.6265
1.1317 Mohammed/Obasanjo 1977 0.6466
1.1671 Obasanjo 1978 0.6060
1.2238 " 1979 0.5957
1.2628 Ob asanjo/Shagari 1980 0.5464
1.2647 Shagari 0.9 P
MER 1981 0.6100
1.2495 " 1982 0.6729
1.1734 " 1983 0.7241
1.1216 " 1984 0.7649
1.0765 Buhari 1985 0.8938
1.1999 Buhari/Babangida 1.7
PMER 1986 2.0206
2.5554 Babangida 3.9
PMER 1987 4.0179
6.5929 " 5.9
PMER 1988 4.5367
8.0895 " 6.7
PMER 1989 7.3916
12.0695 " 10.7
PMER 1990 8.0378
16.2419 " 9.3
PMER 1991 9.9095
17.4955 " 6.7
PMER 1992 17.2984
27.8684 " 21.9
PMER 1993 22.3268
33.2522 Ba bangida/Abacha 56.8
PMER 1994 21.8861
A 33.4252 Abacha 71.7
PMER 1995 21.8861
34.7111 " 78.3 P
MER 79.8955 AFEM 127.66 AFEM
1996 21.8861
35.7368 " 81.8
PMER 84.5750 AFEM 135.90 AFEM
1997 21.8861
35.7368 " 84.7
PMER 84.7004 AFEM 136.60 AFEM
1998 21.8861
35.7368 Ab acha/Abubakar 88.0-90.
0 PMER 85.0004 AFEM 136.00 AFEM
1999 (July) 85.9800
137.4680 Obasanjo 105.0
PMER 94.88
AFEM 145.71 AFEM 2001 April 115.7
Obasanjo 140 PM
ER
PMER (Parallel Market Exchange Rate or "Black" Market)
AFEM (Autonomous Foreign Exchange Market); official dual exchange rate
started in 1995, and abolished in October 1999 and replaced by daily
Inter-Bank Foreign Exchange Market (IFEM), which in effect is the official
exchange rate.
Sources: Central Bank of Nigeria, Statistiscal Bulletin, Vol. 7, No. 2,
December 1996, Table D.31, page 188 for figures up to 1996. CBN Annual
Reports 1996-1999; CBN Foreign Exchange biddings and newspaper reports.
------------------------------
------------------------------ -------------
If we eliminate the two highest outlier 1999/1990 exchange ratios
(official: non-Africa - Indonesia and Brazil ; official: Africa - Uganda
and Zambia ; parallel: Africa - Ghana and Zambia), we see that the
average devaluation ratios for the remaining 28 countries in each category
are as as follows:
Non-African countries: Official: 10.5 devaluation ratio
(average of 28 countries)
African countries : Official: 48.7 devaluation ratio
Parallel: 11.5 devaluation ratio
(average of 28 countries)
Africa non-CFA: Official: 101.8 devaluation ratio
Parallel: 20.0 devaluation ratio
(average of 14 countries)
If one understands that the official position is invariably to overvalue a
country's currency while the parallel market would tend to reduce that
value relative to foreign currency (the dollar in this case), then the
trend in Table 2 clearly shows that the devaluation by the parallel market
has almost invariably been tracked by that of the official rate, with the
official African exchange rate actually on average trying to over-correct
(by a factor of 5) for its seeming under-valuation of its own currency.
The non-CFA African countries have fared much worse than their CFA
counterparts.
Clearly, for those who have both the local and foreign currency OUTSIDE
the traditional (and hence easily monitored) banking system - including
both drug and other corruptly-acquired foreign cash denominations - it is
convenient to create an environment for currency speculation and "round
tripping" (buying currency low from the Central Bank and selling it high
to interested buyers at the parallel market), particularly when the
impression or reality of difficulties of obtaining foreign exchange
through the normal official banking system exists.
Attempts by governments to "close the gap" between the official and
parallel markets in order to use ordinary market forces to "drive out the
parallel market " almost invariably have led to another cycle of parallel
market devaluation followed by yet another official attempt to close the
gap, etcheram, ad nauseum. An inspection of Table 3 shows that in
Nigeria, for example, a dual exchange regime came into effect in March
1995 when the official rate (at N22/$1) was supplemented with an
Autonomous Foreign Exchange Market (AFEM) rate of about N80/$1, the latter
being in reaction to an existing parallel (black) market rate of N78/$1.
