Mispricing China (III)

By

Sampson Iroabuchi Onwuka

In a book Stephen A. Greene ‘China’s Stock Market’, the author makes a critical argument about the rise of Shanghai Stock Market at the expense of Shenshen. Historically, it was Shenshen province that began to incorporate foreign investors in Chinese Stock and many of those early Investors funded much of the new and newer companies of Shenshen. It is said that Shenshen probably has more foreign hands in deciding its uplift industrially than Shanghai. But the man in charge of then Shanghai Province at the point was a certain Hu Jintao, who re-introduced Shanghai Stock market in 1985 to the world and forced local industries to register independently. It was the incoming Mayor of Shanghai so to speak that forced a political case to be made about Shanghai as a legal and preferred alternative Stock exchange than Shenshen. The result has been the overshadowing of Shenshen in spite of its very huge potential.

What is however happening now is that a shift from international companies to local companies have taken place, and Shenshen through the last decade is gradually reappearing and carrying with it, substantial companies that offer as much as Shanghai and Hong Kong, with a drop in prices. The new Shenshen Stock Exchange has in its roots very CHINA traits, and these companies that are deliberately local in Shenshen are entertaining the posture for foreign business through Red Chip. There is then the market advantage of buying Shenshen on the condition that China cheap money to upend inflation, need an outlet in final product, and this availability may help facilitate Nigerian direct bidding of companies with B shares index.

Sinopec and Petro China are China owned but overpriced. Their registration types and processes involved in deal making and executions make them expensive and mark them foreign. It is not too late to complain that we damage our Crude oil market to go that big since Nigerian Crude oil woes has not done any better since the arrival of the Chinese big tuff corporation.

Nigeria is not that big, and in terms of underperforming companies in a placed country like China, you buy into the companies outright, given the managerial depth of the company. If that is achieved, the Invested Interest been naturally subject to companies growth will position itself strategically and then profit rotation in dollars or Naira becomes a different matter.

In essence, the success of these companies in many parts of world, especially Afghanistan, a success that includes a 100 billion profit in 2006 alone, makes Petro China the most capitalist company in China and one of the highest rated in the world. For that case, these companies are not that fitted to drill for much Nigerian profit from Crude oil.

It also makes Petro China an instant rival for the Seven Sisters, bigger in market rate than Gazprom and Shell, but not in capitalization. It also makes Sinopec - a company that is not lagging behind Petro China in wide swathes - a very expensive crude company in Naira terms. But such commentary should find accommodation in the recent pricing of Nigerian oil fields and above all, in the very recent effort on Nigerian government to auction a part of their very lucrative crude oil fields to local and international companies.

I guess, it need be asked, what was the reason behind such huge profits made in 2006 by Petro China, the reasons are quite few but it also includes a shift from Red Chip operating with direct Beijing incentive with little or no expense drive - in and services, rendered whole by communist workers to a shift based on the newly acquired ADR status, where the loans are originated in dollars and therefore balanced in dollars. The total money function aggregates off in as dollar rated company and the return in dollar terms means that China is not selling their Crude oil and done oil to China alone, they selling by selection to outfits within the states as well.

Mispricing China (II)

By Sampson Iroabuchi Onwuka

....This does not take anything away from Chinese companies in Nigeria that is worthy of mention, but in terms of crude oil, it is amazing how China can navigate between these giants, and how they conduct themselves in the main is quite remarkable. But there is need to remain committed to these changes which now remain part of the daily dribble on Nigerian Crude oil

What is however troubling is why the names of these companies are not made public yet, since many of these Chinese oil companies differ from each in very market terms. And many of these companies are so successful through investment ranks of Americans and Asians that these companies are by Standard Deviation expensive, especially for a third world economy like Nigeria.

Above all, there is a consistent downfall dip of Chinese Red Chip companies (that is Chinese Companies operating outside the People’s Republic of China), that need arises to question the wisdom behind pushing towards big names and big corporation like Sinopec and Petro China when Nigeria can arrange a much deeper alternative. If business is all about making money, why should Nigeria out price itself in a business that involves the rest of us. I mean to say that these two mentioned companies are not different from various other expensive companies in Nigeria. There are categorically the same saving for the name and assumption

There are Crude oil producing and refinery companies in China that are quite cheap relative to what is now available, many of them quite cheap but nearly all of them out of reach, given the formidability of Petro China and Sinopec, both of whom are registered through ADR and applied public wise through by dollars.

This cheap and downward Red Chip stocks suggests that business inside China is not that encouraging. Chinese big companies are having a hard time in China and business in not as usual given their very expensive bagging, which under a new lover like Nigeria would become much fruitful. These companies can have access to main events in Nigerian Crude Oil and of course we build small and gradually with them. These companies may also be enticed with other ventures in Nigeria like Hydroelectricity which Hu Jintao is a specialist. PIPE dreams from perhaps a Shenshen economy will not disappoint many Nigerians private placement.

Understanding how Chinese markets work is also a great advantage when pricing China, locally and internationally. Understanding that Chinese market, especially the oil industry is not an organic whole is an added advantage in Crude oil and refinery business. That a difference exists between for instance, Shenshen and Shanghai Stock exchanges is important. These two are very close but very different in operational dynamics. Taking advantage of what is being offered in these provinces is what Global Markets are about. Understanding why companies registered in any of China South stock exchanges or companies originating in the South, differ from the North of China is quite a necessity and economic pricing advantage.

Confronting China on Nigerian Crude oil (I)e

By

Sampson Iroabuchi Onwuka

....What some Africans and Nigerians have written, I for one concur, that the geography of the continent called Africa in the last quaternary age (25 000) was riddled with flooding and swamp. The Northern part of the Continent the higher and the peak of the very continent was parts Sudan and Egypt noted for its black dregs from Atlantic. Arabian Desert once called Eastern Desert had been part of Africa until 1920, and it contains all forms of Crude oil known to man. But African continent in those 25 years was full of foul vegetation and creatures which might include man. In due time, as perhaps thousands of years passed on, waters ceded back to the Atlantic, Indian, and Red Sea, new lands appeared in the continent including the Sahara (Green Sahara) and then the grasses and debris that settled, replaced each other in ever increasing form that much of what is now Nigerian oil and West Africa strategic location such Ghana, Cameroun and Congo, has large depository of this silt and green vegetation that go back to the creation of the world. The West African continental Coast and Shelf from Atlantic ‘bight of Biafra’ still bear much of that remaining history and Crude oil is easily available in that region. It explodes to the surface during intense periods of earth’s movement. Nigerians of Niger Delta and the Cameroun are aware of this old anomaly, and in fact think each time it happens, the native that the goddess of the sea is angry. Even there, the waters are still receding and swampy oil Rich Bayelsa state of Nigeria is experiencing New Lands.

It is possible that China may have finally understood this riddle about the ever abundant preserve of the most natural Crude oil known to man, - the Nigerian Bonny light, to be replaced by another Nigeria light crude oil - and they seek it with all their might. From the look of things, there will not depart from Nigeria, if from Nigeria, they will not depart from West Africa. If we put Shell and their stupidity in context, can be said that there were that foolish, or did the Nigerian neglect of the area lead Shell into all evil. China is coming and we must do the obvious now. Ask for explanations, encourage and by law force open sources and legal citation, and make public information concerning their Crude oil business in that part of the world now. Confront China today.

Confronting China on Nigerian Crude oil (I)d

By

Sampson Iroabuchi Onwukka

....The world Crude oil market is estimated in excess of 40 trillion dollars, and Shell and company can claim to have made only 1 dollar from Nigerian oil, that they have invested all that they have ever earned from Nigeria in Nigeria. Nigerian was however the highest earner for Shell and many years. In common business market, these Oil companies like Shell or BP is estimated to generate at 2 billion dollars in sales every day in US alone. Once you understand the recent money function between Euro and the dollars, you can be certain that we are honking on at least 5billion in total sales a day. Chinese at not that far behind in recent years, and offering Nigeria pittance for the best Crude oil in the oil is like a big FU. But Nigeria should explore alternatives like asking payments in Gold and not in paper currency which US can print with chemicals.

We are not expected to react to such thing since investing 25 billion dollars seems a whole lot for Deborah Vighram(?) when especially the price estimate for product and quantity surveying will include 10 times the normal rate on pipes that go back to 1960 and never replaced. There will be more pipe leakages in the world and Nigerians in Niger Delta will remain the stock of public jest in Nigeria and in the world. Even last year alone, there were at least 110 Shell pipe leakages in the world, that flaring gas in Nigeria is so secondary affair given the company’s irresponsibility and lack of maintenance vehicle. Perhaps theirs is a drug problem which is not unlike Nigerian, but attention has now shifted over China and their oil company who are touted to be replacing the old. This will only be a beginning and in due time, the same must be asked of Exxon Mobile, Texaco, Shell, and so on, on their relationship with China and on their information net box.

