Good points. To be clear, I am not advocating for market without regulations. I assume that should be taken as given. Instead, I am asking that we regulate and but then let people play in that market without interference or changing rules arbitrarily or in the middle of the game. That breeds confusion, lack of confidence, and ultimately will result in the opposite of what they are trying to achieve.
OU
OU,Indeed, one should be concerned about the confusions coming from top government officials on important economic policies. But I disagree with you on ...'rather than retreat with grace, and allow the market to work efficiently'. Has the market ever worked efficiently anywhere in the world without some of form of regulations?. The theory of market efficiency is premised on perfect information. But scholars have proved over and over again that even in ideal environments, there is no perfect information. It is only an assumption. The idea of the independence of CBN, which Prof Aluko also advocated is not feasible in our circumstances and I dare say, is part of the of the extremes of neoliberal economics that we have swallowed hook, line and sinker for a long time. CBNs are not meant to target inflation only. They should combine both monetary and fiscal policies to stimulate the economy, through lowering of interest rates such that Commercial Banks can lend to the real sector-where jobs can be created. Of course this will require that other variables such as quality infrastructures and institutions are present.SO--On Wed, Dec 21, 2016 at 4:29 PM, Okechukwu Ukaga <ukaga001@umn.edu> wrote:Joshua,
You are absolutely correct. What the recent pronouncements and efforts by the finance minister and CBN show is that they either lack basic understanding of how foreign exchange market works or they know but are afraid to argue against the president's preferred strategy. But that strategy has so far failed and will continue to fail. Honestly I am surprised that they seem to be doubling down on this failed strategy rather than retreat with grace, and allow the market to work efficiently. Instead of a futile effort at price control, Nigeria should focus on (1) import substitution to reduce need for foreign exchange and (2) export promotion to generate foreign exchange. These two strategies coupled with no interference in private market and CBN policies seems to me the best way out of the current foreign exchange problem in the long run.
OUOn Dec 21, 2016 7:52 AM, "Joshua Gogo" <jgogo@connect.carleton.ca> wrote:--It is always wildly naive or the fantasy of a gulag/police state to contemplate that you can fix or determine the price of a product or an asset you don't own/produce or the price at which those who own/produce it but don't need it and those who need it but don't have it, are willing to exchange the asset/product. It really doesn't matter whether any or all of these parties are speculators.--When the Finance Minister or the CBN Governor has found a way of creating/earning sufficient foreign currency reserves or meeting all the demand for foreign currency at their artificial official exchange rate, without seeking to criminalize a free market interaction among law abiding Nigerians, they can talk about the disparity between the official and parallel exchange rates. But then, this is your Finance Minister whose highest qualification is a PGD in Finance and your CBN Governor that who was a banking accountant, from a bank that is not really a bank, hence no fantasy between them is particularly shocking or even surprising.On Wed, Dec 21, 2016 at 3:30 AM, Mobolaji Aluko <alukome@gmail.com> wrote:--My People:The Finance Minister should not be so categorical about making statements on behalf of the CBN, in a manner that does undermines the substantial independence of the CBN. The Presidency should handle FISCAL POLICY while the CBN handles MONETARY POLICY, and while there should be COORDINATION, there should NOT be "DIRECTION" of one by the other. This notion of INDEPENDENCE of the CBN is a given international one, even if in reality it is true or untrue to various degrees in various countries.So there should be better guidance in that respect in terms of public pronouncements.On another note, a N500-$1 exchange rate is pretty hefty....and crushing. Clearly economic orthodoxy - this notion of supply and demand and laissez-faire economics - is not helping much - but we shall see.And there you have it.
Bolaji Aluko----Nigeria's central bank will eliminate naira black market, says finance minister
ABUJA Dec 20 – Nigeria's central bank will try to eliminate the currency black market, where the naira trades about 40 percent below the official rate against the dollar, Nigeria's finance minister said on Tuesday.
Africa's largest economy, dependent on oil exports, is in its first recession in 25 years as low global crude prices take their toll.
The central bank scrapped a 16-month-old peg of 197 naira to the dollar in June, but it continues to trade in the official market, so that the naira remains far stronger against the dollar there than on the parallel market. The government has blamed that black market for damaging the already shaky economy.
The central bank (CBN) "has been directed to do this and CBN has promised to do something by putting a system in place to eliminate the black market because it's damaging the economy", Finance Minister Kemi Adeosun told a conference.
A CBN spokesman, Isaac Okorafor, said the central bank was working towards "ensuring that the forex market operates as effectively as we would envisage".
He said the aim was to "ensure there is no black market" but did not give details of how this would be achieved.
The naira has traded around 305.5 naira to the dollar on the official interbank market since August, while it was quoted at 487 to the dollar on the parallel market on Monday.
CREDIT: REUTERS
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