BDC operators’ president ‘worried and disturbed’ as naira plunges to 490/$ | TheCable

[Joe Attueyi]

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

[Wilson Iguade]

Quote

I don't know of a country in the world that allows market to determine exchange rate not even USA.

Unquote

Mr. Dada,

Please provide support or clarify your statement cited above.

Or, if you prefer since "market" in the USA does not ALLOW for determination of "exchange rate", according to Mr. Dada. Thus, please DESCRIBE or STATE for us the "mechanism" or system by which "exchange rate" is determined in the USA?

I ask this question given my knowledge and professional experience in the USA's financial sector as REGULATED under the Dodd Frank Act. 

Dada, please respond to elaborate and be educative as I wish for, and I am also confident that such a response will enhance my knowledge base on how market forces, though regulated, DO NOT "allow" market to determine "exchange rate" in the USA, as you claimed and posted in the fora.

Stay tuned! 

Wilson Iguade

TX, USA 🇺🇸 

Sent from my iPhone

On Dec 29, 2016, at 5:13 PM, 'G.Dada' via OkonkwoNetworks <okonkwo...@googlegroups.com> wrote:

Gentlemen,

I don't know of a country in the world that allows market to determine exchange rate not even USA.

We can see that in the politics of Democrat and Republican on the appointments of Governors of Federal Reserve Banks in USA. 

There is no reason to peg $ to N and there is no justification for the current exchange rate of Naira to dollar.

Read Dr. Bala Usman book that is relevant to this problem.

Compare FX of Nigeria to many African countries particularly their rates to $!!!

Ethiopia is very good in FX management and does not have oil.

DaDA

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[John Ebohon]

My brother Wilson,

 

Mr Dada is correct, every government sets a threshold that their currency will not fall, and are prepared to intervene, hence what is known as dirty float:

 

FEDPOINT

U.S. Foreign Exchange Intervention

·         The U.S. monetary authorities occasionally intervene in the foreign exchange (FX) market to counter disorderly market conditions.

·         The Treasury, in consultation with the Federal Reserve System, has responsibility for setting U.S. exchange rate policy, while the Federal Reserve Bank New York is responsible for executing FX intervention.

·         U.S. FX intervention has become less frequent in recent years.

Purpose of Foreign Exchange Intervention
The Department of the Treasury and the Federal Reserve, which are the U.S. monetary authorities, occasionally intervene in the foreign exchange (FX) market to counter disorderly market conditions. Since the breakdown of the Bretton Woods system in 1971, the United States has used FX intervention both to slow rapid exchange rate moves and to signal the U.S. monetary authorities' view that the exchange rate did not reflect fundamental economic conditions. U.S. FX intervention became much less frequent in the late 1990s. The United States intervened in the FX market on eight different days in 1995, but only twice from August 1995 through December 2006.

 

 

John

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[Wilson Iguade]

OJ

You make think that Mr. Dada is correct, based on your understanding of "... I [Mr.Dada] don't know of a country in the world that allows market to determine exchange rate not even USA."

OJ, yours below, as I understand it is a description of a "regulated market". As you said "every government sets a threshold that their currency will not fall, and are prepared to intervene,".

Again, this is a REGULATED Market, maybe my choice of words are confusing to you, since am in the USA and not in England like you. Hehehehe!

My point, to avoid unnecessary waste of time, I do not understand yours to mean the same as that communicated by Mr. Dada. So, he cannot be correct to me, given my understanding of yours, and my lack of understanding of his, thus my question to him. 

I know Mr. Dada very well, frankly better than I know you, given we (Dada and I) served together at NIDOA's Board, even though I was there for one term, while Mr. Dada served multiple terms.

So am clear, I know and have spoken to Brother OJ many times on the phone. I worked with Mr. Dada for almost 2 years - daily, weekly, etc. 

So, I look forward to what he has to say. Thanks for your two cents. Iguade

Sent from my iPhone

[Mobolaji Aluko]

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 Boyo

The 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.

------------------------------------------------------------------------------------------------

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[Mobolaji Aluko]

[Joe Attueyi]

Prof Aluko 

Henry 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

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[maxim...@yahoo.com]

Without production to "mop up" the illusion of "surplus", a mercantilist system will always be an illusion and a failure. Money is only a concept (it is in the eye of the beholder), production and labor are reality.

If you don't produce what you eat, what you shelter under, what you wear, your comfort, and the tools you use for these things (things paper by itself cannot make), you are always going to appear to have too much paper (which is the way money is made these days), you can't do anything with.

The value of money is in what it can buy. If you don't sell anything you make, there will always be too much money (an illusion of wealth). Without products and labor (with the knowledge and skills it brings), money by itself is useless. 

A true venture capitalist looks for products and labor. Money really means nothing to such a person, because the reason they are chasing labor and creativity/products/production is because they have money they don't know what to do with in the first place ("surplus" money).

That is why there is always a value chain, or money by itself is a source of hell. 