What some Africans and Nigerians have written, I for one concur, that the geography of the continent called Africa in the last quaternary age (25 000) was riddled with flooding and swamp. The Northern part of the Continent the higher and the peak of the very continent was parts Sudan and Egypt noted for its black dregs from Atlantic. Arabian Desert once called Eastern Desert had been part of Africa until 1920, and it contains all forms of Crude oil known to man. But African continent in those 25 years was full of foul vegetation and creatures which might include man. In due time, as perhaps thousands of years passed on, waters ceded back to the Atlantic, Indian, and Red Sea, new lands appeared in the continent including the Sahara (Green Sahara) and then the grasses and debris that settled, replaced each other in ever increasing form that much of what is now Nigerian oil and West Africa strategic location such Ghana, Cameroun and Congo, has large depository of this silt and green vegetation that go back to the creation of the world. The West African continental Coast and Shelf from Atlantic ‘bight of Biafra’ still bear much of that remaining history and Crude oil is easily available in that region. It explodes to the surface during intense periods of earth’s movement. Nigerians of Niger Delta and the Cameroun are aware of this old anomaly, and in fact think each time it happens, the native that the goddess of the sea is angry. Even there, the waters are still receding and swampy oil Rich Bayelsa state of Nigeria is experiencing New Lands.

Confronting China on Nigerian Crude oil (I)b

By

Sampson Iroabuchi Onwuka
...

The truth then and now is that China is drilling oil in Nigeria and has been since 2005, and the answer we seek to note is why this same ‘three refineries’ which was part of the old and done deal from initial 2005 licenses still resurface in many other ways?

We are also aware that China reached a trade agreement with Nigeria that will involve an offload of 30, 000 bbl/d of crude oil in next recurring five years from 2005. Counting backward from 2010, there is no denying that China has not been making billions from Nigerian oil over these five years. What they are saying is that now in 2010, the refineries are yet to be built, and if and when built, the refineries would be a lend lease of 23 billion dollars to Nigeria. The duration for this repay of money is not noted or public. In my view, there is a something missing from the stages of oil drilling and production, and given the very dark compromises of Obasanjo’s administration, there is a new face of what Shell was in the early 80’s to Nigeria in very recent oil business in Nigeria.

Actions prejudicial to human rights are not China concerns and ignoring Transparency International is only part of official policy. Perhaps these days China may be noted as business driven but in due time as more hands ease from China control of large Nigerian Crude oil, we would more than likely experience a second version of Shell.

It goes without saying that Chinese are hugging too much action in Africa, but what is China expected to do, for how could they lose the chance to shine in a world that is full of competition. It is quite difficult to understand the difference between the MUO of the past between China and Nigeria involving three refineries and production of petro-chemical accessories and the MUO of the present, with the same set of people and set of features. In terms of other companies, what happened between 2005 and 2008 was that a ‘share’ price of 25 billion dollars was offered to Nigeria government which never made to the very country and that proved nonexistent after withholding the license. China, like of the Asian countries whose licenses were confiscated in 2008, played as much deceiving role as these Asian compeers now scrambling for Nigeria oil.

Confronting China on Nigerian Crude oil (I)

By Sampson Iroabuchi Onwuka

People Republic of China will be sending their official delegates to Nigeria to close a deal about the much proposed three Crude oil Refineries. One of the proposed Crude oil Refineries in Nigeria will be built in Lagos LFTZ, Lekki Free Trade Zone, under the auspices of NNPC and Engineering Director, Billy Agha. But the news is not surprising since Nigeria will auction of Crude oil blocks come August. The act coincides with supplementary amendment of Nigerian budget and the implied deficit for 2010 given the argued drop in revenue. China is expected to play a pivotal role in the auction of these Crude oil blocks and not only that, China will be expected to dominate the bidding process given their undisguised interest in Nigerian Crude oil since 2005.

This attempt raise as much problems as it solves, since matters concerning the projected three refineries and the petro products are not very new and are in fact several years old. It seems to me that the People’s Republic of China is up to strange tricks and manipulations about their businesses in Nigerian Crude oil and is about time they offer explanations. For how could it that possible that a repeat of the information from 2005’s MOU about this refineries are part of a supposed agreement that will involves a kind of lend lease and the tenets of the reports about the Lekki Free Trade Zone suggest that the Refinery or refineries has a raft for private ownership. The only difference between 2005 MUO either for the facts of development of Agbami fields or drilling, is that this year, these groups of business people and their Chinese have a spokes woman long associated with Shell.

In October 2004, deepwater block OPL 222 was auctioned off and appraised during Obasanjo’s era. Production was then set to begin in 2010 and is expected to co-inside with 20% Chevron participation, 30% ExxonMobil, Nexen Petro which will participate at 20% range. The group that led the exploration and production then and now is China, and if all correspondence are right, especially IEA, China forced Nigeria of the Obasanjo’s administration into a MUO ‘memorandum of understanding’ in 2005, an understanding that involves Crude oil refineries as part of their Nigerian lobby to deal break with Shell. The initial licenses were offered to China and all indication will point to the fact that these licenses were not affected by the cancellation of the consequent 2006, 2007, 2008, auction.

Naira Depression and What Sanusi Can Do (III)e

By Sampson Iroabuchi Onwuka

For every money hard working Nigerians send in USD, Euro, Pounds Sterling, and so on to Nigeria, and received by Nigerians in Nigeria in USD, Euro, Pounds Sterling, the Naira suffer in value and quality. Naira’s usability depreciate with every currency you release in Nigeria other Naira. Consider an instance of transfer border trade. When as Alfred Marshall argued that one country invest in another country, the point will reach such that the investing country will earn gradually on the host because of the unit of exchange and trade exchange.

Of course the whole philosophy of the ‘competitive advantage of nations’ of Michael Porter and Krugman is not that dissimilar from this case saving for the fact that what happens in terms of commodity and in terms of new found gold mines, is closer at home to currency and transportation of hard and super currency to Nigeria via Naira only. Nigerians abroad is like that form of investment strategy and when they rover their currency from US into Nigeria, and from Europe to Nigeria, they trade in on the Naira.

Nigerian Naira currency rate to USD is 1 to 150. For every 1 USD we receive we exchange for 150 of our own. Think about it for a moment. A man in US has a house and you have 150 houses, and according to exchange rate, you will lose your 150 houses to gain 1 house. Perhaps we can cite a different example by suggesting that every American child is worth 150 fifty Nigerian kids. The above example cannot work for Nigerian market, the conditions are that different and there is rate at which each is determined. But the balkanization of Naira on a continuous time since 80’s means that other issues are at work. Either external debt to the rest of the world which took place under the last administrators or the current issue of excess currency importation in Nigeria




The problem becomes a question of original investment in the Hard currency. When there is investment on any local economy, there is a chance of growth of that economy. But the problem comes when investors want to repatriate the Hard currency from their local economy. But nothing crashes any market especially a third world economy than capitulation, recapitulation, and above all, repatriation of hard currency from the local economy.

If the information reaching us that credit is responding is true, then there is a possibility that Nigerian credit market has taken a given look. But who is quoting who? Accessibility of credit is only profits for banking as far as small businesses are concerned. The difference between a third world economy and first world is that one places too much emphasis one product and the other many multiple products with a view for small business.

But nothing is far from the compelling view that Nigeria is only waking up to the demands of the society which may only be viewed from bottom to the top by a statutory weight of the local unit of exchange - the Naira.

There is a possibility that perhaps a case for Nigerian Federal reserve system can be made via the 6 parts of the country to absolve future CBN chairpersons of the responsibility of running the economy and waging on price simultaneously.

Mispricing China (I)

By Sampson Iroabuchi Onwuka

As August approaches, there is the question of what is really happening on the ground in Nigeria. Chinese oil companies already in Nigerian are probably reaching in via connection, to enhance their portfolio by August in Nigeria. They are doing so in dollars, which makes it difficult for anyone to see any clear difference between a company like Shell, Exxon Mobile, Texaco, and a company such Sinopec and Petro China. They may have the barge of Chinese outfit and so on, but their profit is noted internationally in dollar terms and they are therefore not Chinese Companies in market terms.

The other Crude oil companies that come from Asia, especially China, seem to have originated from Hong Kong, whose stock exchange and companies are quite expensive given their imitation of dollars as in Hong Kong dollars. Much of the companies instituted through Hong Kong are the product of UK and many European countries, so having Chinese looking people and faces in Nigeria, does not mean that these people are Chinese in just about everything and at least in paycheck. So they can wear the face of China and bring down the assumption that they are the cheaper and in money terms better alternatives, but these are European companies in Asian disguise.

In common sense, it is the exchange rate that makes economy of China look a better alternative to dollar-driven companies of UK and US. If that it is taken away, there is nothing cheap about any of these Asian and Chinese companies, and therefore a serious case of mispricing of Nigerian Investment Category crop such as Crude is very evident. And that fact is all too clear from the high up here, since Shell would not have died a natural death in Nigeria without an outpost, and since Shell had been a serious component of major Hong Kong oil producing companies. Whatever we remember about China, it should not exclude that they have a growing markets that retains wage and price and the rate of the Sovereign Wealth. There are also similar outfits for Exxon Mobile.

Nigerian Budget Deficit and the Crude oil (II)

By sampson Iroabuchi Onwuka

Olusegun Aganga, the Nigerian finance minister, explained that the delay was due to the drop from $80 dollars a barrel to $70 in earnings which forced the hands of the government to withdraw. The explanation is not acceptable since Crude oil prices this year have jumped from 57 dollars a barrel to $70 a barrel and up, before correction. But we are still far from where we started. As such the price effect is already factored in. If there were new facilities in the budget, there was no reason for the delay.

But how this year’s balancing of Nigerian Budget is suddenly central to crude oil auction this August is quite amazing. It seems certain that such plans will go on given the pressure from top and below concerning the budget. Nigerians are however saying that FGN should not under any illusion attempt to patch the hole in the budget with money from this auction. It will only make the problem worse and not better. The Finance minister needs to also explain the very basis of the 500 million dollar bond.

