The falling Naira

[gogannaka]

Are you aware that the Naira is depreciating fastly against the Dollar?
Just a month back it was N117 to the Dollar but now it is around N130.

Conspiracy theorists have it that the Govt is behind it because if the Naira is low against the Dollar it means when we sell our Crude at a low price we actually get more Naira.

Soludo on the other hand says all is well and it s the handiwork of some speculators/opportunists whom he promise to make incur heavy losses.

[gogannaka]

Phew----the Dollar is now 145.

It hasn't been this expensive since the first OBJ days.

[IBB]

Are you aware that the Naira is depreciating fastly against the Dollar?
Just a month back it was N117 to the Dollar but now it is around N130.

Conspiracy theorists have it that the Govt is behind it because if the Naira is low against the Dollar it means when we sell our Crude at a low price we actually get more Naira.

Soludo on the other hand says all is well and it s the handiwork of some speculators/opportunists whom he promise to make incur heavy losses.

I see in that case we cant continue selling crude in dollar. I dont understand this O.P.E.C sef

[HUSNAA]

This is inscrutable. The dollar is falling against every currency worth its salt, and it is appreciating in Nigeria? What for? These ppl like to keep the Nigerian poor under a yoke for ever? At least if it depreciates, somethings become cheaper for us. How does that work out selling crude at a lower price? How can we get more Naira that way? What possible good would it do us to get more naira against the dollar? after all if we have to buy goods from outside we'd still use the equivalent of what we got for the dollar to buy what ever. So where is the gain? Additionally, America is looking for ways to cut down on their dependence for foreign crude. Secondly, the three auto giants are in trouble they just had a setback in their demands for the 25 to 35 billion they are looking to gt from the US govt in order to bail them out of trouble. So if they collapse over 250,000 ppl will be jobless in the US, not talking about the auxilliary industries that will be affected who will have to cut down on their staff or fold up altogether. So from that scenario, Nigeria will be severely affected and even if we sell our crude at 5 dollars per barrel, there may not be a market for it. At any rate if these three auto industries are able to get back on their feet, they will start to seriously concentrate on hybrids and super energy efficient automobiles which means less crude sales for us.
We should wake up and turn our attention back to the land farming and exploiting our other natural resources. Do we have any coltan in Nigeria? Its the hottest selling mineral in the world at the moment. Its also very controversial.

[Dave_McEwan_Hill]

The British pound is plummeting against the dollar also and is now worth the same as the Euro. Yet the dollar is dropping also. This has nothing to do with any attempt to put people down. It's to do with the world's money markets and their opinion on each country's management of its economy. Look close to home for the reasons if the value of your currency is dropping.
The falling pound is due to the fact that the UK is virtually bankrupt and in deep debt. 
On the subject of American motor industry - the collapse of this has come not a minute too soon. They manufacture crap. Their cars are big and flashy but mechanically very poor and in technical terms not in the same league as Japanese and most European car manufacture

[Muhsin]

One would have even taken it you were the one who made one report on BBC's World Today early in the morning, Dave. Thats exactly what they said in the report. I really wonder.

Why England have not taken Euro as its currency since?

Soludo, Soludo, Soludo...I quite don't like the man. He is an egoist, I think. He always sees himself perfect and no one else but him. And wallahi no wonder if he's really behind all this.

[Dan-Borno]

 ???  ??? i tried explaining this dollar-naira
relationship to a friend but ended up confusing
me by asking questions i dont know from where
to start explaining things for him.  this is the
most view of the average Nigerian, he doesnt
care what is happening at the international
markets as he doesnt differentiate if nigeria is
at loss or profit, for him, its all the same.

may God bail us out.

[HUSNAA]

The British pound is plummeting against the dollar also and is now worth the same as the Euro. Yet the dollar is dropping also. This has nothing to do with any attempt to put people down. It's to do with the world's money markets and their opinion on each country's management of its economy. Look close to home for the reasons if the value of your currency is dropping.
The falling pound is due to the fact that the UK is virtually bankrupt and in deep debt. 
On the subject of American motor industry - the collapse of this has come not a minute too soon. They manufacture crap. Their cars are big and flashy but mechanically very poor and in technical terms not in the same league as Japanese and most European car manufacture

I am talking about the appreciation of the dollar against the naira, despite the economic downturn. The reality of it is that the naira should appreciate  to take advantage of the falling dollar. When I talk of keeping ppl under a yoke, I meant nigerians keeping nigerians under a yoke not westerners for some covert reasons so dont get me wrong Dave.
The auto industries make crap. well and fine. at least it keeps our crude in the market. We use Japanese cars anyway so whether they make crap or good cars is really not our concern. Just let them keep making them.

[Dave_McEwan_Hill]

Cheers, Husnaa. I take your point.