The restructuring and re-posturing should always be shifting towards production and labor, not just "controlling" money. 

Already, it is a market of "infinite" demand relative to "infinitesimal" production. The place where money can grow exponentially for at least 50 years when creativity, production and products are appropriately managed. A place of relatively infinite opportunities. In such a place, the oil money is less than chicken change.

The frustration is that Nigeria has all the creative energy it needs to produce all it wants (talk less of needs). The worst criminals are the so-called "intellectuals" who show everything but intellect, and the demon parasite politicians who demand their hocus pocus to create this designed poverty and desolation.

Those who have ears.

O.E.

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Sent: Thursday, December 29, 2016 6:46 PM
Subject: Re: [africanworldforum] BDC operators’ president ‘worried and disturbed’ as naira plunges to 490/$ | TheCable

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-op erators-president-worried-and- disturbed-as-naira-plunges-to- 490


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[Mobolaji Aluko]

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

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[Mobolaji Aluko]

OE:

This 2007 prescription remains true:

QUOTE

http://www.nigerianmuse.com/20070901133324zg/sections/other-peoples-essays/sam-aluko-the-proposed-new-naira-exchange-rate-and-the-nigerian-economy/

      Pari passu  with a healthier naira should be a reducing rate of interest ,much less than 10% for agricultural and industrial investments. Nigeria will remain uncompetitive  in international markets as long as  the rate of interest remains as high as 20%, compared with  4.5% in USA,  about 5% in Western Europe  and 1.9% in Japan. For small and medium industries in Japan, for instance, the rate of interest is as low as 0.7%.The naira cannot continue to appreciate if Nigeria continues to remain import-dependent even in those goods and services in which it should be an exporter .The monetary policy of the Central Bank should not be essentially devoted to reducing the quantity of naira in circulation, through arbitrarily withdrawing naira from the banks, It should be  devoted more to assisting in the increased productivity of agricultural,industrial and service goods, as the Australian Central Bank had done over the years and as it continues to do .In other words, in the Equation of Exchange of MV = PT, the concentration should not be on  M(quantity of money) and its circulation  but also on T(quantity of goods and services) as they are affected by price. It means that for the naira to continue to appreciate exports must increase considerably and imports must reduce also considerably.

Nigeria’s share in the global output of goods and services must increase, so that by our running lower external deficit, Nigeria will continue to   accumulate larger reserves and continue to adopt more planned economic  policies that will make our economy less vulnerable to external shocks. All these will make the naira exchange rate less volatile  and increase the confidence of domestic and external investors in it and in the economy. 

      Better fiscal, monetary and exchange rate policies will bring down the rate of inflation, even though low inflation rate per se does not  necessarily lead to economic growth. However, with the low external debt profile of Nigeria today ,rapid growth, decreasing rate of inflation and increasing external value of the naira are possible and attainable

What is important in our present stage of development is not to continue to take deleterious dictation   from abroad but to put up development programmes that will be the result of joint efforts of consumers, workers, investors, tax payers, voters and the citizens in general. Our government should ensure that  the  generality  of our people know much more than hitherto on how the economy  and our finances are managed, so that those who are able can make appropriate input and exert control over the activities of government ,including those of the Central Bank. In that case, the type of sudden bombshells from the Central Bank on banks, insurance and on the strategic naira will, in future, be avoided. That is the import of the Directive Principles of State Policy entrenched in our Constitution. Hitherto, the Federal Government and its Central Bank have been under the undue control of the ‘development partners’. They are those that we should hold responsible for the introduction of the proposed strategic naira.

UNQUOTE

And there you have it.

Bolaji Aluko

On Fri, Dec 30, 2016 at 4:44 AM, maxima1757 via AfricanWorldForum <africanw...@googlegroups.com> wrote:

Without production to "mop up" the illusion of "surplus", a mercantilist system will always be an illusion and a failure. Money is only a concept (it is in the eye of the beholder), production and labor are reality.

If you don't produce what you eat, what you shelter under, what you wear, your comfort, and the tools you use for these things (things paper by itself cannot make), you are always going to appear to have too much paper (which is the way money is made these days), you can't do anything with.

The value of money is in what it can buy. If you don't sell anything you make, there will always be too much money (an illusion of wealth). Without products and labor (with the knowledge and skills it brings), money by itself is useless. 

A true venture capitalist looks for products and labor. Money really means nothing to such a person, because the reason they are chasing labor and creativity/products/production is because they have money they don't know what to do with in the first place ("surplus" money).

That is why there is always a value chain, or money by itself is a source of hell. 

The restructuring and re-posturing should always be shifting towards production and labor, not just "controlling" money. 

Already, it is a market of "infinite" demand relative to "infinitesimal" production. The place where money can grow exponentially for at least 50 years when creativity, production and products are appropriately managed. A place of relatively infinite opportunities. In such a place, the oil money is less than chicken change.