Above all, there is the new issue of ECA ‘Excess Crude Account’ converted to Sovereign Wealth. In the course of the passing the bill, Sanusi preached a ‘quick take off’. The potential damage this could do Nigerian economy has not been discussed. The greater difficulty is raising a bond in international market with USD as bait.

If there is some truth about Remi Babalola comments last week about the bankruptcy status of NNPC, then his claim that NNPC could not pay Nigerian government’s 3.8 billion dollars worth owed to Shell can only question the reason for additional debt from Oil companies and from European banks. To make the issue that clear, Olusegun Aganga and Dora Akunyili, both dismissed the claim, citing that it is NNPC that is owed 1.1 trillion Naira, about 73.3 billion dollars. Olusegun Aganga did not indicate the debtors. I hope we are all on the same page.

Naira Depression and What Sanusi Can Do (III)c

By Sampson Iroabuchi Onwuka

....Needs be said that US Dollars in Nigeria has no value but its exchange rate has a lot to do with its dominance in Nigerian local market. Pounds, Euro have no value in Nigeria at all saving for what the locals could gain when they exchange for Naira at local Bureau of Exchange. The issue of parallel market and parallel economy so often a lightning rod in Nigerian market has not been dealt with by Sanusi and his Cabal. The impact of sure market strategy and the bloodletting of the Nigerian black markets also encourage heavy money laundry, all of which do not help Nigeria Naira war against the USD, the Pounds Sterling, the Euro, etc, by day and by night, a war it must at least engage to its end…until perhaps Equilibrium which is not certain is attempted, achieved.

Currency is a unit of exchange that defines the economic performance of any country in the world. Price is a function of the market, which is how much you can pay for a product in a given market environment. They constitute a credit economy. Managing a credit economy is a big issue and in terms of the credit, we shift our intellectual pole of ‘credit’ to include paper money and securities which is not paper currency at all but fortune. The more we capitulate on the Naira, either by exchange batten or barter, we erroneously destroy the credibility of Nigerian Naira. In essence, Naira capitulation is bad credit rating of the local currency by locals.

Constant depreciation of the Naira may result in high employment. High employment is cancer for poverty and high inflationary pressure discourages any kind of growth. Many countries break this cycle through money injection and through freezing of credit to avoid new debt problems and re-issue of bank. But inflation is also an issue when you are constantly sinking, when there is monopoly in business, when there is raking in the mono-cultural economy.But the inflation which deepens the further depreciation of the Nigerian currency can be helped by capping the source of raking in Nigerian economy, which sometimes brings with it a counter argument, an argument that may not apply to our third world economy.

Naira Depression and What Sanusi Can Do (III)b

By Sampson Iroabuchi Onwuka


Bill Lipschutz, the great currency trader, once said that ‘even if you can’t hedge in the forward market, you can create the position through an interest rate swap. However, in the case of sterling dollars, which has a very liquid term forward market, there was certainly a market for at least ten years.” He goes on to illustrate how for instance the sale of pounds on a forward market “converts half that position into a proxy.” Then he argued “that you put on the British pounds, while the original is a call position”. Thus, “half the position is call, the other a put.” A put option is equal to profitable returns on portfolio summary. In terms of market and in terms of currency, there is room to gain on a particular currency.

Well the relevance of that quote from a popular book ‘Market Wizards’ by Jack D. Schwager would not seem very clear unless we add in the contesting difference between US bond markets and European Bond markets, or the American Style of option which can exercised anytime before expiry date and European style of option which can only be exercised on expiry. These two bond and forms of option is quite revealing in coming to grasp with what happens in any markets of the world, given the continuous currency rotation in a time and time decay. For here, the difficulty of Keynes’ ‘equilibrium’ of money and bond become a secondary matter.

This idea of some countries of the world been perpetually poor at the success of bigger economies such as US was hinted on by John Maynard Keynes and perhaps others. But Keynes remedy for regional currency and leveling of price was an economic blunder which Nigeria and West Africa need not imitate. Keynes may have been right that lack of Government activity in the 30’s in creating jobs could have contributed to rate of unemployment, but he is wrong in regional currency which Robert Mundell took over and which is current incarnation of what is now Euro. When you regionalize the money, you flatten the market.

Nigerian Budget Deficit and the Crude oil (I)

By Sampson Iroabuchi Onwuka


Several Journalists reporting from Abuja mentioned that Nigerian Federal Government may be in dire need of balancing the National budget of 500 million dollar plunk. The DMO ‘Debt Management Office’ of Nigeria has raised official curtain about its intent on seeking this 500 million dollars through Euro Bond. In the initial budget passed in April 2010, the 500 million dollars was set to be raised internationally and the new issue of auction in Nigeria may serve the purpose.

In an article by Adejuwa Tsun titled ‘2010 – budget – ‘Reps for Show down with Executive’ made out the issue that the President’s revisionary position on the budget and his citations of “shortfalls in the projected revenue” this year, may have resulted from the ‘N507.12 billion Naira addition in the supplementary budget for recurrent expenditure’, which the initial projected earnings provided for.

In terms of 283 .32 billion for ‘wage adjustment’ there is 100 billion set for increase in civil servants wages with direct reference to tertiary Schools in Nigeria. It is difficult to understand why these numbers are tossed around so much that Nigerians don’t even know what is actually going on.

But the National budget for 2010 is already signed by the President, and Members of the house of Rep question the delay. In fact a new row of confrontation with the executive branch is actually expected given the unusual infringement and tendency of FGN to deal break. There is a call that the budget should be dealt with ‘as is’ basis, since promises to LGA were already factored into the budget for the year.

Naira Depression and What Sanusi Can Do (III)a

By

Sampson Iroabuchi Onwuka


....Before Soludo was a different Sanusi by name Joseph Sanusi, who entirely blocked the capitulation of Naira in Nigeria and within the interim, Naira stabilized but then he was engineered out of office as CBN Chairman in matter of months. Joseph Sanusi was not without traces of corruption, but from a market perspective, his financial ‘doctors’ were well aware of the situation in Nigeria and helped burnish to his view about the cryptic money transfer to Nigeria to redeem in dollars and pounds sterling instead on Naira, which was endemically squeezing life out of the local unit of exchange, the Naira.

So how do we solve the problem of the depreciating Nigerian Naira short term? We can solve the problem through a coordinated embargo on foreign currency on any Nigerian or non Nigerian living abroad, sending money to Nigeria to receive in any other currency other than Naira. That they, including their business men must by matter of rule redeem the money through the Naira. Acquiring the foreign currency from Nigeria can then be achieved as it is from direct Auction and direct currency exchange executed on line and by CBN.

Secondly the issue of parallel market which still exists in various forms should be done away with completely even it means re-educating Nigerians, including the Mallamia, and other Northerners on the act of currency trade on line, which does not mean that they will be damned by the acts. No, they can’t, since Nigerians and other visitors are making it to the country daily through dollars. But as far quoting on top of exchange rate, there is need for redemption. 3, there is a need for currency board in most countries for ‘Currency board’ which entirely regulates the availability of foreign currency in any country, which should include Nigeria. There is also the issue of currency hedging which must concern Nigerians and those who have the special angle of managing their wage and price.

Naira Depression and What Sanusi Can Do (II)c

By

Sampson Iroabuchi Onwuka


....There was also the issue of too much cash recurring from the 420 billion Naira injections to Nigerian banks and Muktar’s billions of dollars in expenses in months after the crash. Nobody gives account to the Federal Government and I mean these Northerners are becoming too reckless to be questioned on the allocation of federal resources. Such procedure however made the available bond that expensive and required short time decay to enable useful profit, which would only lead Naira to higher price level and not lower. That will also bring Naira closer to dollars in international markets and in spite of Nigeria performing with its international debts and obligations the Naira will continue a spiral downwards, and like what we have seen so far there will be redemption through Crude oil dollars to encourage stability. But Sanusi needn’t buy out the Naira at all he can block the recapitulation in dollars or any foreign company through Nigerian banks and he can correlate the rate of repatriation of foreign currency to be equal to currency rotation outside the inception, relative to money through crude oil. There is also the case of Crude oil dollars. There are other forms of soft conversion that should ease the fears with companies uncomfortable with long term investment in Nigeria. Case in point is what happened during Soludo’s administration when we owed the world nothing. The Naira was still doing badly leading Soludo to buy over 500 million dollars worth of Nigerian Naira at a time. But the downwards spiral continued. The reason he eventually figured out was the hemorrhaging was through foreign currency rotation in Nigeria. Soludo’s leniency was towards high dollar repository in Nigeria and its CBN, with a view of attracting businesses from around the world needing repatriation in dollars as necessary condition for investing in Nigeria, a path which denied the Naira a home court advantage…essentially lampooned on the Naira which could not take the ‘strain’. Secondly, there was no real measure to gauge the Naira independently and no real structure to block the flow of dollars and other foreign papers which made difficult understanding the warning signs. As such his first move was naturally to get rid of the parallel market. The exiting parallel market in Nigeria began to experience all kinds of trouble and resistance, and in the end, it was a case used by certain people against Soludo who attempted to replace the parallel market with direct auction, to curb the speculative bubble and foreign currency over price. Hence, there was an inflationary pressure on the Nigerian Naira, driven by the necessity to sale to a higher bidder. There was also the round table device which armed bankers with damaging ammunition to speculate freely, recklessly as become the case. Soludo was arguably forced out of office on this account and the issue of recapitulation.