Within three years, while the official rate was held steady, the AFEM rate
inched up and then held steady during much of the Abacha regime at N85,
while the parallel market rate gained steadily to N90. By July 1999, one
of the first steps of the new president Obasanjo was to in effect
depreciate the Naira by doing away completely with the confusing N22
exchange rate, with the AFEM rate jumping to N95. The parallel market did
its own jump to N105. The AFEM was abolished on October 25, 1999 and
replaced with an Inter-bank Foreign Exchange Market (IFEM) regime,
becoming in effect the official exchange rate of note since the government
abandoned the earlier regime of "fixing" an exchange rate all by itself.
In recent weeks, IFEM rates have varied from N110 - 120, while the
parallel market has wavered from N120 - 140 per dollar.
In short, in this official/parallel market situation, we have the tail
wagging the dog, and at the same time, the dog trying to bite the tail in
a never-ending circle of exhaustion and near-death.
Until and unless this chain is broken by OFFICIALLY banning the Black
currency market, this recurrent devaluation of the respective currencies
due to parallel market influences will continue unabated. This first step
towards control of our currencies, of course, does not absolve the
government from ensuring other worthy fiscal and monetary policies, as
well as stemming corruption and diversifying tthe countries' productive
capaciites.
Epilogue
My conclusion, therefore, is that the Black (Parallel) Market should be
banned throughout Africa, and certainly in Nigeria, because we cannot
allow criminal activity to guide official policy while such activity to
continue openly with impunity. It is not allowed elsewhere, so why must
we officially hoodwink crime against our currency in Africa?
These are questions that inquiring minds want to know.
------------------------------
------------------------------ ---------
References for further reading
------------------------------
http://allafrica.com/stories/2
00106080283.html Naira Rides Higher, Rates Dip in House Hearings
The Guardian (Lagos) June 8, 2001
http://allafrica.com/stories/2
00106070204.html Why the Naira is Falling, By Sanusi
The Guardian (Lagos) June 7, 2001
http://allafrica.com/stories/2
00105250387.html President Orders Fresh Measures to Shore Up Naira
The Guardian (Lagos) May 25, 2001
http://allafrica.com/stories/2
00105180229.html Government Bars Officials From Forex Market
Impelled by the urgent need to save the naira from further fall, against
other world currencies, the Federal Government yesterday took a bold step
when it barred all its officials from patronising there parallel market.
It has also started probing some banks for round-tripping of forex.
The Post Express (Lagos) May 17, 2001
http://allafrica.com/stories/2
00105170037.html Obasanjo Bars Govt Officials From Parallel Market
President Olusegun Obasanjo yesterday barred government officials from
patronising the foreign exchange parallel market henceforth, as part of
the strategy to save the naira from further depreciation.
Vanguard (Lagos) May 17, 2001
http://allafrica.com/stories/2
00105160346.html Central Bank, Customs Department Now to Brief Obasanjo On Economy
This Day (Lagos) May 16, 2001
http://allafrica.com/stories/2
00105150265.html Currency Black-Market Batters Zim Dollar
African Eye News Service (Nelspruit)
May 15, 2001
http://allafrica.com/stories/2
00105140739.html Central Bank Blamed Falling Naira
Panafrican News Agency May 14, 2001
http://allafrica.com/stories/2
00105140392.html Naira Appreciates At Black Market
This Day (Lagos) May 14, 2001
http://allafrica.com/stories/2
00105110049.html Obasanjo to Battle Defects in Nigeria's Foreign Exchange
Panafrican News Agency May 11, 2001
http://groups.yahoo.com/group/
AlukoArchives/message/48 MID-WEEK ESSAY: Defending The Naira, Nigeria's Currency - Some, Thoughts
Mobolaji E. Aluko, April 25, 2001
------------------------------
------------------------------ -----------------
Dr. Mobolaji E. Aluko is Professor & Chair of Chemical Engineering at
Howard University, Washington, DC. He can be reached on
------------------------------
------------------------------ ----------------
On Fri, Dec 30, 2016 at 9:40 AM, 'Joe Attueyi' via AfricanWorldForum <africanworldforum@googlegroups.com > wrote:
--Henry Boyo's point in the essay below is that Dollar scarcity is due not only to those who are genuinely demanding it for manufacturing, school, etc., but due to those who have EXCESS Naira (in their bank accounts or in their bedrooms or water wells) who are buying up dollars as a store for those Naira. So if you look to solve the forex problem only by acknowledging Group 1, the problem will never be solved no matter how much forex you make availableThanks for the explanation/ clarification Prof Aluko.
