We are aware of the fact that credit spread in many ways does have negative impact on convertibility arbitrage funds. That investment Put option require additional loading which for future sake lead to expectation of lower returns. At continuous time depreciation, predictability of Naira decline becomes a mean variance property subject to all sorts of ravaging and manipulation.
By injecting a redemptive 420 billion Nigeria into Nigeria country, you create additional problem of inflation. Money injection has never been the solution to any economy in the world long terms but it a way to break a certain cycle short term. Its proven that you can eliminate uncertainty by providing a soft padding for credit challenged banks through bail out, but that does not mean the economy is doing very well of a sudden. And such money may go the distance to provide a market direction and eschew the issue of international valuation which nose dive world economy.
But the economic question has always been how to form equilibrium for these extreme of the market. In essence, money injection confronts us with two problems which are money velocity and rate of money in any economy. The main course of equilibrium is not how to arbitrarily demote certain currencies of the world like Chinese and Brazilians do, but how to discover and permit a fair dealing that can accommodate both sides of the market with a near intent on equilibrium.
Of course equilibrium stagnate the market when achieved, and in ordinary market condition demand and supply never quite meet, and inflation is also wage and price rising simultaneously.
Price at least in market is ever rising, always a tendency to be bullish and the real curve ball for any CBN or Federal Reserve is to protect real income, fixed incomes, and wage. Wage is the bear side of the market and in many ways wage can only be protected by the action of the Government, which précis is achieved through interest rate and through protection of currency value such as the Naira. And through certain Amendment of Customs’ Act among other example
Inflation is too high in Nigeria. The ability of many Nigerians to buy anything is just too stiff. There is no protection of real income. In fact the bantam does not exist. There is no real remedy for this kind of situation since Nigeria is part of the international markets. In essence, the current condition will continue long into the future if nothing is done about it. Nigeria is part of international markets, the currency float freely, the currency has no protection in local markets, and the currency is not among the 30 useful currencies in the world. It means that in many ways that our currency, the Naira, is not even a blip on the Radar. The augur for open trade fair is competition with the best of them. And that means that you win as much you lose.
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