1 posted on 07-19-2010, 05:41:07 AM Kaparak Re: Naira Depreciation And What Sanusi Can Do (ii) Mr. Iroabuchu, why waste paper and ink on this University of Khartoum (top-ten worst Universities in the world) alumnus who is totally clueless on what his role is. I mean, Nigeria cannot afford on-the-job-training for this kind of position. I have just read Sanusi's political diatribe he authored "POWER-SHIFT AND ROTATION: BETWEEN EMANCIPATION AND OBFUSCATION" in which he concluded, I quote “…Nigerians have be parasiting for three decades….” among chockfull of other grammatical errors. That amateurish article is totally lacking of original ideas that even a C- average primary school kid with access to a library of Nigerian newspapers could easily compile better “What I did during my School Break” essay. Perhaps we should send Sanusi back to school to learn not only how to construct logical sentences, spell correctly but most importantly, how to focus on his job in which he is scoring a solid F, at best. Professor Kperogi, where are you? Come and train one of your students on syntax, grammar, spelling, especially economics – we cannot take this anymore. posted on 07-19-2010, 10:26:31 AM Sampson onwuka iroabuchi Re: Naira Depreciation And What Sanusi Can Do (ii) Kaparak...

Sampson Onwuka's response

We are friends of Sanusi and the good Naira...there is need to continue to exchange ideas of what we can do to help our country. This is one easy way to accomplish it. There is a chinese saying...'big problem small solution' and we must take it very seriously that much of our economic problems in the ten years or so...is not without the capitulation on the Nigerian Naira.

Cheers...

Posted on 07-19-2010, 10:30:49 AM Oyeols Re: Naira Depreciation And What Sanusi Can Do (ii) This is an article that will work on the largely uneducated masses, but not on those of us who are well educated in finance and international economics. I am not here to defend anyone, but I think its unfair to blatantly mis-represent facts to the public. First of all the Naira has not spiralled downwards since Sanusi took over. This is a blatant untruth!! The naira has been stable at about $/N150 for about a year now. The Naira will gain once we begin to earn more dollas as a country via exports than we require to finance our imports. This was evident in 2007-2009, when as a result of huge inflows to invest in the stock market and bank re-capitalisation, most banks didn't even need to go to CBN for auction. Therefore the price went down and the exact reverse was the case when all the money went out again at the beginning of the recession. SIMPLE!! posted on 07-19-2010, 11:55:13 AM

Sampson onwuka iroabuchi Re: Naira Depreciation And What Sanusi Can Do (ii) @Oyeols.

...completely untrue. Naira will not gain nothing if there is higher importance of hard capital in the country. For christ that's the whole purpose of currency board...even here in US. That is to forstall unnecessary importation of currency to US.

Secondly...the Naira did not gain anything in 2007-2009, I mean it did not. I was very active up to 2008 and I can assure you that stabilization of Naira in those Soludo years was due to the falling price of USD. Most countries of the world...including Caribbean received a boost on their currency with a dampning of US dollars.

thirdly...there was the issue of the Oil price as convertible for Euro and inverse of dollars. Remember that oil rocked 150 dollars pe barrel before reverting to 40 dollars per barrel. Why did we experience such change in dollars price..at first Euro did very well and then went quite high because of huge repostory of Arab dollars from high earn oil.

There was availability of dollars in Nigeria up to 2008 due to its cheap assorted class of USD...which does not mean that huge dollars in Nigeria led to stability of Naira. The lack or 'plenitude' of dollars in any economy has no marginal effect of the local currency...it is the repository and the issue of rotation that independently determine the value of any currency in the world. Other issue of trade deficit and trade and so on, are means to enhancing the 'exchange rate' of the given currency out of which the value is hue.

You mentioned 2007-2009...I think it is very late case in the matters affecting Niara. I take 2007-2008 as pivotal case study...you must remember that the issue of world order through those was quite eminent, so eminent that Gold dealers were pretending at calling for a change in world money order. The Euro was a good candidate.

The casaulity of the short window was dollars...largely because the profit from crude oil at 150 dollars a barrel was offshored to Euro...in a sense the Euro perculated at the rise of crude oil and it at whinning down on dollars. Nigeria is oil producing economy and its currency was pegged to dollars... enjoyed brief period of stability because of earnings which ended in the pockets of derivitive Nigerian petrol managers and yet Nigeria made a lot of money from Crude leaving excess of dollars in rotation and of the ECA....

But then Crude oil prices dropped precipititiously from 150 to 40 dollars leading to a crisis of Naira at the tail end of Soludo years...Naira crisis due to the issue of strong and peculating dollars which forced US feds to lower Interest rate up to O%.

Assuming you argument had any use, what is the reason why the Naira did so badly in those 2008/2009 years, inspite of the very availability of the dollars.

Fourthly, you seem to discount the issue of a rising interest rate to Naira. Naira depreciation will fast forward when US interest start counting beyond the 1%. I hope you added that in your commentary on how Nigeria will do in terms of regaining US dollars. Don't think the shift from 148 to 150 this year alone is due to anything magic about CBN.

Even when the US went 0% interest...I am personally aware of the fact that CBN did not hedge at all. So what the point of the commentary.

Buying into the Naira in plain hard currency is largely inadequate to helm the skid of Nigerian Naira. It is an old practice that is not without effect but what makeS you think Nigeria is the only country doing it. More like someone reserving a typical point in the tick (?) and wait for the market to tick in from vanishing point yesterday. Of course others are doing the same thing and nothing that magic about it.

I did see anything you wrote about how the 'no' ball movement of world currency and interest rate is not directly responsible for Naira balancing effect.... posted on 07-19-2010, 19:34:35 PM Kaparak Re: Naira Depreciation And What Sanusi Can Do (ii) @Iroabuchi, the best way to support Sanusi, and by extension Nigeria, is to advise this “razzmatazz mambo-pambo-ride-the-Whitehorse” to keep his poker nose off politics and focus, solely, on economic theories to see if he could grasp the elementary fundamentals of monetary and fiscal policies that every 1st year MBA students learn in 4 weeks of Finance 101 to accomplish what he was appointed to do at the CBN. Until then, I am not sending my hard-earned dollars to Nigeria for him to negligently fritter away to the more astute foreign bankers who only dwell, 24/7, on how to improve the financial performance of their respective economies & leave politics to the politicians. If Sanusi cannot do that, then he should be merciful enough to quit for elective office, and let someone else that is more qualified and dedicated to finance & economics fill the spot. posted on 07-20-2010, 14:17:28 PM Sampson onwuka iroabuchi Re: Naira Depreciation And What Sanusi Can Do (ii) kaparak,
My fellow NVS...why don't you hammer out your argument on this Naira thing so that we crack the hole wide open. You write very well. I will like to read about new markets and economic theories...I mean reviewing Pat Utomi for the rest of us is a good way to start, given his interest in the Presidency...although there is not original about the economist. BUt he is from markets.

And not only him, there is need to review the chattered papers of Fashola on 'Agriculture' and the relevance of his article to Nigeria. Some of these people running for any useful office should have a platform from which to make their claims...given our status as a commercial economy

Cheers posted on 07-21-2010, 04:03:34 AM Oyeols Re: Naira Depreciation And What Sanusi Can Do (ii) @ Iroabuchi,

You have said a lot in your response, but you failed to answer my main issue for replying in the first place, which was my issue with your saying that "But since his inception, Naira has been on a down ward spiral". Sanusi was appointed CBN governor on June 3rd 2009. The CBN central rate as at JANUARY 14th 2009 (before Sanusi was appointed) was $/N149.5. As at JULY19th 2010 it is $/N148.2, so where is the downward spiral?????. The downward spiral occurred between NOVEMBER 28th 2008 $/N116.12 and JANUARY14th 2009 $/N149.5 when Soludo was in charge. And like I said that was caused by the massive outflux of forex when the worldwide recession started. Simple demand and supply!! In our case demand exceeded supply at that point so I don't understand what you mean by "Assuming you argument had any use, what is the reason why the Naira did so badly in those 2008/2009 years, inspite of the very availability of the dollars"? Which very availability are you referring to?

While I don't doubt that interest rates and international cross rates have an effect on the $/N rate, their impact is not as huge as the impact of demand and supply. Even abroad any currency trader will tell you of the impact of the "earnings season", where foreign companies (usually american)repratriate their profits home. At such times, due to the demand for dollars by say General Electric in Japan, you will see the Dollar/Yen rate go from say USD/JPY 107 to USD/JPY 115 as the dollar gains value. This is a clear example of the law of demand and supply on exchange rates!!

You also mentioned that " ...in view that Nigerian banking as they claim was a formerly corrupted house until Sanusi arriving". You make it sound as though the view that our banks are indeed not corrupt is incorrect! Trust me, they were very corrupt before Sanusi and they still are now, though probably less so. I used to work in a bank and in currency trading, so I know a thing or two about what goes on in there.

Anyway, this should not be an unnecessary back and forth. I just did not like your choice of words which misrepresented some facts about Sanusi. No doubt you are well educated, but that does not mean you are not wrong about certain things. No one knows it all. The important thing is that one is objective enough to see obvious errors and admit them. I don't know it all either. Economics is a diverse subject and if solutions were so obvious, all economists would have the same ideas and approach, but of course we know they never do, even in very intellectual societies like America. posted on 07-21-2010, 12:28:05 PM Sampson onwuka iroabuchi Re: Naira Depreciation And What Sanusi Can Do (ii) Oyeols...

