{"id":367807,"date":"2011-03-27T04:32:46","date_gmt":"2011-03-27T04:32:46","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/03\/27\/how-politicians%e2%80%99-dollar-demand-devalues-the-naira\/"},"modified":"2011-03-27T04:32:46","modified_gmt":"2011-03-27T04:32:46","slug":"how-politicians-dollar-demand-devalues-the-naira","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/","title":{"rendered":"How politicians\u2019 dollar demand devalues the naira"},"content":{"rendered":"
\n

Despite sustained measures to defend the naira, the currency has been depreciating at a high rate. Now it is N156 against the dollar. What might be responsible for this steady fall?<\/p>\n

Since the beginning of this month, demand for foreign exchange has been very alarming. Between March 1, 2011 and Wednesday, 23 March, the Central Bank of Nigeria (CBN) has been intervening with an average of N325 million daily, thereby putting more pressure on the fragile naira.<\/p>\n

So far, the apex bank has pumped into the market over $2.9 billion at the official Wholesale Dutch Auction System (WDAS) window. This is far higher than $2.25 billion traded in January. $1.7 billion was traded in February. In January, an average of $281 million was traded per session while $242 million was traded in February. With the volatility at breath-taking level, Nigerian naira has been depreciating at high a rate against the dollar.<\/p>\n

In January, a naira to a dollar was N154 and this was sustained till middle of March when demand plummeted and the naira crumbled to N156 against $1. CBN on its part, in a bid to further strengthen the naira and neutralize the effect of increase in government spending as well as curb inflation, had at its Monetary Policy Committee (MPC) meeting last Tuesday, raised the Monetary Policy Rate (MPR), interest rate to 7.5 percent.<\/p>\n

Pre-liquidating of the dollar<\/p>\n

Analysts said with last Tuesday\u2019s tightening of monetary policy, the cost of borrowing should reduce pressure on the exchange rate. They believe that more companies are pre-liquidating their dollar obligations ahead of maturity because of the uncertainty ahead of the April elections and this, they said, is putting further pressure on the naira, a dealer in Lagos explained, asking not to be named. \u201cThe interest rate hike coupled with the rising stock of foreign reserves should reduce pressure on the foreign exchange market within the next few days,\u201d the dealer noted.<\/p>\n

Politicians\u2019 demand pressure<\/p>\n

However, a bureau de-change operator based in Abuja who wouldn\u2019t want his name mentioned for certain reasons, attributed the slide in the value of the naira to on-going political activities. \u201cPoliticians are killing the Nigerian economy. They are contributing to the free fall in value of the naira. The demand pressure on dollars from the politicians far outstrips supply. I operate a bureau de-change and I know what I am saying. The demand for dollars by the politicians is too high,\u201d he said.<\/p>\n

He explained, \u201cOf course, I stand to be corrected; the dollars are for bribes because it is easy to carry huge sums of money in dollar bills rather than carry millions of naira in big bags or brief cases. For instance, I can carry $10,000 in my wallet. That is N1.5 million. That could be the possible reason why politicians have besieged BDCs to buy foreign currencies \u2013 bribery and corruption.\u201d<\/p>\n

Heavy subsidy<\/p>\n

According to him, \u201canother possible reason why the naira is falling is the heavy subsidy on petroleum products. For instance, Kerosene lands in Nigeria at N120 per litre yet government sells it for N50 per litre so the difference is borne by government.<\/p>\n

\u201cAgreed that the prices of oil have risen significantly on the international community, but the increase is not impacting on our reserves. The money is still being depleted by government to fund campaigns and the political process,\u201d he noted. \u201cWe have been reading how aspirants have been spending huge sums chattering aircraft, helicopters and more for campaigns. They are paying in hard currency and that puts severe pressure on Nigeria,\u201d he said.<\/p>\n

\u201cI can tell you categorically that the demand for the dollar since the campaigns began is over 100 percent. If not for bribery, what do they need dollars for? What are they importing? What business are they doing?\u201d he asked.<\/p>\n

Demand, supply forces<\/p>\n

Frank Ogiemien is of Partnership Investment Plc. On his part, he said, the political situation in the country has a little impact on the naira.<\/p>\n

According to him, the naira is responding to demand and supply forces, he explained, \u201cThe rise is an indication that we still depend heavily on imported goods and services. Up till now, the CBN does a lot to regulate the exchange rate; so the N157 is not the highest the rate could get to. The political situation has little impact on the rate in that with a calm political and social environment, our GDP would go up thereby strengthening the naira.\u201d<\/p>\n

He said, \u201cthe CBN will not devalue the naira; I see it getting the money deposit banks to increase lending to real the sector so that our dependence on foreign items can be mitigated. This will reduce the pressure on the naira.\u201d<\/p>\n

The International Monetary Fund (IMF) had concluded its last article 4 consultation with the federal government on February, 11, 2011 and released its report on February 17 and questioned the wisdom of continuation of \u201cfiscal stimulus\u201d in spite of solid GDP performance and high inflation.<\/p>\n