The frustration is that Nigeria has all the creative energy it needs to produce all it wants (talk less of needs). The worst criminals are the so-called "intellectuals" who show everything but intellect, and the demon parasite politicians who demand their hocus pocus to create this designed poverty and desolation.

Those who have ears.

O.E.

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[maxim...@yahoo.com]

"What is important in our present stage of development is not to continue to take deleterious dictation   from abroad but to put up development programmes that will be the result of joint efforts of consumers, workers, investors, tax payers, voters and the citizens in general."

The pitch for local production will continue to ring true because it is the only way to live.

The high demand for foreign goods by itself can drive the devaluation of the buying currency. This means that if we address the demand pressure (producing for domestic consumption first) this demand pressure/inflation system can become more manageable.

If the assumption is that the purpose is to continue to "cater to" the money, we lose sight of the fact that the world monetary market is actually a great draw for production at first, then when production cannot meet up with the demand, inflation surges.

The short form of this is that planning with a 160 million people market, the first market to cater to is the internal one. If we use our "surplus naira" to surge for production, the demand for external supply will drop and the devaluation pressure on our currency will drop commensurately. 

In this case, our domestic production needs to "mop up" our import demands first, even before we want to concentrate on export. The advantage of this "mopping up" is that we begin to first learn the economy of scale that exporting to the world market demands. Then we can compete there. 

Most economically successful countries vie on the world market with their "surplus products" and never their strategic produce (raw materials and strategic tools - technology, weapons, strategic intellectual property). That is also partly why we can't seem to get any thing from the western world as soon as we begin to talk about development. We already have more than they have per capita, to create/develop anything we want (talk less of need).

On the other hand, we're driving out (not even exporting - a much more organized enterprise) our most important strategic produce - intellectual property - which we produce significantly and waste. That is why the Mark Zuckerberg ilk is coming recce and shopping. Currently, they (the ones that could get away into exile) bring 31 billion dollars annually into the Nigerian economy to be burnt by the anti-light locusts of darkness we have in power everywhere without exception. And the 31 billion dollars is mostly from just wages. To make 100,000 dollars in wages, you have to bring in at least 5 to 10 million. If this is true, that means this strategic commodity is actually worth  1.5 to 3.0 trillion dollars  (among the big ones in europe) when they are not restricted and restrained to catering to their hosts' economy as they must be managed, or they will dominate even their hosts' intellectual energies too. And those "hosts" know it. We are talking about 3 to 6 times the Nigerian current gdp at 521 billion dollars (world bank 2013). However, within Nigeria, leveraging 1.5 to 3 trillion dollars appropriately (by a factor of 10) with the intellectual resources at home, we are looking at 15 to 30 trillion dollars (in the top five in the world even with a 50% achievement ratio). And oil  has not even figured at all. That is why the Nigerian diaspora wealth will change all that oil money into pennies without even thinking about it. 

In short, if in the next ten years, the only focus we have is just satisfying our domestic (then our contiguous market - sub-saharan Africa's 1 billion people with no production at the moment) market with domestic production, we can become a roaring tiger on the world stage, whose roar can create earthquakes/tsunamis/hurricanes/cyclones/tornadoes planet-wide, in less than 20 years.

The frustration is that we have everything we need to do it, including what to do and how to do it. In nature, the diamond model that begins with carbon, then polymerizes with a lattice structure, is an example we can follow.

And we are being distracted with these abrahamic religions and ethnic schisms (anti-sense, disintegrating energy waves) by the locust parasite politicians and their stargazing hocus pocus pseudo-intellectual sycophants.

Those who have ears ...

O.E.

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From: Mobolaji Aluko <alu...@gmail.com>

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Sent: Thursday, December 29, 2016 7:54 PM

Subject: Re: [africanworldforum] BDC operators’ president ‘worried and disturbed’ as naira plunges to 490/$ | TheCable

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[Joe Attueyi]

O.E

The fastest way to curb the demand for foreign goods is to make them too expensive. And the fastest way to make them expensive is to devalue the Naira. 

When you artificially make your Naira 'healthy' at N200/$ you are SUBSIDIZING foreign goods.  

At N400/$ this summer many folks that use to spend summer holidays abroad spent it in Calabar! Consumption of champagne has plummeted 

At N600/ $, export of cassava, tantalite , charcoal, solid minerals , furniture products will blossom. 

The deleterious effects of the devaluation on LOCAL PRODUCERS can be addressed by fiscal policies--eliminate VAT and import duty on raw materials and machinery. Give tax breaks as incentives to manufacturers.  It is called SUBSIDING LOCAL PRODUCTION

These things are not rocket science. It is the Nigerian middle class with their entitlement mentality--- go abroad for holidays, send their children abroad for education, buy foreign shoes and clothes -- whose lifestyle is majorly hit by devaluation. Not iya fisi 

Joe

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[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

Thanks 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"?