You use the term 'blatant untruth'...about the down ward spiral on the Naira...Naira to dollars was at 148 at last year end and is today 150...what the 'blatant untruth'

Your initial reply...said

"This is an article that will work on the largely uneducated masses, but not on those of us who are well educated in finance and international economics. I am not here to defend anyone, but I think its unfair to blatantly mis-represent facts to the public. First of all the Naira has not spiralled downwards since Sanusi took over. This is a blatant untruth!! The naira has been stable at about $/N150 for about a year now. The Naira will gain once we begin to earn more dollas as a country via exports than we require to finance our imports. This was evident in 2007-2009, when as a result of huge inflows to invest in the stock market and bank re-capitalisation, most banks didn't even need to go to CBN for auction. Therefore the price went down and the exact reverse was the case when all the money went out again at the beginning of the recession. SIMPLE!!"

"The Naira will gain once we begin to earn more dollas as a country via exports than we require to finance our imports."

null

Am not what you mean by that.

In your next commentary we read...

"You have said a lot in your response, but you failed to answer my main issue for replying in the first place, which was my issue with your saying that "But since his inception, Naira has been on a down ward spiral". Sanusi was appointed CBN governor on June 3rd 2009. The CBN central rate as at JANUARY 14th 2009 (before Sanusi was appointed) was $/N149.5. As at JULY19th 2010 it is $/N148.2, so where is the downward spiral?????. The downward spiral occurred between NOVEMBER 28th 2008 $/N116.12 and JANUARY14th 2009 $/N149.5 when Soludo was in charge".

Can you explain why?

"And like I said that was caused by the massive outflux of forex when the worldwide recession started. Simple demand and supply!!"

Can correlate that with your initial commentary...and explain demand and supply in Currency terms.

"In our case demand exceeded supply at that point so I don't understand what you mean by "Assuming you argument had any use, what is the reason why the Naira did so badly in those 2008/2009 years, inspite of the very availability of the dollars"? Which very availability are you referring to?"

Am sure in your first commentary you mentioned the following

"The Naira will gain once we begin to earn more dollas as a country via exports than we require to finance our imports. This was evident in 2007-2009, when as a result of huge inflows to invest in the stock market and bank re-capitalisation, most banks didn't even need to go to CBN for auction. Therefore the price went down and the exact reverse was the case when all the money went out again at the beginning of the recession. SIMPLE!!"

We take it from this comment that availability of dollars equals depreciation of Naira or is it the reverse that you had in mind

Commentary 2

"While I don't doubt that interest rates and international cross rates have an effect on the $/N rate, their impact is not as huge as the impact of demand and supply. Even abroad any currency trader will tell you of the impact of the "earnings season", where foreign companies (usually american)repratriate their profits home. At such times, due to the demand for dollars by say General Electric in Japan, you will see the Dollar/Yen rate go from say USD/JPY 107 to USD/JPY 115 as the dollar gains value. This is a clear example of the law of demand and supply on exchange rates!!"

Clearly we can make the argument that demand and supply is the deciding quantity in Currency valuation. Now I wanna ask you clearly and concise to make a simple case about the Naira depreciation between 2008 and 2009...especially the Soludo years.

Your commentary 2.

"You also mentioned that " ...in view that Nigerian banking as they claim was a formerly corrupted house until Sanusi arriving". You make it sound as though the view that our banks are indeed not corrupt is incorrect! Trust me, they were very corrupt before Sanusi and they still are now, though probably less so. I used to work in a bank and in currency trading, so I know a thing or two about what goes on in there."

...well the issue of the statement 'as' 'they' 'claim' should mean entirely that it was 'as they claim' . What's hard to undertstand about that.

"Anyway, this should not be an unnecessary back and forth. I just did not like your choice of words which misrepresented some facts about Sanusi. No doubt you are well educated, but that does not mean you are not wrong about certain things."

clearly the issue is not about Sanusi's academic ability...the issue is not 'back and forth', the issue is a matter of coming to grasp with Sanusi...paying more attention to managerial function than Naira. Naira stabilizing DOES NOT MEAN that Naira is gaining.

If Sanusi has paid pivotal attention to the Naira, the currency would have taken a very positive appreciation given the current stagnation of US dollars. Naira stabilizing, does not in anyway mean that Nigerian CBN is doing anything exceptional. The oil since Sanusi's inception to office has appreciated. Is Nigeria Naira correlated to the dollars

"No one knows it all. The important thing is that one is objective enough to see obvious errors and admit them. I don't know it all either. Economics is a diverse subject and if solutions were so obvious, all economists would have the same ideas and approach, but of course we know they never do, even in very intellectual societies like America"

clearly there is a gap between the twof us. Largely enough...demand and supply has nothing to do with currency. Currency is a different economic dimension. Is like a third dimension which Americans and the English mastered a long time ago. Pounds, Dollars, and so on have no inherit value...pounds is also earned and therefore has no inherit bais.

In fact the shift from dollar correlation to gold to pure paper is the work of Arthur Burns lifting pages from John Maynard Keynes. Maynard Keynes arguments if followed carefully did not quite avoid Gold as 'junk'. Keynes never quite make the argument that the relationship between gold and money is negligible.

IOU is probably what you had in mind and of course its relationship to Junk bonds....It has potential value like Euro...which is not real currency. Like Chinese and Brazilian currencies which are 'pre-value' and set, which are intended to preserve wage and price and which are not real time currency. They do not float

But legal tender such as pounds and dollars and Nigerian Naira are the world greatest example of free market system. They float freely...they are currency per excellent. Their value and value alone is so kinetic, so dependent on usability that every move that dollars makes, must affect the Naira and the pounds. Every move that Naira makes must apply to USD.

If the Naira is stabilizing...it is not gaining, it is 'loosing' in future since the stability means that other factors 'will' affect the currency and positively USD is then negatively Nigerian Naira. Naira is at war with dollars, pounds, and so on and it must win them every day...every second, it must gain.

Moving currency to Nigeria via Western Union and company to pick up dollars and pounds in Nigeria, is Naira capitulation (which is also where you may be coming from supply demand paradigm) and is a losing positive on the Naira. We don't have to wait for a strong dollars through interest rate spike of the US Feds to understand that there is no hedge on the currency...the naira.

Naira is equal to the Euro, equal to the dollars, equal to the cedis and equal to any currency in the world. But their exchange rate - the 3rd dimension of market - make all the difference. The difference (we can compute the differentials) if so stretched is a summary of the deciding economic strategies of these countries.

So Oyeols...why don't to fire off on how to position

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

Naira Depression and What Sanusi Can Do (II)a

By

Sampson Iroabuchi Onwuka

The job of Sanusi as Central Bank Chairman is moderating price and wages. In essence, he is the moderator, the interventionist, the referee, the practical See if not the brain behind the Nigerian banking system and the one that proclaims the agreement of the banking institution. He has direct emphasis on wages and price and from these economic standpoint, we must understand his role as a Governor. The functional dynamics of wage and price as part of his job is tied to the Naira. In everywhere, the balkanization of the Naira is the man’s chief concern.

He has prodded on the bankers and banking institution but his attention should be not misplaced as a man in charge of what happens to the Nigeria credit facility and the very unit of exchange. The continuous time depreciation of Nigerian Naira means that Sanusi is failing in his primary duty as Governor, or at least, he is losing the war on his primary duty which is the stability of the Naira. But of course, the banking institution had other problems before his inception in office, and Sanusi’s argument is that he had to deal on the condition, perhaps before turning his attention to the currency, the buying power. But the current argument that Sanusi’s credit as a banker is appreciably fair in terms of his administration reform (? ) may be taken seriously by view of what a stronger administrative cohesion will do for the later part of the economy.

But the tight rope around the banking institution may yet prove too strong for civilian participation and may show signs of wearing since the CEOs of Banks are no longer trusted. Bank Supervision in terms of Sanusi can mainly yield a lack of faith in the industry and then failure for Banks to perform. I have argued that some of his actions are not based on any real saving a string of pre-conceived notion. However, Sanusi’s has also won the admiration of some Nigerians, and lately at NVS, he was even diagnosed by Azu Mary of being a ‘misunderstood patriot’. Some question the meaning of the praises on him on account of what is missing from the general economy and others accept it, in view that Nigerian banking as they claim was a formerly corrupted house until Sanusi arriving. But since his inception, Naira has been a down ward spiral and it is on this public evidence can be begin to remind ourselves that the Nigerian society is often obtuse on more critical issues since partisanship exist in the many rungs of the society, including Banking

Naira Depression and What Sanusi Can Do (I)c

The question is also the answer since ‘currency’ by its definition means rotation by any means of exchange. As such the paper fortune of currency is the simple fact of its usability. The example is to be appreciated if we are to understand why the role of Western Union, Vigo, Eastern conducting dollars and Euro to Nigeria without buying into the Naira. In essence, they force Nigerians who conduct over 7 billion dollars every year from different part of the world to use the dollar in Nigeria are the expense of Naira.

