As CBN Pumps Another $221m, Analysts Expect USD’s Slide to N400 | THISDAYLIVE

[Joe Attueyi]

One hopes these interventions are staged as a precursor to a full float of the Naira.

Otherwise these episodic 'pumping of dollars ' into the system will not be sustainable

Joe
https://www.thisdaylive.com/index.php/2017/02/27/as-cbn-pumps-another-221m-analysts-expect-dollar-to-slide-to-n400-n425/


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[Mobolaji Aluko]

Joe Attueyi:

These episodic pumpings-in of dollars due to improved oil money earnings - $520 million in the past week or so -  is NOT sustainable - neither is floating the naira that you suggest in your hackneyed orthodox manner.   On the long run, only (1) a re-structured Nigeria (both administrative and reward-wise), (2)  reduced foreign appetite/increased self-reliance, and  (3) improved infrastructure  and (4)  increased/diversified productivity for increased international investment/earnings will get us out of the rot that we are in.  

We are in a post-rapaciousness,  Buhari-fear-induced era in Nigeria where at the same time there is TOO MUCH (MANY) Naira and TOO MANY Dollars (from the rapacious period) now OUTSIDE the banking system CHASING EACH OTHER.....so that no matter the fiscal or monetary policies of either the Central Bank or the Nigerian Government, nothing will seem to be REALLY working in managing our forex.  Those with too much Naira are hedging by buying dollars in the black market and storing some of them in dollars; those with dollars (many of who also have Naira) are taking advantage of the high exchange and getting hot Naira also in the black market....and so the dance continues, with the "average" Nigerian "cursing" those who came to clean up for "incompetence" instead of directing angst appropriately - all at the same time proclaiming laughter being the best medicine! :-).

This is REALLY where years of corruption have gotten us to, which is the real cause of the INSECURITY and POOR ECONOMIC CONDITION that we have been facing for a while.

On the short run, the anti-corruption crusade must be more holistic and decisive  - and certainly not the way it is being fought, in fits and starts.  The Judiciary is re-collecting itself after an initial jolt; an opportunity to clean the Augean stable might have been lost, as Judges (and even the legal profession) may have now closed ranks to "support their own" and drags things out.  The Legislature continues to frustrate serious legislation that will lead to class suicide;  and one no longer fully understands the Senate and EFCC filings at the CCT (for example).   Even the Executive may have begun to show the same disease it purportedly came to cure, with all kinds of "grass-cutting" contracts!  But maybe "whistle blowing" will pump new life into the whole enchilada?

On the SHORTER run - or even SHORTEST RUN -  besides legislating the limiting of dollar holdings within Nigeria and pumping in dollars, changing the COLOR of our Naira currency SUDDENLY and NOW - note: not changing the currency, BUT the combination of colors - will put the MOST serious bite on the corruption crime of those who hold millions and billions of Naira OUTSIDE the banking system in the junkyards and money wells, which have been chasing those dollars.

But will CBN's Emefiele do that?  Inquiring minds want to know.

And there you have it.

Bolaji Aluko

Shaking his head

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[Joe Attueyi]

Prof Aluko 

I was minded not to respond to yours below because we have had this specific debate many times over a long period. 

On second thoughts and given the fact that some policy makers read these postings  it will be remiss of me to allow anyone who does not know better to pick these your hackneyed economic proposals and run with them. 

I can't believe that in the year of the Lord 2017 there are folks who still believe that "..legislating the limiting of dollar holdings within Nigeria and pumping in dollars, changing the COLOR of our Naira currency SUDDENLY and NOW ". Really? This is the mindset that gave us these same policies in 1984/85 and we know where all that ended. 

I don't have the time right now to respond in full to yours. However there are certain facts --no matter how unpalatable they maybe --that we cannot run away from in today's Nigeria:

1. Nigeria's need for capital for infrastructure--power, roads, airports, railways, etc-- is far in excess of capital availability within Nigeria. 

I have seen a report that estimates that the capital requirements to generate , transmit and distribute 45,000 MW of electricity is approx $60 Billion. That is about 3 X the 2016 federal budget at official rates

2. If we are to achieve the development goals we wish for, we need to attract LARGE AMOUNTS of capital ---debt, equity, development finance, FDI, FPI into Nigeria in addition to investments by local investors. 

3. As our economic 'patriots' have found out over the last 2 years, a fundamental requirement for access to foreign capital is a FREE MARKET. The cheapest development finance any country can get today has the fundamental requirement of running your economy on a FREE MARKET before you can access the funding. 

That is why Madam Adeosun has been dancing kokoma with IMF. She needs external infusion of capital to achieve her budget goals; the providers of this capital need IMF to certify her economic plans; IMF needs her economic plans to become more transparent i.e. FREE MARKET; she ( or more likely her boss) has a negative knee jerk reaction to IMF and she has been going round in a carousel for 2 years. 

4. If I were a betting man, and I am not , I'd bet that it is INEVITABLE that the Naira will free float and our economic policies will head towards more transparent MARKET DRIVEN policies. It is only a matter of how much more damage we will inflict on ourselves before we say enough. 

5. Btw nothing says of course that we cannot adopt AUTARKY as an economic policy. Make a budget based on our earnings. Spend 70% of the budget on salaries and pensions of civil servants and elected officials. Spread the balance on roads, rails, power etc.  We will probably be producing 6,000 MW of power in 2090!😎

Joe

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