[gogannaka]

Husnaa here is the controversy:
A barrel of crude sells for $48. At the N117 rate it means that we would earn N5616 per barrel.
However if the dollar is now N145 then it implies a barrel would cost N6960.
This means that the federal Government actually has more Naira to use internally.

Logically it sounds good. The main thing is to control inflation by mopping out excess liquidity.

[HUSNAA]

Husnaa here is the controversy:
A barrel of crude sells for $48. At the N117 rate it means that we would earn N5616 per barrel.
However if the dollar is now N145 then it implies a barrel would cost N6960.
This means that the federal Government actually has more Naira to use internally.

Logically it sounds good. The main thing is to control inflation by mopping out excess liquidity.

GGNK, thats all fine and good if we were manufacturing and exporting stuff. But as we are not, we will use the same rate to exchange the Naira for the dollar and whats more import some other things. So where's the gain?

[Muhsin]

Naira to stabilise soon –Soludo
Moves to protect banks against foreign exchange risk
By SEUN ADESIDA
Thursday, December 18, 2008

The Central Bank of Nigeria (CBN) has said that the depreciation of the Naira against the dollar is necessary to protect the country's foreign reserves, the apex bank's Governor, Prof. Chukwuma Soludo, disclosed this while addressing the Senate today in Abuja. He also hinted that the naira will soon stabilize.
According to the governor, "as of December. 12, Nigeria had $57 billion in reserves and it would be a tragedy to fritter it away. The naira has tumbled 15 per cent against the dollar since November 26 following a drop in the price of oil, which accounts for 90 per cent of Nigeria's exports, and as investors pulled funds out of the country because of the global credit crunch. The central bank is committed to a stable, not a fixed exchange rate."

Facing falling oil revenue, Soludo said, "the bank opted to have a quick and sharp response and stabilize afterwards. Now we've sucked up much of the naira, the rate will start to stabilize. The weaker currency was needed to help local industry compete with foreign competitors."
Speaking further, he said, "if the exchange rate is not adjusted, we have to import literally everything, and that will kill our industry."

As a matter of fact, Soludo said: "The naira has begun to stabilize in the foreign exchange market, after the government met recent strong demand for dollars from importers, banks and global investors. Dollar demand in the interbank foreign exchange market has declined sharply to around $72 million on Tuesday from over a $1 billion last week. We have met the demand in the market. As of today, the rate has just appreciated because there is a decline in demand."

Retail banks, portfolio managers, importers and businesses are behind the big shift out of naira and into US. dollars, due partly to concerns over how falling oil prices will impact the world's eighth largest oil exporter. But the Central Bank initially did not make enough dollars available at its bi-weekly auction to meet this demand, virtually shutting down the interbank foreign exchange market and prompting a sharp depreciation in the naira.

The naira, broadly stable against the dollar for months, tumbled to around 135.50 last Thursday from 117 in the past month. "We needed to have a quick, sharp adjustment and then stabilize the rate," Soludo said.
Dealers said they resumed trading in the interbank forex market later on Tuesday following the increased intervention from the Central Bank and that they expect the naira to rise slightly.

Soludo refused to specify a target for the naira/dollar exchange rate, saying the appropriate level depends on supply and demand fundamentals. "The Central Bank of Nigeria is committed to a stable exchange rate, but not a fixed exchange rate. We want a rate that is market determined," Soludo said.
Economists say it is in Nigeria's interests for the local currency to fall as sub-Saharan Africa's second biggest economy tries to mitigate the effects of lower global demand for crude, which is eating into its foreign earnings. A weaker naira gives the government greater spending power in naira terms for every dollar earned, helping the OPEC member to manage a widening deficit.

In a related development, the apex bank has issued a statement to the effect that after a careful review of the developments in the foreign exchange market, it approved the reduction of the foreign exchange Net Open Position (NOP) of all banks from 20 per cent to 10per cent of shareholders funds with effect from December 15, 2008. All Authorized Dealers are enjoined to ensure strict compliance with the advised limit in their daily foreign exchange transactions, failing which appropriate sanction shall apply.

The Net Open Position is the most commonly used measure of foreign exchange exposure of any financial institution. Under Basel methodology, a bank's NOP is calculated as the sum of the following items: the Net Spot Position all assets less all liability items, including accrued interest, which is denominated in the currency in question), the Net Forward Position, Guarantees that are certain to be called and are likely to be irrecoverable, Net Future Income or Expenses not yet accrued but already fully hedged, any other item representing a profit or losses on loans to enterprises.


http://www.sunnewsonline.com/webpages/news/national/2008/dec/18/national-18-12-2008-14.htm

[gogannaka]

So it isn't a conspiracy anymore.
Why did Soludo at first denied manipulating the price of the Dollar?
This kind of attitude with Nigerian officials is so disheartening. They never tell the truth unless if their job is threatened. It has come to a stage where anything the government denies has actually happened.