The usability of any currency of the world infers its demand and the demand for any currency in the world determines its value. Is like a tug of war between internet carrier systems such as Google, Aol, Yahoo, Bing etc, or pure plays such Face book, Twitter, Feboz, and like cell phones, where the more you use them the bigger they are, currencies of the world are like that. The more you use the dollars at the expense of Naira the bigger the Dollars, Euro, Pounds, etc, and the weaker the Naira. So those who ask you to send money in dollars from US or Europe and receive dollars, pounds, and Euro in Nigeria at a lower transmission price are betting on the collapse of your economy and a depreciation of your currency.

The soft and hard question is why…why would you send dollars to Nigeria and pick dollars at a lower price than pick up in Naira? By Rights, Western Union, Eastern Union and Vigo, are supposed to buy into the Naira as part of its faith in the economy. But they are evading the currency. By buying into the Naira would mean that these companies should conduct your 7 billion into Nigeria through their naira bait on the local banks.

Naira Depression and What Sanusi Can Do (I)b

By

Sampson iroabuchi Onwuka

The depreciation of any currency in the world with huge foreign investment like Nigeria is almost a guarantee that the country will default on its foreign debt. Case in point is Sinopec, the Chinese outfit, who were said to have signed a MOU with Nigeria about its 23 billion dollar investment in the country. Second case in point is the accrued repository for a second bridge over the river Niger and widening the road between Nigerian and Cameroun. This will mean that Sinopec will build three oil drilling factories and agro-chemical industries in presorted areas. The backdrop to this is that Sinopec proves itself a ‘Bond’ for the general public and lien for credit swaps. That is a form of guarantee that Sinopec will revert to bank coverage should business fails.

But the group did not at anytime mention the role of Western Union, Vigo, Eastern Union, etc, companies providing international services without buying into the local currency in damaging the Nigerian Naira. Neither did the group raise the attention of Sanusi neglecting his role as the real manager of Nigerian Naira which has gotten bad publicity.

The chosen question for many countries of the world is how to make their currency much more competitive, to essentially withstand the strain of hard currency penetration. Since the perform grade of any economy is ultimately noted by its currency, the challenge faced many Central Banks is how to develop a working dynamic for their unit of exchange, how to create a form of price and wage control.

Naira Depression and What Sanusi Can Do (I)a

On May 30th 2010, a group of financial engineers collectively called NEMT pulled their attention together to hear out finance Minister. This group includes ministers of Agriculture, commerce, and industry, power, Transport, works, and National planning. There were trying to solve the problems of the economy, they were confronted with issue of current exchange rate which was then and now 150 Naira for a dollar.

This of course has nothing to do with inflationary pressure from High Tariff, the group argued that certain product considered embargo should be exited from federal customs and taxed in many right ways. The question that remains to be answered is whether the NEMT did not know how to solve the problems of the depreciating Naira, and if they didn’t know how, we question their silence on the matter.

If we slash Tariff across the board by 49% on a one time ‘three month’ agility for deeper 26%, then the next step will be curbing the depreciation through blocking super currency importation to Nigerian through Western Union, Vigo, and of Eastern Union others. These steps will in one hand flood the commodity markets and on the other hand, put a brake on notional windfall of the Naira. They will be shortage of certain currency which Crude oil and direct Auction instead of parallel market should more than provision for.

A Market Advice for President Jonathan Goodluck (IX) by Iroabuchi Onwuka

By

Sampson Iroabuchi Onwuka

Yet again, the monopoly of these companies nearly ‘bleached’ the country dry through the hands off approach to cell phone industry, a condition that remained the backbone of Obasanjo’s disastrous privatization scheme until fairly recently. But of course such companies in Nigeria like the Indian outfit hugging all the actions with the metal industry in Nigeria and raising the price Sky high, would do little to improve their company in Nigeria and much more in creating foreign rates in Nigeria. They are not seriously challenged or dogged in the Nigerian market by others in Nigeria. This is a vacuum process. And this vacuum process swallow whole on all avenues of commerce, it indirectly creates a legal case of monopoly and the end result is just high cost in virtually any source of living.

A Market Advice for President Jonathan Goodluck (VIII) by Iroabuchi Onwuka

....incentive is that necessary if we are to grasp with what happens with small businesses transitioning to mid management. In many ways, most third world economies grind themselves to a halt with false attention on foreign investor seeking to enhance the growth through special privileges. These special privileges create inflationary pressure which rest in peace of the buying power. In the name of economic growth, these third world economies when engaged forget the bullish market side of business and the power of self interest, making silly Tariffs that go the distance ruining the benefits of privatization.

The trouble begins when we have little or no success in privatization and when a country like Nigeria turn to foreign investors who for the fact of being outsiders need guarantees of return from their investment. The problem becomes worse when these foreign investors begin to look for repatriation in super currency for instance dollars. Repatriation in dollars from Nigeria Naira is such a market crash that the 1/150 rate of exchange is the only way to understand price appreciation through market Nigeria.

To say that Globacom and MTN are not very good companies in Nigeria is to raise all kinds of objection. Unqualified reports may be made about them but measured against Oando oil, a Nigerian oil company involved in merit search for newly coveted oil fields, the two companies above may actually rank lower. Many Nigerians may revile against the indictment but it is actually true. Going as far as US example of high rated companies in Thomas Register, Donnelly List, Standard and Pour on Industries, and the 9 US census bureau, these companies will be at the bottom of the list. But there are other more disaffecting list and ranking system. On the whole, these two companies ‘MTN and Globacom’ do not at least come up with any new product and soft ware for general use, as such they merely copy existing products, manufacture prototypes and much of their profit go into expansion and staff provision, mainly.

A Market Advice for President Jonathan Goodluck (VII) by Iroabuchi Onwuka

Iroabuchi Onwuka

...such incentive is that necessary if we are to grasp with what happens with small businesses transitioning to mid management. In many ways, most third world economies grind themselves to a halt with false attention on foreign investor seeking to enhance the growth through special privileges. These special privileges create inflationary pressure which rest in peace of the buying power. In the name of economic growth, these third world economies when engaged forget the bullish market side of business and the power of self interest, making silly Tariffs that go the distance ruining the benefits of privatization.

The trouble begins when we have little or no success in privatization and when a country like Nigeria turn to foreign investors who for the fact of being outsiders need guarantees of return from their investment. The problem becomes worse when these foreign investors begin to look for repatriation in super currency for instance dollars. Repatriation in dollars from Nigeria Naira is such a market crash that the 1/150 rate of exchange is the only way to understand price appreciation through market Nigeria.

To say that Globacom and MTN are not very good companies in Nigeria is to raise all kinds of objection. Unqualified reports may be made about them but measured against Oando oil, a Nigerian oil company involved in merit search for newly coveted oil fields, the two companies above may actually rank lower. Many Nigerians may revile against the indictment but it is actually true. Going as far as US example of high rated companies in Thomas Register, Donnelly List, Standard and Pour on Industries, and the 9 US census bureau, these companies will be at the bottom of the list. But there are other more disaffecting list and ranking system. On the whole, these two companies ‘MTN and Globacom’ do not at least come up with any new product and soft ware for general use, as such they merely copy existing products, manufacture prototypes and much of their profit go into expansion and staff provision, mainly.

A Market Advice for President Jonathan Goodluck (VI) by Iroabuchi Onwuka

Sampson Iroabuchi Onwuka

But during transitioning strategy, there are always the issue of very few Manufacture companies to start with and fewer locals capable of making competitive investment, hence a third world economy. In such circumstances, this is where the Banks come in. In Nigeria, the recent experimentation with credit yielded a harvest of debt as such a slowdown in representation. China however solved the problem with Development banks and they remain slightly ahead of manufacture curve of many countries largely on defense of their premier wage and price control on the working and middle class China republic. In essence the rate of growth of Chinese influence in recent years has everything to do with inflation control, a dynamic, that is less wicked for Nigeria whose Naira is not even fixed. But China is a quasi communist economy and as such their price and wage control cannot apply in Nigeria or any third world economy.

I mean Nigeria should look at fixing the currency if such high protective and structured Tariffs will be allowed to continue. Else the NEMT should understand they are fretting the economy away to the cheapest merchants of the world. Merchants when not managed only leave a pill of dumps in any country of their wake. In essence, the wider the chance you give these people, the more they clean the markets.

In terms of Privatization from Government ownership, countries such as Nigeria will only be expected to struggle with successful privatization given above all the fact that they are time constrained to produce more of the same or different goods for their ever expanding demographics

A Market Advice for President Jonathan Goodluck (V) by Iroabuchi Onwuka

The evolution of markets, the very wealth of nations, especially in its infant period, sometimes represents a sought of gauge on the country’s commercial character and usually help to study missed set of opportunities. For any country in the world where there is any form of stock market, the purpose has always been to help encourage investment, especially foreign investment. Monopoly which guarantees their survival snails the process but the question naturally arises as to how to form a kind of equilibrium between importation of goods we don’t already have in Nigeria and protection of local markets from harassment.

That must stretch to greatest moments of most third world countries which occur when there is a transfer of production capacities like manufacture from Government owned to private. Privatization scheme is a paradigm shift from the Government owned to private, but from the early days of that transition strategy onwards, countries with weak markets dynamics always encounter the problem of monopoly and high Tariffs.