And how does Boyo propose to solve the problem of "..those who have EXCESS Naira (in their bank accounts or in their bedrooms or water wells) who are buying up dollars as a store for those Naira"?
JoeSent from my iPhone
Joe Attueyi:
Henry Boyo's point in the essay below is that Dollar scarcity is due not only to those who are genuinely demanding it for manufacturing, school, etc., but due to those who have EXCESS Naira (in their bank accounts or in their bedrooms or water wells) who are buying up dollars as a store for those Naira. So if you look to solve the forex problem only by acknowledging Group 1, the problem will never be solved no matter how much forex you make available.
Boyo's earlier suggestion of dollarizing some of the state government's revenue allocation is not unconnected with the suspicion that the Federal Government SHORTCHANGES states when it converts some of the dollar earnings (say from oil) to Naira using conversion rates that may not be favorable to the states due to forex movements. It may also encourage states to make dollar investments without having to apply through the Federal Government, thereby enhancing "federalism".
Events may have taken that suggestion now, as we struggle with low oil earnings.
Bolaji Aluko
--
On Fri, Dec 30, 2016 at 3:58 AM, 'Joe Attueyi' via AfricanWorldForum <africanworldforum@googlegroups.com > wrote:
--Prof AlukoHenry Boyo and I had these debates on some other forum about a year ago where he was arguing that dollars received into the federation account should not be paid /'auctioned ' by CBN into Naira as it increased 'Naira liquidity and bringing about devaluation of the Naira vis a vis the dollar '. He suggested that the Federation should pay dollars directly to the states. I could never understand how paying dollars to the states addresses the problem he identified and had to move on from the debate.
I still don't understand his suggested solution and will pass on his debate once again.
Joe
Sent from my iPhone--
Joe Attueyi:
Please read this, which I believe:
QUOTE
Nevertheless, despite our reduced export revenue, unless, there is an urgent intervention by either President Buhari or the Legislature, Naira liquidity surfeit would clearly remain a challenge to poverty alleviation and the realisation of vibrant and inclusive economic growth in 2016 and thereafter. Advisedly, however, the adoption of dollar certificates/warrant for allocating dollar denominated revenue will surely minimise Naira liquidity and shore up the Naira value in the market and also positively restrain inflation. A steady hardening of Naira exchange rate will also gradually encourage public preference for the Naira as a stronger store of value than the dollar.
Evidently, so long as CBN continues to tackle the problem of an ever sliding Naira rate from the prism of demand for dollars, rather than frontally addressing the bogey of eternally surplus Naira, the end of our economic dislocation and deepening poverty will never be in sight.
UNQUOTE
And there you have it.
Bolaji Aluko
---------
Nigeria: Naira Exchange Rate - CBN Don Miss Road!
January 6, 2016
By Henry BoyoThe Central Bank of Nigeria, is, obviously losing the battle to arrest inflation and the unyielding slide in the Naira's exchange rate. With inflation consistently closer to 10 per cent, all static incomes have lost over 40 per cent of purchasing values since 2010; thus, the laborer's N18,000 minimum wage may just be worthless than N10,800 today; inevitably, elder citizens whose pension incomes are static, have also become destitute.
However, spiraling inflation is usually, primarily, triggered by uncontrolled and liberal money supply (otherwise known as excess liquidity), chasing relatively few goods and services. Indeed, spiraling inflation spells doom for the economy and people of any country. Monetary authorities in successful economies, invariably endeavour to keep inflation below two per cent by avoiding a surfeit of money supply!