The Fund made some critical statements about Nigerian economic management that despite world oil prices in excess of the budget benchmark price, the government spent all current oil revenues and drew on savings in the Excess Crude Account, despite high inflation. The CBN reduced the rate on its standing deposit facility in response to pressures on the currency and sold reserves rather than raise interest rates or let the exchange rate depreciate.<\/p>\n

IMF however asked the apex regulatory body to devalue the naira. But in response, the CBN goverGor, Sanusi Lamido Sanusi said government would not devalue its currency.<\/p>\n

Devaluation may be answer<\/p>\n

But, Opeyemi Agbaje, Chief Executive Officer (CEO), Resources and Trust Company Limited, a strategy, policy and business advisory group said in spite of the CBN governor\u2019s emotional position on the exchange rate, it is clear that the naira is under pressure and something has to give.<\/p>\n

\u201cThe rising demand structure for foreign exchange suggests most businesses expect the naira to depreciate and are taking a position against the naira. It is either we beef up foreign exchange reserves, slow demand through higher interest rates or devalue the naira! The political risk associated with elections may be a contributory factor, but the dominant factor is the depletion in foreign reserves and rising spending may be the real drivers,\u201d Agbaje explained.<\/p>\n

Unbridled imports<\/p>\n

Managing Director, CRC Credit Bureau, Tunde Popoola said unless federal government tackles the issue of poor production, the nation will continue to have hike in exchange rate. \u201cNigeria being a mono economy is prone to fluctuations in exchange rate. We need to move from our mono-cultural economy, diversify the economy and produce for export\u2014it is when you produce for export that you can have enough foreign exchange to cushion the effect of inflation,\u201d Popoola stated.<\/p>\n

He added, \u201cThere must be practical frame work on how the economy will be driven by export. We need to control what we bring into the country. Unless we do that, we cannot control the rise in exchange rate. It is subject to demand and supply and if demand for import is high there is tendency for the rise.\u201d<\/p>\n<\/div>\n<\/p>\n

Read this article:
\nHow politicians\u2019 dollar demand devalues the naira<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Despite sustained measures to defend the naira, the currency has been depreciating at a high rate. Now it is N156 against the dollar<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-367807","post","type-post","status-publish","format-standard"],"yoast_head":"\nHow politicians\u2019 dollar demand devalues the naira - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"How politicians\u2019 dollar demand devalues the naira - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"Despite sustained measures to defend the naira, the currency has been depreciating at a high rate. Now it is N156 against the dollar\" \/>\n<meta name=\"twitter:creator\" content=\"@ghanamma\" \/>\n<meta name=\"twitter:site\" content=\"@ghanamma\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/\"},\"author\":{\"name\":\"\",\"@id\":\"\"},\"headline\":\"How politicians\u2019 dollar demand devalues the naira\",\"datePublished\":\"2011-03-27T04:32:46+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/\"},\"wordCount\":1193,\"commentCount\":0,\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/\",\"url\":\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/\",\"name\":\"How politicians\u2019 dollar demand devalues the naira - Ghanamma.com\",\"isPartOf\":{\"@id\":\"https:\/\/www.ghanamma.com\/2011\/#website\"},\"datePublished\":\"2011-03-27T04:32:46+00:00\",\"author\":{\"@id\":\"\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.ghanamma.com\/2011\/#website\",\"url\":\"https:\/\/www.ghanamma.com\/2011\/\",\"name\":\"Ghanamma.com\",\"description\":\"News In Ghana - Latest Ghana News Headlines\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.ghanamma.com\/2011\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"How politicians\u2019 dollar demand devalues the naira - Ghanamma.com","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/","twitter_card":"summary_large_image","twitter_title":"How politicians\u2019 dollar demand devalues the naira - Ghanamma.com","twitter_description":"Despite sustained measures to defend the naira, the currency has been depreciating at a high rate. Now it is N156 against the dollar","twitter_creator":"@ghanamma","twitter_site":"@ghanamma","twitter_misc":{"Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/#article","isPartOf":{"@id":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/"},"author":{"name":"","@id":""},"headline":"How politicians\u2019 dollar demand devalues the naira","datePublished":"2011-03-27T04:32:46+00:00","mainEntityOfPage":{"@id":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/"},"wordCount":1193,"commentCount":0,"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/","url":"https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/","name":"How politicians\u2019 dollar demand devalues the naira - Ghanamma.com","isPartOf":{"@id":"https:\/\/www.ghanamma.com\/2011\/#website"},"datePublished":"2011-03-27T04:32:46+00:00","author":{"@id":""},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.ghanamma.com\/2011\/03\/27\/how-politicians-dollar-demand-devalues-the-naira\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.ghanamma.com\/2011\/#website","url":"https:\/\/www.ghanamma.com\/2011\/","name":"Ghanamma.com","description":"News In Ghana - Latest Ghana News Headlines","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.ghanamma.com\/2011\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/posts\/367807","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/comments?post=367807"}],"version-history":[{"count":0,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/posts\/367807\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/media?parent=367807"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/categories?post=367807"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/tags?post=367807"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}