Joe

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[Joe Attueyi]

Bro John

Nigeria has about $26 billion in foreign reserves. We can make the Naira equal to the dollar within a very short time if the CBN starts selling a billion dollars from our reserves every two weeks. 

This policy will restore Naira to the height of its previous glory. No?

Joe

Sent from my iPhone

[maxim...@yahoo.com]

"The deleterious effects of the devaluation on LOCAL PRODUCERS can be addressed by fiscal policies--eliminate VAT and import duty on raw materials and machinery. Give tax breaks as incentives to manufacturers.  It is called SUBSIDING LOCAL PRODUCTION"

Fiscal policies alone have no teeth without production or production capacity, and supporting infrastructure already in place.

No one will sell you their best steel and cement to make your dams (yet the most durable and scale-able sources of constant power, the central element of ALL economies,) when their production level is for them alone. That is why you're still looking for steel when all you have is iron ore and your metallurgy graduates are going to look for work abroad where you export your iron ore, bauxite, e.t.c. That is why you can't make machines or machine products, including turbines, to produce power.

No one will sell you refineries because they need the same for themselves. They will gladly sell you their products and they will not sell you refineries, while your petroleum and petroleum engineering graduates go to them for work. 

They will not sell you their intellectual property either. That is why you send your money to train in their universities to develop your own intellectual property capacity. With severe limitations.

No one will sell you the geese that lay their golden eggs. That is what you don't need rocket science to figure out.

Your "middle class" or potential middle class are shipping out with your raw materials to others who will process both and send you expensive products that you can only print (if they give you their manufactured printers) money to buy.

Manufacturers cannot benefit from tax breaks when there no manufacturers to do any manufacturing. Manufacturing is predicated on more than just tax breaks, it also needs infrastructure, and enabling process (both of which you have to create on your own), as two of the enabling environments, to manufacture.

That is why the Japanese, Chinese, Europeans, e.t.c. are not exporting iron ore, petroleum or buying machinery from others. They buy your raw materials, make their own machinery, and sell the surplus for their own foreign reserves, which they use to acquire your raw materials and produce more luxury items to sell to your locust, demon parasite looters who call themselves leaders, and their gargoyle thoughtless (apes obey) pseudo-intellectuals with Masters and PhDs, who have no ability to think at all.

To be competitive at home, the easiest product market to penetrate is the one that already has a hunger for those products. Produce for their tastes while you pivot towards increasing availability elsewhere. 

You cannot replace something with nothing, you are only preparing yourself for the anger of the people (the anger of God). A hungry people cannot think. You only generate hopelessness and destroy creativity.

That is why your so-called middle class or potential middle class is leaving while they can, in their youth. There are many engineers, technologists and others, made in Nigeria, that are taxi drivers and nursing assistants in other countries. 

That is why there is the situation of too many mercantilists without any production minded people in the corridors of power that is driving artificial poverty, with mushrooming corruption.

That is what your fiscal policies have produced so far after 40 years of that illusion of money driving every thing and nothing driving money. 

In the early 70s, the Gowon Government and others wanted to strengthen our capacity by generating intellectual property muscle to utilize the developing raw material, agricultural and other production capacity for Nigeria. The mercantilist shagari, babangida, falae and kalu came in the 80s and turned it upside down with their thoughtless, quick fix, sap, and the same fiscal policies that have repeatedly failed in the face of no production, and the degradation of infrastructure.

Buhari wanted to feed Nigerians in the early 80s with people going to farm. Your young university graduates went there, and there were no agric support services to go with them. babangida came and it all collapsed literally overnight to be replaced by 1988 with young armed robbers.

"Quick" fixes have never provided production capacity or built infrastructure where there was none, and the population is mushrooming. They are only indications of lack of planning or thinking, reacting rather than responding. 

Only true intellectual and deliberative engagement will work.

Those who have ears ...

O.E.

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From: 'Joe Attueyi' via AfricanWorldForum <africanw...@googlegroups.com>
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[maxim...@yahoo.com]

The "excess naira" is actually stolen money that should have gone into infrastructure and manufacturing capacity development.

The way to make that useful again is to turn it into venture/production development capital. If you don't invest it in building roads, dams and factories, you lose it to currency change or devaluation.

That should be Henry Boyo's solution.

Those who have ears ...

O.E.

