The Central Bank of Nigeria (CBN) team just ended a great week on policies. I think they deserve our commendations. I understand that the economy is still hurting. But over the last few days, the CBN is recalibrating. I am reversing my projection on the continuous deterioration of Naira against the US dollars at scale; the marginal loss remains due to our poor productivity quotient and overall poor balance of trade.
The CBN under Governor Emefiele ran a solid good monetary policy under President Jonathan. But at the inception of the President Buhari administration, he cannibalized what was working. It was very strange and I have written here to show my frustration on the evolution of these policies.
But today, they are getting back to the fundamentals. I expect more funding for startups. I also expect more remittance hitting Nigeria. In short, the biggest export Nigeria has run for years now is the human capital. And those citizens reward the nation via remittance. I estimate about $1.8 billion – $2.2 billion monthly remittance into Nigeria. If that happens, that means more foreign currency will be in circulation, giving Naira a breathing space.
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Our total remittance as a nation is always at parity with the total executed national budget. In other words, even though we may have a budget of $30 billion, the execution is never 100%, and by the time you look at the percentage of execution, the number is always around the amount remitted into the economy from Nigerians living abroad. That remittance froze because the deal was not there: if you had sent $1,000 via Western Union last week, they would pay your family N384,000!
Hopefully, in two weeks, after they have adjusted to the new policy, Western Union will ask your bank to pay you $1,000 in cash or put the money in your dorm account. With that, more forex enters into Nigeria and more Nigerians in diasporas will have incentives to wire more.
“We are leaving no stone unturned to ensure that our customers instantly receive their transfers as cash (USD) or transfers into their domiciliary accounts. Our customers have the flexibility to choose the mode of receipt that suits them. It is strictly on their terms,” said a leading bank in Nigeria.
This new policy will attain a full steady state in late Q1 2021 as there are many backlogs for foreign currency that any immediate supply would be swallowed up quickly. Also, due to Christmas holiday coming, economic activity will slow down. But from March 2021, Naira will stabilize with the official and black rates fairly closer, provided Covid-19 does not add another shock in the crude oil market which may rattle the world oil demand. As I write, crude oil prices are hitting to close a 5th week of gain; a $50 per barrel on Brent crude is just around the corner.
That it took CBN this long to do this is unfortunate. But we have to be happy because it has been done. Well done CBN.
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What is the price for bad policy? If you kill someone with a weapon, you are likely to be charged of murder, and when you kill with bad policies?
We cannot commend or clap for folks who ruined lives, as a result of weird and thoughtless policies, and now they managed to get some of their senses back; they still owe the people high dose of atonement and reparation.
This idea of rewarding mediocres have numbed many brighter minds here, that a fool somewhat contributed meaningfully during a sound debate doesn’t make him a wise person; the folly is still very much within him.
They have been terrible for too long, so a fairly good week cannot erase all their malfeasances, we still need to see if it was a fluke or real sign of repentance.
I wonder, the policies governor Emefiele was making before these changes were disgusting. Even an engineer like me cannot made these policies on the economy, it’s bad. Hope these steering changes are for real. It will have good impact on the economy.
Its better late than never . Although the CBN adjusts its policies as monetary abd fiscal conditions change, They should be more alert to the fluctuating nature of the naira. There was not much merit paying back in naira from dollars remitted abroad. This put a lot of pressure on the naira that is struggling for support from manufacturing and oil .
I commend the CBN for this important policy adjustment but also advise that they should be more reactive to ever changing financial market intelligence.
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I don’t think the CBN should be commended for breaking something that was working. The fact that they are now going back to basics should be an indictment not a commendation.
I will go as far as saying the CBN is responsible for virtually all the economic problems Nigeria is facing as a nation.
Why reversing back to the policy that he canceled himself and you will now commend him for that? Those this mean we waste four years for nothing? This is the same government that cancel the policy.
That’s what happens when you put try to put square peg in round hole. It never fits! CBN needs a sound economist as governor, not a practising Banker. The fact that we call it Central BANK doesn’t exactly make it a bank. It’s essentially a regulatory body regulating Fiscal and monetary policies. We got it dead wrong when we appointed a practising Banker (Emefiele) as head of the CBN.
What’s the difference between official Naira rate and black market rate. If I want to buy something from abroad which one I will consider.
Story to calm the Nigerians.
Four years of economic hardship imposed on Nigerians through draconian policies begs the question why the sudden renege to what was working, which he Emefiele terminated.
Like someone rightly said, we should throw away sentiments and stop putting squared pegs into round holes, and let the right persons/ professionals manage the economy of this nation. Saying that Emefiele deserves commendation is like saying PHCN deserves commendation for supplying the electric power that you pay for.
So if someone sends me £5000 pounds. Where and how would I change this to naira?
You can take it cash and change anywhere including your bank or black market. By having the option to have the money in cash, you can exchange it for whatever you can get. In the past, the only option was getting the rate at CBN rate which was off by miles to what you could get in black market.