For instance, the current issue of stake holders of NERC and MYTO (Multi Year Tariff Order) which matter arising from Government attempt at removing subsidy at current per unit use of 6.00Kw to 7.00Kw and would likely rise to 10.0Kw. The Electricity Tariff has risen up to 30% in a matter of months and is expected to compete with challenge the ridiculous 90% Tariff imposed on GSM products by Ernest Ndukwe of N.C.C. until Natcoms (National Association of Telecoms subscribers) managed to force a jettison on the back breaking and somewhat illegal tariffs. If this High Electricity Tariff should ‘retention’ then the fixed income earners would simply toe the line of Nigerian Medical doctors now on strike. There is no way to pretend that China’s mispriced interest in Niger Delta Electric Power Supply is not a stimulus for this. There is no pretending that this is a step in the right direction but the difference between a Redchip still falling in price and a ADR China Bluechip still rising are to be understood if we can hope to demonstrate that the unnamed companied interested in Nigerian power supply is one too few and will import foreign rates that hold no prisoners about very fixed rate in Nigeria…a case of Alfred Marshal partial parity and in many counts, the roots of high inflation in the country.

A Market Advice for President Jonathan Goodluck (IV)

But this is a bad economic idea whatever the reasons are. For a rising period of importation of tires from has increased in worth and in natural condition, the industry has now attracted the greedy nose and eyes of French companies. In many ways, a member of Nigerian ministry cannot make so public a statement had efforts not been made to lure the commercial Actors towards an informal alignment with Michelin and Dunlop. Of course the foreign companies have no interest for long term investment and if they did, they wanted local currency for such support. The only way to control so vast a Nigerian market was naturally through High Tariffs, tariffs so high. With high Tariff structure, there will redemption through sales and then there will be inflationary pressure from need to profit and cost, then the domino effect.

But if John Maynard Keyes opens ‘The General Theory’ with opposition to Say’s Law that “supply creates its own demand” is does not at anytime mean that he was talking from market perspective which was Says. In market reality, supply does create its own market and for that, penetration of goods and availability of market can make a difference in terms of public trust. But on the upside view Keynes made that it was demand that created supply, hence attention on production, we see the inverse relationship between political economics and market economy. One key in the argument is that one side of the case involves the spending government and the other side involves the sales district, markets actually. Surely we wouldn’t need James Buchanan idea of public choice which inveighed and remained critical of Keynes, in which he suggested that public choice is vulnerable to market condition. This is easily achieved through High Tariffs which is anti competitive and which can be of some benefit to the country and no.

The case in point will be the outbreak of 19th century Irish corn and potato embargo which Thomas Malthus argued that local prices had to appreciate first and formally to gauge the rate of importation of corn from Ireland. It was a wrong and right argument. Wrong because of the rent issue and the case of subsistent wage, right because of diminishing returns with view of relatively matching number of small scale English Agriculturist in the 19th century English population. Of course William Jevon from sales and pure market perspective challenged Malthus and his point on total and marginal utility apply in Nigeria since utility must compensate wage, a classic Betham on Utilitarian economy (on what we need, including industries and stadium) with the twist on labor and wage increase.

A Market Advice for President Jonathan Goodluck (III)

In many parts of Nigerian manufacturing department, we find a virtual absence of local investment or the presence of newer companies. The reasons are not farfetched, for we know that Nigerian companies in dollars terms will never compete with turnkey investment from God know where. These other companies in the guise of foreign investment in a big Nigerian market will talk up the Nigerian Commerce ministry and make high pitch for monopoly on any selling industry in Nigeria. In the name of supporting local economy and improving home supply they blind the department from seeing the size of damage that a few unrestrained companies can do in Nigeria.

Such move will always take place in Nigeria since we know that it will almost naturally cripple any form of competition from local Nigerians interested in the same business. The Bull side of this market is that a guarantee for steady profit on shortest possible period is certain even if means doing away with Nigerians entirely. The Bear side is however dead, so dead that the minimum government intervention which occasional burst inflationary prices is back sated in green of the argument that High Tariff was a way of protecting local manufacture. The bear side of the market which is noted for its role in preserving fixed income earning, and civil servant, may have given way to the facts of self interest involved in unprotected markets. This vacuum system is responsible for just about everything. It is a looting system accomplished through high tariff on just about any profit driven entity is inflationary pressure on Short term, to which the local are party to. The long term view that prices will fall will never happen given the Balkanization of Nigerian Naira. Remember income on general term, is largely fixed.

Last Tuesday 7th of July, Deputy Chairman of Nigerian Commerce Ministry, Mr. Ibukun Akindudu with the Support of Senator Jabric Markins –Kuye, publicly expressed his wishes for the return of Michelin and Dunlop to Nigeria. It was a tire business which will naturally require a form of high Tariff protection in order to allow these companies to make it to Nigeria following their successful talks with Akindudu. But is the choice of the public served here, for if the public is not served then self interest is the drive in. By the very office, the public is not protected and the inflation is not managed at all.

A Market Advice for President Jonathan Goodluck (II)

Given the inflationary pressure from High Tariff and high unemployment in many parts of the country, given the little or no credit from Banks, the country cannot escape slow or insignificant growth for small businesses. Given the high numbers of unemployment in Nigeria and estranged condition of the Nigerian fixed income earners, there is no telling how disaffected and disfranchised Nigerian Laborers are and whether they can survive the unconditional vacuum system. There is ‘vacuum system’ of course in Nigeria, a process which involves protection of certain rights with high tariffs, which inadvertently destroy any comfort for long term investment and therefore cur for inflationary pressures.

For instance, when Nigerians pay so much for GSM products, for SMS connection or software, it reverts to overall high price which injure the local fixed income earners. High price market is seriously expensive for local businesses but cheap for foreign investors many of them demand repatriation in Dollars for profit made through the profit. So this is where the pun begins in Nigeria, we need cell phones but not have to any price for it. Above all, we should not have to take the rate that is only commensurate with dollar minded market. Given the dependency ratio of Nigerians on cell phones and the problems of fixed income of the many Nigerians, It is save to conclude that against a depreciating Nigerian Naira, Nigerians are paying far too much for the ordinary cell phone use, irrespective of the reduction in Tariff. It also makes Nigeria a very expensive cell phone industry….one of the most expensive in the world.

We can estimate the market demand of real effect of high phone call in Nigeria, the use of cell phones in Nigeria make cell phone call a derivative of the general pull on demand. Demand may by itself be a sensitive barometer in testing the range of pressure to buy a product that we don’t already have, but it is steady bait against. This can easily result in paying too much for essential needs of the society. You can it a ‘Want’ category, a market of self interest, and the product under this condition drives the market.

Inflationary Pressure from High Tariff (VI)

By

Sampson Iroabuchi Onwuka

The trouble begins when we have little or no success in privatization and when a country like Nigeria turn to foreign investors who for the fact of being outsiders need guarantees of return from their investment. The problem becomes worse when these foreign investors begin to look for repatriation in super currency for instance dollars. Repatriation in dollars from Nigeria Naira is such a market crash that the 1/150 rate of exchange is the only way to understand price appreciation through market Nigeria.

To say that Globacom and MTN are not very good companies in Nigeria is to raise all kinds of objection. Unqualified reports may be made about them but measured against Oando oil, a Nigerian oil company involved in merit search for newly coveted oil fields, the two companies above may actually rank lower. Many Nigerians may revile against the indictment but it is actually true. Going as far as US example of high rated companies in Thomas Register, Donnelly List, Standard and Pour on Industries, and the 9 US census bureau, these companies will be at the bottom of the list. But there are other more disaffecting list and ranking system. On the whole, these two companies ‘MTN and Globacom’ do not at least come up with any new product and soft ware for general use, as such they merely copy existing products, manufacture prototypes and much of their profit go into expansion and staff provision, mainly.

Yet again, the monopoly of these companies nearly ‘bleached’ the country dry through the hands off approach to cell phone industry, a condition that remained the backbone of Obasanjo’s disastrous privatization scheme until fairly recently. But of course such companies in Nigeria like the Indian outfit hugging all the actions with the metal industry in Nigeria and raising the price Sky high, would do little to improve their company in Nigeria and much more in creating foreign rates in Nigeria. They are not seriously challenged or dogged in the Nigerian market by others in Nigeria.

This is a vacuum process in Nigerian markets and this vacuum process swallow whole on all avenues of commerce, it indirectly creates a legal case of monopoly and the end result is just high cost in virtually any source of living.



Read full thread

Inflationary Pressure from High Tariff (V)

By Iroabuchi Onwuka

But during transitioning strategy, there are always the issue of very few Manufacture companies to start with and fewer locals capable of making competitive investment, hence a third world economy. In such circumstances, this is where the Banks come in. In Nigeria, the recent experimentation with credit yielded a harvest of debt as such a slowdown in representation.

China however solved the problem with Development banks and they remain slightly ahead of manufacture curve of many countries largely on defense of their premier wage and price control on the working and middle class China republic. In essence the rate of growth of Chinese influence in recent years has everything to do with inflation control, a dynamic, that is less wicked for Nigeria whose Naira is not even fixed. But China is a quasi communist economy and as such their price and wage control cannot apply in Nigeria or any third world economy.

I mean Nigeria should look at fixing the currency if such high protective and structured Tariffs will be allowed to continue. Else the NEMT should understand they are fretting the economy away to the cheapest merchants of the world. Merchants when not managed only leave a pill of dumps in any country of their wake. In essence, the wider the chance you give these people, the more they clean the markets.

In terms of Privatization from Government ownership, countries such as Nigeria will only be expected to struggle with successful privatization given above all the fact that they are time constrained to produce more of the same or different goods for their ever expanding demographics.

