A colleague said to me, “it’s uncanny how your Central Bank’s policy on Foreign Exchange is similar to that of Zimbabwe of 2008”.
I had to go check what Zimbabwe did and where it led them to. Zimbabwe. after a bout of hyperinflation, abandoned its currency. Nigeria’s current arrangement may get us there.
It is a good time to own a BDC. BDC licenses can cost as much as N15m now. The same license cost about N3m some years ago. Why has it gone up? A BDC can generate a weekly return of N1.3-1.4m just on a $50k bid. Most people can live on that. With a spread of N65 on a dollar: official at 410 and parallel at 475, why do you have to sweat?
So what is the impact of this? A long run destruction of the economy, a higher subsidy than calculated on petrol and a significant market distortion. A distortion that profits less than 1% of the population and sending a higher number into poverty.
READ: FG rejects IMF’s advice to devalue the naira
With, until recently, accretion to reserves impaired by low crude prices and low volumes, there is a rapid depletion of the country’s reserves. Why does a government borrowing heavily choose to subsidize the dollar?
The answer is corruption. Corruption played out supported by perceptions of what could happen to the middle class if the Naira were allowed to float. Nigerians tend to politicize the exchange rates. It’s for them a sign of economic management. Governments in power have that awareness. It’s part of the play in sustaining corruption.
The future is bleak. The external reserves shed over a $1billion in the last few weeks. Nigeria is consuming the present and the future. There is really nothing to show for the years of interventions. With the ongoing challenges in security and rising poverty, the destination is going to be a crash.
It is time for market unification. It is time for Nigeria to move to find the true value of the Naira. It must stop the corruption in the markets.
Written by Demola Adigun
You write utter nonsense. No currency in the world is left to market forces. The dollar is protected. The yen is protected. The naira will be destroyed by playing the western inspired deception theory of floating the currency. Only a foolish nation will float its currency to market forces corruption or no corruption. Corruption will strive under any system. So let’s bifurcate the issues and stop playing to imperialist designs.
You could have made your point without resorting to gutter language.
Dollar is US and yen is Japan. These countries export manufactured products. What manufactured products does Nigeria export? Did you ever read Mallam Sanusi’s expose on the poor forex? management by Buhari administration
Not a very intelligent write up
The CBN knows what to do to control the current situation but some people may be profiteering. CBN ought to protect the naira in the official markets including the I&E window and widen the scope as well as participants in this window. All legal fx requirement should be easily accessible in this more liberalized official channels.
At the same time CBN should float the naira in the parallel market by also floating CBN rate to BDC per transaction to reflect BDCs’ going rate to end users and CBN allowable margin to BDCs.
For example while official rate remains stable at 410/$. CBN rate to BDC will vary per week based on the parallel market going rate. If BDCs sell at 480 and CBN allowable margin to BDC is 10. Next week CBN will sell to BDC at 470. If BDC rate increase to 560, CBN will sell to them at 550. Soon it will be pointless for BDCs to keep increasing price indefinitely or absolutely unattractive for speculators to buy in the parallel market. Parallel market then becomes a channel for those who absolutely need fx and cannot access the I&E window instead of speculators. This will weed out a lot of bad eggs. Remember more regulations has never helped economy to evolve.
This shouldn’t be difficult or am I missing something.
There was a time the stronger currencies had two slashes across them. Nowadays each has only a slash. Let us have naira with only a slash.
All the individuals comments on the Naira exchange rate to the Dollar makes very interesting reading, but my contribution is to advice the CBN to issue traveler’s cheques to BDC instead of cash. That way no one individual can buy and smuggle $50,000 to $100,000 and over without CBN or Customs knowing about it. Cash transactions are difficult to monitor. Pls let try another approach in managing the Naira. Thanks.