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From: 'Joe Attueyi' via OkonkwoNetworks <okonkwo...@googlegroups.com>

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Sent: Friday, December 30, 2016 12:40 AM

Subject: Re: [africanworldforum] BDC operators’ president ‘worried and disturbed’ as naira plunges to 490/$ | TheCable

On Thu, Dec 29, 2016 at 5:57 PM, 'Joe Attueyi' via AfricanWorldForum <africanworldforum@googlegroup s.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-op erators-president-worried-and- disturbed-as-naira-plunges-to- 490


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[Mobolaji Aluko]

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

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

http://www.afbis.com/analysis/black_market.htm

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-1999   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    1.48     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     5500

Iran            Rial      0.6    1.0    1.35     1.4     1.8       3

Iraq           Dinar      0.06   0.06   0.25     0.30    3.75    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    8.25     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    3.75     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.  Official exchange

                       2.  Parallel (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   14548

                       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  Gowon/Mohammed

     1976              0.6265                     1.1317 Mohammed/Obasanjo

     1977              0.6466                     1.1671       Obasanjo

     1978              0.6060                     1.2238           "

     1979              0.5957                     1.2628  Obasanjo/Shagari

     1980              0.5464                     1.2647       Shagari

                       0.9   PMER

     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  Babangida/Abacha

                      56.8    PMER

     1994             21.8861    A                33.4252       Abacha

                      71.7    PMER

     1995             21.8861                    34.7111          "

                      78.3   PMER

                      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  Abacha/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   PMER                            

 

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/200106080283.html

Naira Rides Higher, Rates Dip in House Hearings

The Guardian (Lagos) June 8, 2001

 

http://allafrica.com/stories/200106070204.html

Why the Naira is Falling, By Sanusi

The Guardian (Lagos) June 7, 2001

 

http://allafrica.com/stories/200105250387.html

President Orders Fresh Measures to Shore Up Naira

The Guardian (Lagos) May 25, 2001

 

http://allafrica.com/stories/200105180229.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/200105170037.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/200105160346.html

Central Bank, Customs Department Now to Brief Obasanjo On Economy

This Day (Lagos) May 16, 2001

 

http://allafrica.com/stories/200105150265.html

Currency Black-Market Batters Zim Dollar

African Eye News Service (Nelspruit)

May 15, 2001

 

http://allafrica.com/stories/200105140739.html

Central Bank Blamed Falling Naira

Panafrican News Agency  May 14, 2001

 

http://allafrica.com/stories/200105140392.html

Naira Appreciates At Black Market

This Day (Lagos) May 14, 2001

 

http://allafrica.com/stories/200105110049.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

mal...@scs.howard.edu

 

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[Wilson Iguade]

Quote

These things are not rocket science. It is the Nigerian middle class with their entitlement mentality--- go abroad for holidays, send their children abroad for education, buy foreign shoes and clothes -- whose lifestyle is majorly hit by devaluation. Not iya fisi 

Joe

Unquote 

Wow! Entitlement Mentality! Really, you must be the poster child of this class suffering from such "entitlement mentality".

Above confirms that you are a natural born hypocrite given your recent JACK OFF in the fora about your stay in NY and your son being educated overseas. 

Ehn! And, this dude is a pastor? Lord have mercy. 

Iguade

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[Wilson Iguade]

Quote

Bro John

Nigeria has about $26 billion in foreign reserves. We can make the Naira equal to the dollar within a very short time if the CBN starts selling a billion dollars from our reserves every two weeks. 

Unquote

Na wire, your solution is always sell this sell that and at some point there will be nothing to sell. I rarely read solution from you, so called "best and brightest" on ideas to WORK HARD in creating and expanding PRODUCTION. 

It is sell, sell, sell for your type! I tire. Yes, Nigeria has 26 billions in foreign reserves, and some country has 4X (4 times that) and your solution is to sell off what we have not INCREASE our foreign reserves, and you see yourself as a leader to be followed! Tufiakwa!!!

Ignorance is indeed bliss for your type. Iguade

Sent from my iPhone

[Joe Attueyi]

Prof Aluko

Your points 1-4 I will wholeheartedly support

Your point 5 does not sound practical. Every economic activity is a response to a stimulus ( even bootlegging )

1. You can either eliminate the stimulus causing the response and it goes away ( or becomes minimal)---or spend resources enforcing (or more appropriately driving underground) that response. 

2. A market determined official exchange rate will make the official rate NEARLY EQUAL to the parallel rate--thereby eliminating your concern. The two rates will never be the same because the parallel rate offers small buyers and sellers ease of transaction, less paper work etc and therefore sellers get better rates and buyers pay a small premium

5. Parallel exchange rates exist even in the U.K.  Along Oxford Street / Regent Street are many Indian / Lebanese 'mallams ' buying and selling dollars / Euros.  Their rates are different from Travelex / bank rates on the same high street. They cater to tourists with $ or Euros they need to change to pounds. Or Brits travelling to Europe or US and want $ to carry as cash. The price differential is not as high as you see in Nigeria because the official exchange rate of the pound is not been fixed by the Bank of England --but it exists because they offer ease of transaction to small buyers and sellers

Joe

Sent from my iPhone

On 30 Dec 2016, at 13:39, Mobolaji Aluko <alu...@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>

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[Joe Attueyi]

Wilson

If you were not acting dumb you would realise sarcasm when you read it. 

I have argued here severally with Prof John Ebohon that the right FX policy is a market determined exchange rate. Common sense will therefore tell any reasonable person I was being sarcastic in proposing Naira at 1:1 to the dollar. And if you used your brain you would have realised the inherent question in my post:

Selling $1 billion every 2 weeks to 'strengthen ' the Naira will eliminate the foreign reserves in 52 weeks. Then what?