The same incentive is that necessary if we are to grasp with what happens with small businesses transitioning to mid management. In many ways, most third world economies grind themselves to a halt with false attention on foreign investor seeking to enhance the growth through special privileges. These special privileges create inflationary pressure which rest in peace of the buying power. In the name of economic growth, these third world economies when engaged forget the bullish market side of business and the power of self interest, making silly Tariffs that go the distance ruining the benefits of privatization.

Inflationary Pressure from High Tariff (IV)

By
Sampson Iroabuchi Onwuka

The case in point will be the outbreak of 19th century Irish corn and potato embargo which Thomas Malthus argued that local prices had to appreciate first and formally to gauge the rate of importation of corn from Ireland. It was a wrong and right argument. Wrong because of the rent issue and the case of subsistent wage, right because of diminishing returns with view of relatively matching number of small scale English Agriculturist in the 19th century English population. Of course William Jevon from sales and pure market perspective challenged Malthus and his point on total and marginal utility apply in Nigeria since utility must compensate wage, a classic Betham on Utilitarian economy (on what we need, including industries and stadium) with the twist on labor and wage increase.

The evolution of markets, the very wealth of nations, especially in its infant period, sometimes represents a sought of gauge on the country’s commercial character and usually help to study missed set of opportunities. For any country in the world where there is any form of stock market, the purpose has always been to help encourage investment, especially foreign investment. Monopoly which guarantees their survival snails the process but the question naturally arises as to how to form a kind of equilibrium between importation of goods we don’t already have in Nigeria and protection of local markets from harassment.

That must stretch to greatest moments of most third world countries which occur when there is a transfer of production capacities like manufacture from Government owned to private. Privatization scheme is a paradigm shift from the Government owned to private, but from the early days of that transition strategy onwards, countries with weak markets dynamics always encounter the problem of monopoly and high Tariffs.

For instance, the current issue of stake holders of NERC and MYTO (Multi Year Tariff Order) which matter arising from Government attempt at removing subsidy at current per unit use of 6.00Kw to 7.00Kw and would likely rise to 10.0Kw. The Electricity Tariff has risen up to 30% in a matter of months and is expected to compete with challenge the ridiculous 90% Tariff imposed on GSM products by Ernest Ndukwe of N.C.C. until Natcoms (National Association of Telecoms subscribers) managed to force a jettison on the back breaking and somewhat illegal tariffs.

If this High Electricity Tariff should ‘retention’ then the fixed income earners would simply toe the line of Nigerian Medical doctors now on strike. There is no way to pretend that China’s mispriced interest in Niger Delta Electric Power Supply is not a stimulus for this. There is no pretending that this is a step in the right direction but the difference between a Redchip still falling in price and a ADR China Bluechip still rising are to be understood if we can hope to demonstrate that the unnamed companied interested in Nigerian power supply is one too few and will import foreign rates that hold no prisoners about very fixed rate in Nigeria…a case of Alfred Marshal partial parity and in many counts, the roots of high inflation in the country

Inflationary Pressure from High Tariff (III)

By

Sampson I Onwuka

Last Tuesday 7th of July, Deputy Chairman of Nigerian Commerce Ministry, Mr. Ibukun Akindudu with the Support of Senator Jabric Markins –Kuye, publicly expressed his wishes for the return of Michelin and Dunlop to Nigeria. It was a tire business which will naturally require a form of high Tariff protection in order to allow these companies to make it to Nigeria following their successful talks with Akindudu. But is the choice of the public served here, for if the public is not served then self interest is the drive in. By the very office, the public is not protected and the inflation is not managed at all.

But this is a bad economic idea whatever the reasons are. For a rising period of importation of tires from has increased in worth and in natural condition, the industry has now attracted the greedy nose and eyes of French companies. In many ways, a member of Nigerian ministry cannot make so public a statement had efforts not been made to lure the commercial Actors towards an informal alignment with Michelin and Dunlop. Of course the foreign companies have no interest for long term investment and if they did, they wanted local currency for such support. The only way to control so vast a Nigerian market was naturally through High Tariffs, tariffs so high. With high Tariff structure, there will redemption through sales and then there will be inflationary pressure from need to profit and cost, then the domino effect.

But if John Maynard Keyes opens ‘The General Theory’ with opposition to Say’s Law that “supply creates its own demand” is does not at anytime mean that he was talking from market perspective which was Says. In market reality, supply does create its own market and for that, penetration of goods and availability of market can make a difference in terms of public trust. But on the upside view Keynes made that it was demand that created supply, hence attention on production, we see the inverse relationship between political economics and market economy. One key in the argument is that one side of the case involves the spending government and the other side involves the sales district, markets actually. Surely we wouldn’t need James Buchanan idea of public choice which inveighed and remained critical of Keynes, in which he suggested that public choice is vulnerable to market condition. This is easily achieved through High Tariffs which is anti competitive and which can be of some benefit to the country and no.

Inflationary Pressure from High Tariff (II)

By

Sampson Iroabuchi Onwuka

For instance, when Nigerians pay so much for GSM products, for SMS connection or software, it reverts to overall high price which injure the local fixed income earners. High price market is seriously expensive for local businesses but cheap for foreign investors many of them demand repatriation in Dollars for profit made through the profit. So this is where the pun begins in Nigeria, we need cell phones but not have to any price for it. Above all, we should not have to take the rate that is only commensurate with dollar minded market. Given the dependency ratio of Nigerians on cell phones and the problems of fixed income of the many Nigerians, It is save to conclude that against a depreciating Nigerian Naira, Nigerians are paying far too much for the ordinary cell phone use, irrespective of the reduction in Tariff. It also makes Nigeria a very expensive cell phone industry….one of the most expensive in the world.

We can estimate the market demand of real effect of high phone call in Nigeria, the use of cell phones in Nigeria make cell phone call a derivative of the general pull on demand. Demand may by itself be a sensitive barometer in testing the range of pressure to buy a product that we don’t already have, but it is steady bait against. This can easily result in paying too much for essential needs of the society. You can it a ‘Want’ category, a market of self interest, and the product under this condition drives the market.

In many parts of Nigerian manufacturing department, we find a virtual absence of local investment or the presence of newer companies. The reasons are not farfetched, for we know that Nigerian companies in dollars terms will never compete with turnkey investment from God know where. These other companies in the guise of foreign investment in a big Nigerian market will talk up the Nigerian Commerce ministry and make high pitch for monopoly on any selling industry in Nigeria. In the name of supporting local economy and improving home supply they blind the department from seeing the size of damage that a few unrestrained companies can do in Nigeria.

Such move will always take place in Nigeria since we know that it will almost naturally cripple any form of competition from local Nigerians interested in the same business. The Bull side of this market is that a guarantee for steady profit on shortest possible period is certain even if means doing away with Nigerians entirely. The Bear side is however dead, so dead that the minimum government intervention which occasional burst inflationary prices is back sated in green of the argument that High Tariff was a way of protecting local manufacture. The bear side of the market which is noted for its role in preserving fixed income earning, and civil servant, may have given way to the facts of self interest involved in unprotected markets.

This vacuum system is responsible for just about everything. It is a looting system accomplished through high tariff on just about any profit driven entity is inflationary pressure on Short term, to which the local are party to. The long term view that prices will fall will never happen given the Balkanization of Nigerian Naira. Remember income on general term, is largely fixed.

Inflationary Pressure from High Tariff (I)

By
Sampson Iroabuchi Onwuka

High Tariffs in any industry in Nigeria inadvertently trigger high cost of products in many parts of the local economy. The pressure to sale at a higher return is due to the cost of getting the products to the market place in first place. There is a ‘vacuum system’ in the country that makes it difficult for small business to make vital gains in Nigeria. This vacuum system revolves around the Ports authority, the monopoly of certain good through exorbitant high tariff which extend from the docking areas through Customs to business to business and then the general public who must pay despite the fixed income. The direct control of key industries in Nigeria by strikingly few merchants, force an unnecessary price escalation - a classic case on Adam Smith on Nigerian depression economy.

The Nigerian President, Jonathan Goodluck, should look to slashing high Tariff - I mean all forms of Tariff incentive by at least 49% on year end. He should set up a simple committee to see this happen in matter of weeks. Should such Customs’ Act fail to pass in the coming months, the country should brace for extended occasions of strike if not for high inflationary pressure from newer Tariffs but for political reasons commensurate to elections 2011.

Nigerian is a ‘one crop economy’. Crude oil is Nigeria’s only bait in the world markets and in terms of import making a noise for the country, the country is struggling ‘Third’ at it. World Bank called Nigeria the most expensive business community largely due to the price on Tariff alone. The argument that certain embargo will help local production does not take into account the ever expanding Nigerian demographics. With the depreciating Nigerian power of purchase baited against the wholesale failures of small business in states other than Lagos and Abuja-there are serious depression economy indicators which the Nigerian President should take seriously. For nothing could add to this problem than a rising and very exorbitant cost of what we need.

Given the inflationary pressure from High Tariff and high unemployment in many parts of the country, given the little or no credit from Banks, the country cannot escape slow or insignificant growth for small businesses. Given the high numbers of unemployment in Nigeria and estranged condition of the Nigerian fixed income earners, there is no telling how disaffected and disfranchised Nigerian Laborers are and whether they can survive the unconditional vacuum system. There is ‘vacuum system’ of course in Nigeria, a process which involves protection of certain rights with high tariffs, which inadvertently destroy any comfort for long term investment and therefore cur for inflationary pressures.