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Rational Perspectives

To borrow or not to borrow

President Muhammadu Buhari

President Muhammed Buhari’s is proposing to spend over N6trillion in the 2016 Appropriation bill, even though government ‘reasonably’ expects to earn about N3.8trillion as revenue. Indeed, according to the budget proposals, N984bn will be borrowed in Naira from personal and corporate holders of surplus cash to fund the shortfall, while $4.5b (N900bn) will also be borrowed from the international market at the current exchange rate of about N200= $1 and prevailing commercial interest rates will apply.

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naira sign

Sensible path to stronger Naira, economic prosperity

Hereafter, we will discuss the related ADVERSE consequences of the Current Payments Model (CPM) against the positive attributes of the Advocated Payments Model (APM) for the allocation, for example, of $1bn export revenue in the following explanatory steps. Thus, in CPM: -1 The CBN unilaterally determines the naira exchange rate and thereafter unconstitutionally captures the distributable $1bn revenue and prints/creates in replacement (read as monetizes) N200bn as statutory allocations, which are then domiciled in the bank accounts of beneficiaries.

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CBN Governor, Mr Godwin Emefiele

Can CBN save the Naira and Nigerians?

Historically, the CBN has compulsively devalued the Naira to bridge increasingly widening gaps between official and parallel exchange rates, even when these gaps were caused by the obtusely contrived monopolistic market dynamics of demand and supply. It would undoubtedly create much discomfort for CBN Management if unrestrained dollar demand further pushes parallel market rates well above N300=$1; in such event, CBN may again unwittingly, jerk up the official rate above N300 and remove the embedded ‘subsidy’ from the official Naira exchange rate so as to raise the dollar price and discourage demand and hopefully also minimise the inherent rent seeking market opportunities.

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fuel-pump

Wobbling, fumbling with fuel prices

The PPPRA Executive Secretary, Farouk Ahmed reportedly announced, at a press briefing on December 29th 2015 in Abuja, that a revised template for fuel pricing had been approved by the Agency; the announcement was evidently the formal manifestation of the ‘modulated pricing’ model earlier canvassed by Ibe Kachikwu, the NNPC CEO and current Minister of State for Petroleum. Thus, with the application of the new template, petrol price will be reduced from N87 to N86 in NNPC filling stations, while other marketers would sell at a pump price of N86.50/litre.

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President Muhammadu Buhari receiving IMF Managing Director, Christine Lagarde in Abuja.

Is lagarde a fairy godmother or economic imperialist?

Christine Lagarde, the Managing Director of IMF, held strategic meetings last week with President Muhammad Buhari and some key members of Parliament and the federal executive. Godwin Emefiele the CBN Governor, also joined in the consultations with the IMF boss, who quickly dispelled the trending perception that her visit was programmed to initiate discussions on an imminent IMF Loan.

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Buhari presents N6.08trn 2016 budget to NASS

An unusual austerity budget for 2016

Ironically, despite his well attested frugal administrative style, President Buhari has unexpectedly, pumped up recurrent budget from N3.97Tn in 2015 to N4.28Tn in 2016. The downside of this expansion is that the additional borrowing will certainly increase government activity in the capital market, so that government will invariably continue to outbid and crowd out the real sector from access to cheap loans.

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buhari-Naira

Can Buhari make Naira equal to Dollar?

Buhari made this statement during the South East Presidential campaign rally of his party at the Dan Anyiam stadium in Owerri on Monday, 23rd March 2015. The APC candidate apparently lamented that “it is sad that the value of the Naira has dropped to more than N230 to $1” and he therefore cautioned that “this does not speak well for the Nation’s economy”. Furthermore, Buhari also assured his vibrant, traditionally mercantilist audience, that ‘corruption would be tackled headlong” if he became President and therefore urged the large crowd of supporters from Abia, Ebonyi, Anambra, Enugu and Imo states, who attended the rally to vote for APC.

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Naira-Dollar

Naira exchange rate, CBN “don” miss road

The Central Bank of Nigeria is obviously, currently losing the battle to arrest inflation and the unyielding slide in the Naira’s exchange rate. Regrettably, with inflation persistently closer to 10%, all static incomes have lost over 40% of purchasing values since 2010; thus, the laborer’s N18,000 minimum wage may just be worth less than N10,800 today. Instructively, however, spiraling inflation is, usually, primarily triggered by uncontrolled and liberal money supply. Consequently, monetary authorities in successful economies everywhere, endeavor to keep inflation below 2% by managing money supply!

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CBN Governor, Mr Godwin Emefiele

Is the economy poisoned by CBN $ hoarding?

The crash in crude oil prices from over $145 in 2008 to below $40/barrel presently, has invariably reduced Nigeria’s export earnings by over 50%; consequently, the significant deflation in dollar income is commonly blamed for the persistent intense market pressure on the Naira exchange rate. Interestingly, this perception is, ironically, against, the actual reality that the Naira exchange rate remained static between N152-N160/$1, even when the foreign reserves in CBN’s custody exceeded $60bn.

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CBN Governor, Mr Godwin Emefiele

Does CBN mastermind the brazen rape of the treasury?

It would come as a huge surprise to Nigerians if anyone suggested that surplus money constitutes the greatest impediment to the creation of more jobs to enhance the quality of economic and social welfare of our people. Nonetheless, the constitutional custodian of money supply, i.e. CBN, would readily admit that the incurable presence of surplus money supply is actually the major challenge to best practice inflation rate below 2% and cost of funds below 5%, to successfully drive our economy.

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Buhari

Is CBN’S MPC stronger than Buhari?

Muhamadu Buhari’s ouster from power in 1985 clearly attracted jubilations in several quarters, particularly from those who decried the iron fisted enforcement of social discipline; but three decades later, he was, inexplicably, swept back to power, in an infectious carnival-mode campaign, as the arrow head of the change, Nigeria urgently requires to rechart its trajectory and restore hope for a better life for its citizens.

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FILE: THE AGONY CONTINUES —The crowd and long queues of jerry cans at Capital Oil filling station, along Lagos-Ibadan Expressway, yesterday. Below right: Stranded commuters' option B in Lagos, also yesterday. Photos:Lamidi Bamidele with NAN.

The recurring decimal of fuel queues

The recurring experience of pervasive social stress that comes with fuel shortages seems to have become an abiding motif in the tapestry of our social and economic life, despite our nation’s benevolent endowment with substantial crude oil revenue. Nonetheless, there is the popular local adage that you do not wash your hands with spittle when you are standing by the riverside; similarly, it is inexplicable that so much social agony can be caused by our ‘inability’ to adequately refine the surplus crude oil endowment in our backyard into petrol and other derivatives.

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Indeed, Naira devaluation is probably the most potent weapon against the prosperity of Nigerians. Nigeria’s migration from a potential industrial power house with bustling social affluence, to a subdued and stumbling economy clearly began with the adoption of IMF’s Structural Adjustment Programme during Babangida’s regime: the chorus from International Agencies, at that time, was also that falling oil prices with an unserviced debt burden and the consequent restriction of trade credit to Nigeria, were the products of an allegedly overvalued Naira exchange rate.

Devalue Naira, remove subsidy and ‘kill’ Nigerians

IMF Africa Director, Mrs. Atoinette Sayeh recently noted at a press conference at a World Bank event in Lima, Peru, that “…those measures introduced by CBN to restrict demand and limit access to official foreign exchange for certain imports are quite detrimental to economic activities and invariably led to a lot of unhappiness in the private sector”.

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