You need to grow up and stop being obnoxious 

Joe

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[Wilson Iguade]

O. E.

I can bet you that yours below is NOT understood by many if not all participating in this thread. Bottomline: CREATE JOBS, jobs, jobs. 

Fiscal policy is what the government intends to spend mostly on salaries and entitlements, and it is NOT a direct "investment" in the means of PRODUCTIONS. 

Yes, fiscal policies by creating good work environments (bribe free) will enable growing the economy. But, fiscal policy is not the panacea for driving the economy as "some" have ignorantly suggested. Govt is not even meeting its most basic task - pay salary on time, and yet some THINK fiscal policy is the driver of production. Lord have mercy! 

Iguade

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[Mobolaji Aluko]

Joe Attueyi:

We are getting somewhere now....agreeing on four out of five suggestions is not bad.

But we are back to your laissez-faire orthodox economics of supply and demand theory to fix the exchange rate of the Naira, which I object to.

Look at this universal mass balance:

                 Accumulation within system  = (Input - Output) to/from the system   + (Generation - Consumption) within the system

If you cannot control Input into the system, you can at least minimize Output and Consumption, and maximize Generation.  We cannot allow all kinds of Consumption and Capital flight (Output), ignore Generation, and be begging for FDI and increase in Oil price all the time (Input increase).  Let us do what is within our power.

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[John Ebohon]

My brother Joe,

 

I would have thought that the size of foreign reserves impacts on the exchange rates for a currency?

OJ

[John Ebohon]

My brother Wilson,

 

That is fine.

 

My regards,

OJ

 

From: okonkwo...@googlegroups.com [mailto:okonkwo...@googlegroups.com] On Behalf Of Wilson Iguade
Sent: 30 December 2016 02:23
To: naija...@googlegroups.com
Cc: G.Dada <gd...@aol.com>; Esan Community <Esan_Co...@yahoogroups.com>; naijap...@yahoogroups.com; NIgerianW...@yahoogroups.com; TalkN...@yahoogroups.com; Raay...@yahoogroups.com; Omo...@yahoogroups.com; okonkwo...@googlegroups.com; YanA...@yahoogroups.com; NaijaO...@yahoogroups.com; africanw...@googlegroups.com; Niger...@yahoogroups.com
Subject: Re: BDC operators’ president ‘worried and disturbed’ as naira plunges to 490/$ | TheCable

 

OJ

 

You make think that Mr. Dada is correct, based on your understanding of "... I [Mr.Dada] don't know of a country in the world that allows market to determine exchange rate not even USA."

OJ, yours below, as I understand it is a description of a "regulated market". As you said "every government sets a threshold that their currency will not fall, and are prepared to intervene,".

Again, this is a REGULATED Market, maybe my choice of words are confusing to you, since am in the USA and not in England like you. Hehehehe!

My point, to avoid unnecessary waste of time, I do not understand yours to mean the same as that communicated by Mr. Dada. So, he cannot be correct to me, given my understanding of yours, and my lack of understanding of his, thus my question to him. 

I know Mr. Dada very well, frankly better than I know you, given we (Dada and I) served together at NIDOA's Board, even though I was there for one term, while Mr. Dada served multiple terms.

So am clear, I know and have spoken to Brother OJ many times on the phone. I worked with Mr. Dada for almost 2 years - daily, weekly, etc. 

So, I look forward to what he has to say. Thanks for your two cents. Iguade

 

Sent from my iPhone

On Dec 29, 2016, at 7:44 PM, John Ebohon <ebo...@dmu.ac.uk> wrote:

My brother Wilson,

 

Mr Dada is correct, every government sets a threshold that their currency will not fall, and are prepared to intervene, hence what is known as dirty float:

 

FEDPOINT

U.S. Foreign Exchange Intervention

?  The U.S. monetary authorities occasionally intervene in the foreign exchange (FX) market to counter disorderly market conditions.

?  The Treasury, in consultation with the Federal Reserve System, has responsibility for setting U.S. exchange rate policy, while the Federal Reserve Bank New York is responsible for executing FX intervention.

?  U.S. FX intervention has become less frequent in recent years.

[Mobolaji Aluko]

Olayinka Agbetuyi:

Season's greetings...and thanks for your thoughts!

By the way, I wrote below back in 2001 

   (MID-WEEK ESSAY: Defending The Naira, Nigeria's Currency - Some Thoughts by Mobolaji E. Aluko, PhD Burtonsville, MD,          USA Wednesday, April 25, 2001)  https://groups.yahoo.com/neo/groups/AlukoArchives/conversations/topics/48

and I continue to abide by it, fifteen years later....

And there you have it.

