Painful policies; subsidy removal and unifying exchange rate.
You may not like my thread, but it's the reality, so brace for impact if such policies are executed successfully.
Let's go.
A thread!
You may not like my thread, but it's the reality, so brace for impact if such policies are executed successfully.
Let's go.
A thread!
Let me start with unifying our exchange rate. This means that we will have a single rate that is determined by the forces of demand & supply.
If such happens, then our dollar rate will be something around N600 to N700 based on the DD & SS.
If such happens, then our dollar rate will be something around N600 to N700 based on the DD & SS.
Our official rate is something that the cbn has pegged, and it does not reflect the actual market rate.
My understanding is that unifying the exchange rate is akin to saying floating the naira, i.e., market forces to determine the exchange rate always not to fixed it as how cbn
My understanding is that unifying the exchange rate is akin to saying floating the naira, i.e., market forces to determine the exchange rate always not to fixed it as how cbn
is doing now.
Anything short of that, there won't be a unifying rate because however you do it, people can artificially create a black market for such transactions.
Benefit of unifying the exchange rate:
1. Massive corruption will reduce because nobody will cut corners
Anything short of that, there won't be a unifying rate because however you do it, people can artificially create a black market for such transactions.
Benefit of unifying the exchange rate:
1. Massive corruption will reduce because nobody will cut corners
to get a dollar rate at different prices.
2. Round tripping will be eliminated. (Purchasing at official and selling at black market rate)
3. Availability of the dollar. The dollar will be available to anybody who wants it as long as you can afford the market rate
2. Round tripping will be eliminated. (Purchasing at official and selling at black market rate)
3. Availability of the dollar. The dollar will be available to anybody who wants it as long as you can afford the market rate
And a whole lot of other benefits that it brings to the monetary policy system
Problems of unifying exchange rate:
1. Availability of dollars will create massive unnecessary import. (Aliexpress soldiers are waitingπ )
2. Availability of dollars will create artificial
Problems of unifying exchange rate:
1. Availability of dollars will create massive unnecessary import. (Aliexpress soldiers are waitingπ )
2. Availability of dollars will create artificial
scarcity, hoarding of dollars by powerful elements.
3. Increase in the price of some goods and services. Most manufacturing industries that are producing goods are getting their raw materials from imports, and hence, they obtain the dollar using the official rate,
3. Increase in the price of some goods and services. Most manufacturing industries that are producing goods are getting their raw materials from imports, and hence, they obtain the dollar using the official rate,
Unifying the rate will make them get the exchange rate at a price above the current one, which will, in turn, shoot the price of goods and services.
Electricity bill will also go up because the current system of determining the price of Kwh of electricity is done using
Electricity bill will also go up because the current system of determining the price of Kwh of electricity is done using
The official dollar rate.
Some will ask me what concerns the price of electricity with dollars.
Electricity is generated using gas, and gas price is benchmark using the dollar, that is why.
4. It will lead to an increase in PMS price. Now, this is my major scary point.
Some will ask me what concerns the price of electricity with dollars.
Electricity is generated using gas, and gas price is benchmark using the dollar, that is why.
4. It will lead to an increase in PMS price. Now, this is my major scary point.
Assuming subsidy is not going to be removed, if the exchange rate is unified and dollar is trading around N600 to N700, the price of PMS/litre will go up from the current N190/litre to something above N200+.
The unified exchange rate will boost our crude oil revenue
The unified exchange rate will boost our crude oil revenue
And boost the price of PMS.
Take note of something. An increase in crude oil price ($$) always leads to an increase in PMS price.
So, imagine the scenario where subsidy is removed and the exchange rate is unified. This economic decision will factory reset us all.
Take note of something. An increase in crude oil price ($$) always leads to an increase in PMS price.
So, imagine the scenario where subsidy is removed and the exchange rate is unified. This economic decision will factory reset us all.
Assuming no unified exchange rate and subsidy is removed, we will be seeing the price of PMS at N400 to N500 per litre based on some analysis, but if there is no subsidy and the exchange rate is up because of unification, i can imagine PMS trading at N600 to N700 or beyond.
Understand some key points.
1. Unified exchange is not going to reduce the dollar rate but will shoot it up to merge the forces of demand and supply.
2. Dangote refinery is going to play minimal role because whatever they do, it has to be reference to a dollar rate in question
1. Unified exchange is not going to reduce the dollar rate but will shoot it up to merge the forces of demand and supply.
2. Dangote refinery is going to play minimal role because whatever they do, it has to be reference to a dollar rate in question
If the rate in force is official rate or otherwise, the dangote refinery will act accordingly. Remember, it's a business venture.
3. Unifying the exchange rate will further take the dollar rate to more than N700 because people like me and you will be demanding for the
3. Unifying the exchange rate will further take the dollar rate to more than N700 because people like me and you will be demanding for the
Dollar too much while only a few individuals are exporting or earning through the dollar. High demand of dollar weakens the naira.
Our expected future benefits:
These are good policies, but we will suffer at first, and it will take some time before we reap the benefit.
Our expected future benefits:
These are good policies, but we will suffer at first, and it will take some time before we reap the benefit.
Government can decide to cushion the effect of our pains through viable means like easing transportation cost by making available buses for inter-town or city movement at a reasonable price.
Railway lines for transporting goods from one state to another. Good and
Railway lines for transporting goods from one state to another. Good and
efficient transportation system always increases business effectiveness.
I prefer to spend all the money saved from subsidy removal to investing in the transport system because transportation is one of the beasts that traders rely on to increase the price of goods and services.
I prefer to spend all the money saved from subsidy removal to investing in the transport system because transportation is one of the beasts that traders rely on to increase the price of goods and services.
Opportunities for export will be massive. Imagine yourself earning in dollars from export when the dollar is trading at N1,000.
I hope the government will ease export through schemes like NEPZA, NEXIM bank, and the rest.
Minimum wage and salaries need to review
I hope the government will ease export through schemes like NEPZA, NEXIM bank, and the rest.
Minimum wage and salaries need to review
To merge up with the anticipatory increase in inflation.
There are so many other issues that will arise a lot from these 2 major economic decisions.
There are issues of servicing our debt, security, corruption, and so many other things... God! being president is no joke wallah
There are so many other issues that will arise a lot from these 2 major economic decisions.
There are issues of servicing our debt, security, corruption, and so many other things... God! being president is no joke wallah
May God give us the ability to withstand and see through all the good things that will happen to us and protect us from any difficulties that are inbound.
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