1. Let us be clear, in economics…there is no free lunch
2. Central Bank of Nigeria (CBN) can make N1 to become $1 in three months….how?
3. They fund the Interbank market with $500m daily… $1 will be N1 by June 2017
4. So why is the CBN not funding Interbank market with $500m daily?
5. Well because CBN has reserves of only $30b or so…so by my hypothetical example, that’s 60 days or maximum one quarter of funding imports
6. It is like a bachelor spending his house rent on eating $500 buffet lunch daily at the Hilton for a week….then what?
7. So when you celebrate Naira gaining strength…ask for the Foreign Reserves figure….thats what is being debited.
8. We are simply spending our reserves to make Naira strong, which brings short term joy, long term?
9. Sustainable long term success in exchange rate policy is an increase in Foreign Direct & Portfolio Investment and exports…..
10. Again to close, there is nothing wrong with a weak Naira for a nation that exports a commodity priced in US Dollars.
11. It is important we dont celebrate “strong” Naira…that kills the economy….
12. If N1 became $1, Nigeria CANNOT pay salaries
13. In 2015, according to OPEC, Nigeria earned $45.36b from crude oil sales, at N1 to $1 thats N45.36b…bill for salaries in 2015 budget was N2.6t
14. Will Nigerians accept a minimum wage of $15 an hour? if N1 exchanges for $1?
14. So the Naira should stay weak, to spur exports, because its the $ export proceeds, converted to Naira that funds the nation.
15. The long term strategy must be to substitute imports that drain foreign reserves especially PMS
16. Please note N1 to $1 is simply an analogy to project a “strong” Naira.