Bolaji Aluko

https://groups.yahoo.com/neo/groups/AlukoArchives/conversations/topics/48

--------------------------------------------------------------------

MID-WEEK ESSAY: Defending The Naira, Nigeria's Currency - Some Thoughts

by

Mobolaji E. Aluko, PhD
Burtonsville, MD, USA

Wednesday, April 25, 2001

--------------------------------------------------------------------

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

-----
....some materials deleted.....

---------------------------------------------------------------

On Sat, Dec 31, 2016 at 2:26 AM, Olayinka Agbetuyi <yagb...@hotmail.com> wrote:

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 <alu...@gmail.com>

Date: 31/12/2016 00:27 (GMT+00:00)

To: USAAfrica Dialogue <usaafricadialogue@googlegroups.com>

Cc: rot...@yahoo.com, Ishola Williams <isholaw...@gmail.com>, vincent...@msn.com, "olaka...@aol.com" <OlaKa...@aol.com>, Agbor Ike <ikea...@yahoo.com>, Mgbajala Eziokwu <Niger...@yahoogroups.com>, ebo...@dmu.ac.uk, "nebuka...@aol.com" <Nebuka...@aol.com>, Michael Adeniyi <mgad...@aol.com>, Abba <abba...@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;

    http://nigerianmuse.com/nigeriawatch/officialfraud/?u=Balogun_EFCC_charges_against_him.htm

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...@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?

Ayo

I invite you to follow me on Twitter @naijama

On 30 Dec 2016, at 5:24 PM, Joshua Gogo <jg...@connect.carleton.ca> wrote:

Prof,

It would be quite interesting and enriching to read a full articulation of your five-point proposition

below. 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 activity

to 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 regards

Joshua

I agree wi

On Fri, Dec 30, 2016 at 6:39 AM, Mobolaji Aluko <alu...@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>

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[Edward Erapi]

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[Mobolaji Aluko]

My People:

I continue to be with Henry Boyo on this issue....on the short run, our foreign exchange problems cannot be solved by orthodox supply and demand economics....

Time is the enemy here.....

Bolaji Aluko

PUNCH OPINION

Economy: The floodgates have been breached

January 9, 2017

les...@lesleba.com 08052201997

The naira exchange rate was officially devalued by about 50 per cent last year, in deference to the presumed intelligent advice of financial experts who insisted that the much higher black market rate was a true reflection of the real value of the currency.  Regrettably, the distortional and oppressive impact of devaluation on our already ailing economy and beleaguered citizens was clearly not well-thought out before adoption. Consequently, we may have been stampeded to sacrifice a pound of flesh for no tangible benefit.

Alarmingly, despite the horrendous social agony instigated by the June 2016 devaluation, the experts in whom we reposed so much faith in remain unperturbed and have suggested that further devaluation will again become necessary, because last year’s devaluation was apparently unduly delayed.

Indeed, if the naira is further devalued to match the present almost N500=$1 parallel market rate, the gift of prophecy will be unnecessary to advise that the parallel market rate will approach or even exceed N1000=U$1 by December 2017. The article titled, “Economy: The floodgates have been breached”, was first published on this page on June 20, 2016; a summary of this article follows hereafter. Please read on.

“The Central Bank of Nigeria’s decision to float the naira in response to the dollar demand and supply, in such austere times, will probably be ultimately remembered as another policy shift which breached the gates and unleashed devastating floods that swept away any flickering hope of economic diversification or credible inclusive growth. The serial devaluation inspired by the IMF’s Structural Adjustment Programme in 1986, was another such event that disenabled our economy, traumatised our people and challenged our traditional value system in many ways.

Conversely, the IMF and other reputable international and local experts had actually encouraged the belief that Nigeria’s economy will be enriched if we embraced SAP! Regrettably, 30 years later, the same IMF and its cohorts have again commended our government for swallowing the bitter pill of 50 per cent naira devaluation, which, as usual, they claim to be the strategic path to economic recovery.

Ironically, President Muhammadu Buhari who stoutly resisted devaluation between 1983 and 1985, and later also made naira exchange rate parity, a campaign promise in 2015, has unexpectedly capitulated to the odious demand for more naira devaluation, despite the contrary historical evidence of the unfulfilled expectations of a benevolent impact of this policy. President Buhari’s volte face is intriguing, particularly after his public admission that his economic experts always talked above his head and never truly convinced him that devaluation would favour our economy.

Invariably, as the devastating impact of the present 50 per cent naira devaluation paralyses industries and businesses, more Nigerian youths will still be propelled to join the desert caravan to North Africa en route Europe, choralled in suicidal bath tubs to cross the Mediterranean Sea in search of job opportunities, which offer reasonable living wages.