The prevailing irrepressible inflation rates were compounded by over 25 per cent Naira devaluation this year. Consequently, the Naira plummeted from N160 to below N270=$1 in the parallel market, while the huge margin between both rates has expectedly encouraged financial malfeasance with significant market distortions, which discourages any serious commitment to grow the real sector, and create more jobs.
Historically, Nigeria's discomfortingly rising rate of unemployment and deepening poverty correlates loyally with the Naira's steady depreciation from 50 kobo to N197=$1; thus, in order to enjoy the same purchasing value that 50 kobo commanded before 1980, Nigerians must perform the impossible task of working almost 400 times harder today!
Incidentally, dollar scarcity cannot be the primary cause of weaker Naira exchange rates as often alleged; for example, Nigeria earned bounteous dollar revenue when crude oil prices rose steadily from $53.41/barrel in 1979 to well over $140/barrel in 2008, while average output has also remained consistently above two million barrels/day since return to civil rule; indeed, part of the fortuitously, consolidated revenue surplus of over $12 billion was sunk into the power sector without much impact, while another $18 billion also became available for the controversial London/Paris Club debt exit.
Furthermore, in compliance with IMF recommendations to liberalise our 'embarrassingly' increasing dollar supply, the CBN licensed about 3,000 Bureaux de Change and provided them with weekly dollar allocations that often exceeded total forex provision to the real sector; ironically, Nigerians could, in addition, access up to $150,000 with Naira debit cards at official exchange rates from ATMs abroad annually. However, despite our healthy reserve base, Naira, inexplicably, still depreciated from N80 to N160=$1!
Nevertheless, in order to conserve forex, in the wake of the present collapse in crude prices, CBN has reduced international ATM withdrawals to $300/day (about $110,000 annually); inexplicably, every account holder is also entitled to additional $7,000 weekly ($336,000 annually), for international POS Transactions. Curiously, CBN has kept these individual forex windows wide open, while genuine real sector businesses which add value and create jobs are constrained to patiently await official allocations or alternatively patronise, oppressive black market dollar rates to fund their operations.
Instructively, however, if the primary cause of Naira's depreciation is not identified and addressed, the forex market would steadily become unraveled and the parallel market rate may alarmingly exceed N400=$1 with disastrous economic consequences in 2016.
Historically, CBN's attempts to manage Naira exchange rate have always been targeted at curbing dollar demand. However, increasing dollar demand is actually a function of public perception of the dollar as a stronger and safer store of value than Naira. Thus, unless actual market dynamics alter this perception, any attempt to control dollar demand or restrict access to supply, will invariably only instigate further rejection of the Naira as a safe store of value, and the demand pressure for the dollar will persist.
If, however, the CBN recognises that persistently surplus Naira is the prime determinant of the dollar/Naira exchange rate, then, our decades long sojourn in the wilderness of monetary strategy will end. Evidently, the unceasing suffocation of systemic Naira liquidity invariably weakens Naira exchange rate in a market where CBN, conversely auctions 'small' rations of dollars weekly.
Incidentally, former CBN Governor, Chukwuma Soludo noted after an MPC meeting in June, 2005 that:
"The major source (cause) of huge liquidity injection has been the monetisation (read as the substitution of naira allocation for dollar denominated revenue) of $1billion from the 2004 excess crude earnings amounting to over N160 billion and this has contributed to the liquidity surge." Soludo therefore warned that... "the (adverse) consequences of excess liquidity (inflation and weaker Naira) stare us in the face." If, indeed, according to Soludo, Naira substitution for just $1billion distributable revenue wreaks such havoc on liquidity, one can only imagine what damage Naira substitution for an estimated $30 billion annual distributable revenue would cause.
Instructively, however, just two weeks to the end of 2015, in deference to the prevailing problematic liquidity surfeit, the CBN again indicated its intention to borrow and store another N135 billion as idle funds.
Similarly, the CBN also decided to remove N1,220 billion ($6.13 billion) from the projected systemic Naira liquidity with sales of government Treasury bills before March ending 2016. Notably, Treasury Bill sales is CBN's instrument of choice for reducing money supply, and establishing price stability in the market place.
