Naira Depression and What Sanusi Can Do (II)b

By

Sampson Iroabuchi Onwuka

....That Nigerian Naira has remained relatively stable for 6 weeks now means that CBN is buying into the Naira through a super currency such as dollars. But what is the idea behind this? The idea behind this is that a given currency ought to be used at all the time, ought to be counted and used in all global markets in order to enhance its value. Currencies of the world must defeat each other in such a way that the success of one currency is the detriment of the other. A tradeoff between NGR Naira and US dollars is what occurs every day in the markets, such that every backdrop of Nigeria Naira, the dollar inch on. If the physical characteristics are brought in to play, then the correlation between dollars and oil become a speculative preference but in terms of what happens to Naira and why is falling, it is because the US dollars and the Euro are rising.

These two shortfalls in pricing are the decisive roots of preferential value of US economy to Nigeria. US economy is not that superior to Nigeria, but as long a serious ‘misprice’ is concerned the Nigeria economy is entirely lousy to US. Much of that weakness comes from weak executive strategy of the part of CBN. It is common knowledge that those who benefit from these trades or other trade off between currencies of the world are known as currency traders. But the speculative preference of one currency over the other depends on people waging war against the success of one currency over the other. Among these people are the CBNs of the world and Federal Reserves. What happens inside a given economy is so decided by the weight of the currency, that neglecting the perform rate of a unit exchange is bad business for the general economy. What happens to a currency at any time affect business attitude within the country and that business attitude with the rest of the world is a ‘strain’ on their trade deficit and trans-border trade. The ‘stress’ is probably a popular way to study the impact of trade deficit on a given currency, but it is approaching the problem from the ‘other’ side, not that one side is the side. But by blocking capitulation in Nigeria other Naira, you directly buy into the Naira via the exchange 7 billion dollars and you will not have spend a dime redeeming a currency you already own. Western Union, Vigo, Eastern Union, and so on that conduct these foreign currencies and the banks that back them, are to be stopped from such behaviors in spite of what we think about price ceiling and about making Nigeria the largest depository of foreign currency, which was Soludo’s blunder. Sanusi can continue from where Soludo stopped by doing away with parallel market completely in Nigeria, assuming Sanusi is called patriotic. It is his wading though the waters of the parallel markets against a dyke of his mainly Northerners that must determine Sanusi’s so called ‘patriotic’ elasticity. The impact of this auction system is hard to illustrate in terms of everyday market but the grasp of the nature of conflicting data and instability of the Naira is one reason why Nigerian banking agenda must include the issue of parallel market and currency and its impact in the rest of the world. His effective administrative audacity has done little to helm the hemorrhaging Nigeria economy.

Sanusi cannot pretend that attempts at stabilizing the currency; his chief essence, has not since his inception taken a back seat. But the new attempt at encoding the Nigerian resource in terms of ECA transfer to ‘Sovereign wealth account’ relieves the attention of how to position Nigerian Naira. Whether or not the currency repository and bait on US dollars is that different from other attempt to help the Naira is not very clear. What is however compelling is that the shift in spite on what it portends, is a welcome departure from Michael Porter’s shallow view of ‘competitive advantage’ to quasi Robert Mundell, a condition which bring up the issue of ‘coupling and decoupling’. Coupling is best used as a form of scaling. In essence fluctuations of Naira by gauge would maintain the facts of ‘disregard’ given the conflicting Nigerian bond model for pounds or in terms of dollars the fluctuation is in force that Naira would be of ‘regard’ given the losing tendency to the US dollars. Currency parity is closer to been successful if the two economies and market are closer in form, in function, and in interest rate grade. The widening gap between USD and Naira as Nigerian Naira But the ‘schools’ are not that fitting for an overheated Nigerian economy at this point. The problem is not with what goes into making the case that coupling Naira to dollars - assuming that’s what the CBN Governor and Finance minister is trying to do - will open the Naira to all forms of speculative advantage and trade. Such move will only deepen Nigerian cascade since the dollar when the interest climbs is likely to hang in there longer than Naira, therefore Naira is losing positive. In essence Naira having anchor in terms of dollars and Sovereign weight, may improve its rating internationally but may not however help the Nigerian currency in the end. If the converted sovereign wealth is the Euro or the Pounds, there is a chance that floatation of the Naira - assuming point and forward on pound sterling - will also lead to constant mobility of Naira which may not help the Nigerian bond market given the modeling after Europe and UK