Indeed, the only immediate apparent advantage of the present devaluation is an increase in government revenue, from the extra N100 that will be printed for every dollar earned from crude oil, notwithstanding the inflationary impact of such monetary expansion in a market where surplus naira is already an existing challenge to the CBN’S effort to battle inflation. Nonetheless, the expected revenue shortfall from lower crude prices should be significantly compensated by the 50 per cent increase in naira allocations for each dollar shared. In effect, this cash bounty should significantly reduce or possibly eliminate the over N2tn 2016 budget deficit. However, the subsequent revenue excess created by devaluation, may still be shared in addition to the proceeds from previously budgeted loans to fund the deficit, without enacting a fresh supplementary Appropriation Bill to account for this expenditure.

Incidentally, in order to restrain the inflation rate, fuelled by the increased expenditure, the CBN may ironically be propelled to increase its debt burden with further borrowing to sterilise part of the naira surplus. Ultimately, the commercial banks, specifically, will earn close to N500bn annually from the high interest paid by the CBN to remove such ‘troublesome’ excess funds from the market.

Indeed, such fiscal rascality has prevailed since 1999, when revenue expectations were usually deliberately understated, with inappropriately low crude oil price benchmarks, to contrive fake budget deficits, which were subsequently approved and processed as public debt, despite the suspiciously high double digit interest rates, which were clearly inappropriate for such sovereign loans. Indeed, if more realistic crude benchmarks had predicated the same budgets, such oppressive, additional government loans would have been happily avoided; conversely, the culture of fiscal irresponsibility is further magnified with the increased allocations from the excess revenue consolidated from the higher than the budgeted benchmark for crude oil prices.

Hereafter, we will assess the direct impact of the present 50 per cent naira devaluation on critical factors such as inflation, productivity, employment and public confidence in holding the naira as a store of value.

Inexplicably, the additional revenue from naira devaluation will ultimately provide little succour for the economy, as it will further fuel inflation and reduce the purchasing power of all incomes and consumer demand. Furthermore, since local industries are still also largely dependent on raw material imports, all import bills will invariably also rise by about 50 per cent if N300=$1. Additionally, the industrial sector’s already disenabling production cost burden will unfortunately, become compounded with another 50 per cent price increase for the diesel and gas required to power their plants. Worse still, with inflation approaching 20 per cent and increasing production cost, the bloated working capital, consequently required to sustain businesses will unfortunately also attract well over 20 per cent rate of interest to ultimately make Nigeria’s industrial output less competitive against import substitutes.

Labour agitation for wage increase will also become strident to further threaten already ailing businesses. The predictable outcome will be serial retrenchments and business closures, with serious implications for our economic and social security, while faith-based organisations may again become beneficiaries of increasingly vacant factory/warehouse spaces. Nonetheless, retirement will also become a nightmare for wage earners whose pension contributions will depreciate by more than 50 per cent. Sadly, pension earners may become near destitute if inflation exceeds the current 16 per cent, especially if petrol also sells for N300/litre without subsidy and electricity tariff inevitably also spikes by over 50 per cent, because of the magnitude of devaluation.

Furthermore, investment values in the stock market will depreciate from over $45bn when $1 exchanges below N200 to less than $25bn with N300=$1 exchange rate. Indeed, the value of our homes and all naira denominated assets, including the cash in your pocket and savings accounts have all now lost up to 50 per cent of the previous dollar value, while the oppressive burden of paying outstanding import bills, and other dollar denominated loans may send such debtors to early graves. Frankly speaking, our collective net worth has now been cut in half, with just a stroke of the pen, but it is unlikely that the speculated inflow of foreign exchange, from portfolio investors, will ever approach $20bn as speculated before this devaluation.

However, since the CBN’s devaluation policy is fixated on dollar demand and supply, and obviously denies the pivotal role of systemic naira surplus, as the prime cause of devaluation, further naira devaluation will become inevitable, and the economy will sadly unravel. Invariably, if the surplus naira syndrome remains untamed, a naira exchange rate beyond N500-$1 will be possible this year. Incidentally, the N1, 000 currency note is now valued just over $3 in the official market. Surely, the naira will never command public confidence as a safe store of value and will continue to slide, so long as the CBN continues to auction the dollar for higher naira bids, in a market already plagued with excess naira supply.”

And there you have it.

Bolaji Aluko

On Fri, Dec 30, 2016 at 7:31 PM, Ayo Obe <ayo.m...@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?

Ayo

I invite you to follow me on Twitter @naijama

On 30 Dec 2016, at 5:24 PM, Joshua Gogo <jg...@connect.carleton.ca> wrote:

Prof,

It would be quite interesting and enriching to read a full articulation of your five-point proposition

below. 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 activity

to 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 regards

Joshua

I agree wi

On Fri, Dec 30, 2016 at 6:39 AM, Mobolaji Aluko <alu...@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>

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[Afis Deinde]

"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."........Alagba Olayinka Agbetuyi.

Afis comment: Just an observation: Is the statement above correct?

Please explain.

Thanks!

I am not interested in Naija palava o.
I am just interested to know the truth on that statement.

Shikena 

Afis

“Just as a solid rock is not shaken by the storm, even so the wise are not affected by praise or blame.” — Dhamapada, verse 81.

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