Furthermore, later in December 2015, the Apex Bank and the Debt Management Office also borrowed over N50 billion long term loans, despite the attendant double digit interest rates which are clearly inconsistent with sovereign, risk free, loans of resource-endowed countries such as Nigeria. Revealingly, these government loans were all oversubscribed by well over a 100 per cent, i.e. a loud attestation to the prevailing high systemic liquidity, and also testimony of the stranglehold of banks on sovereign debts in preference to real sector lending.
Indeed, it is questionable why credit from Nigerian banks should be so expensive in a money market that is allegedly weighed down by Excess Naira liquidity. Surely, no commodity becomes more expensive when it is in surplus supply.
Nevertheless, despite our reduced export revenue, unless, there is an urgent intervention by either President Buhari or the Legislature, Naira liquidity surfeit would clearly remain a challenge to poverty alleviation and the realisation of vibrant and inclusive economic growth in 2016 and thereafter. Advisedly, however, the adoption of dollar certificates/warrant for allocating dollar denominated revenue will surely minimise Naira liquidity and shore up the Naira value in the market and also positively restrain inflation. A steady hardening of Naira exchange rate will also gradually encourage public preference for the Naira as a stronger store of value than the dollar.
Evidently, so long as CBN continues to tackle the problem of an ever sliding Naira rate from the prism of demand for dollars, rather than frontally addressing the bogey of eternally surplus Naira, the end of our economic dislocation and deepening poverty will never be in sight.
------------------------------
------------------------------ ------------------------------ ------
On Thu, Dec 29, 2016 at 5:57 PM, 'Joe Attueyi' via AfricanWorldForum <africanworldforum@googlegroups.com > wrote:
The Government needs to stop meddling with the exchange rate. Let the market determine the rate even if it is N600 / $. At least it will be one unified rate around which people can plan.
1. Ameliorate the impact on manufacturers by reducing/ eliminating duty and VAT on imported raw materials and machinery
2. Use the increased Naira inflow into the federation account to fund specific items like free quality basic education for our kids.
3. This myriad of 12 different exchange rates in one economy is neither fish nor fowl and will not work
Joe
https://www.thecable.ng/bdc-operators-president-worried-and- disturbed-as-naira-plunges-to- 490
Sent from my iPhone
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You received this message because you are subscribed to the Google Groups "USA Africa Dialogue Series" group.
To unsubscribe from this group and stop receiving emails from it, send an email to usaafricadialogue+unsubscribe@googlegroups.com .
For more options, visit https://groups.google.com/d/optout .
Listserv moderated by Toyin Falola, University of Texas at Austin
To post to this group, send an email to USAAfricaDialogue@googlegroups.com
To subscribe to this group, send an email to USAAfricaDialogue+subscribe@googlegroups.com
Current archives at http://groups.google.com/group/USAAfricaDialogue
Early archives at http://www.utexas.edu/conferences/africa/ads/index. html
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You received this message because you are subscribed to the Google Groups "USA Africa Dialogue Series" group.
To unsubscribe from this group and stop receiving emails from it, send an email to usaafricadialogue+unsubscribe@googlegroups.com .
For more options, visit https://groups.google.com/d/optout .
Listserv moderated by Toyin Falola, University of Texas at Austin
To post to this group, send an email to USAAfricaDialogue@googlegroups.com
To subscribe to this group, send an email to USAAfricaDialogue+subscribe@googlegroups.com
Current archives at http://groups.google.com/group/USAAfricaDialogue
Early archives at http://www.utexas.edu/conferences/africa/ads/index. html
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You received this message because you are subscribed to the Google Groups "USA Africa Dialogue Series" group.
To unsubscribe from this group and stop receiving emails from it, send an email to usaafricadialogue+unsubscribe@googlegroups.com .
For more options, visit https://groups.google.com/d/optout .
Listserv moderated by Toyin Falola, University of Texas at Austin
To post to this group, send an email to USAAfricaDialogue@googlegroups.com
To subscribe to this group, send an email to USAAfricaDialogue+subscribe@googlegroups.com
Current archives at http://groups.google.com/group/USAAfricaDialogue
Early archives at http://www.utexas.edu/conferences/africa/ads/index.html
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You received this message because you are subscribed to the Google Groups "USA Africa Dialogue Series" group.
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