Post by omohayek on Mar 1, 2016 23:38:09 GMT
Let Buhari and his apologists keep deceiving themselves about the consequences of his "saving" the Naira. Here's what Bloomberg has to say about the matter.
Isn't this exactly what I've been saying for how long now? Buhari's economic "policy" is nothing more than ignorant nonsense. It doesn't end there, however.
Those who say that Buhari's policies will only affect the "unpatriotic", or that they only target "unessential" imports, are nothing more than economic ignoramuses. The idea that Nigerians are particularly fond of "unessential" imports is just a myth - in fact, Nigeria is already one of the least import-dependent nations in the world, and much of the very little Nigeria does import is absolutely necessary to a lot of businesses, whether or not Buhari and Emefiele are ready to accept that it is. They are precipitating an economic crisis for the sake of nothing more than placating ignorant masses who think their purchasing power can be artificially boosted through indefensible currency pegs: if it were really that simple, surely everyone would be better off exchanging their old Naira notes for new ones at a ratio of 100 to 1, while South Koreans would be amongst the poorest people on earth.
Citigroup Sees Vanishing Nigerian Deals on Devaluation Fears
Citigroup Inc. said deals in Nigeria, Africa’s biggest oil producer, have plummeted because investors are too scared to spend money when it’s expected that the naira will have to be devalued.
“I see this as a year of pause,” Miguel Melo Azevedo, Citigroup’s head of investment banking for Africa, who helped sell dollar debt for countries including Nigeria and Morocco, said in an interview in Cape Town. “You will look very stupid if you buy something in Nigeria and tomorrow it gets devalued. There’s an embarrassment factor.”
Nigeria’s government is shielding the naira after the 42 percent decline in the price of Brent crude in the past year has decimated state revenues. The currency has been pegged at 197-199 per dollar since March last year, while in the unofficial parallel market, the naira is 34 percent weaker, and traded at about 300 per dollar on Wednesday.
The number and the size of mergers and acquisitions is showing the strain. So far this year there have been 12 deals valued at $1.45 billion compared with a year ago when there were 19 deals worth $5.62 billion, according to data compiled by Bloomberg.
“The drop-off in mergers and acquisitions could get worse,” said Ronak Gadhia, a research analyst at London-based Exotix Partners LLP. “The level of foreign direct investment has also dropped off a cliff and it’s not going to recover any time soon until policies around the naira change.”
Citigroup Inc. said deals in Nigeria, Africa’s biggest oil producer, have plummeted because investors are too scared to spend money when it’s expected that the naira will have to be devalued.
“I see this as a year of pause,” Miguel Melo Azevedo, Citigroup’s head of investment banking for Africa, who helped sell dollar debt for countries including Nigeria and Morocco, said in an interview in Cape Town. “You will look very stupid if you buy something in Nigeria and tomorrow it gets devalued. There’s an embarrassment factor.”
Nigeria’s government is shielding the naira after the 42 percent decline in the price of Brent crude in the past year has decimated state revenues. The currency has been pegged at 197-199 per dollar since March last year, while in the unofficial parallel market, the naira is 34 percent weaker, and traded at about 300 per dollar on Wednesday.
The number and the size of mergers and acquisitions is showing the strain. So far this year there have been 12 deals valued at $1.45 billion compared with a year ago when there were 19 deals worth $5.62 billion, according to data compiled by Bloomberg.
“The drop-off in mergers and acquisitions could get worse,” said Ronak Gadhia, a research analyst at London-based Exotix Partners LLP. “The level of foreign direct investment has also dropped off a cliff and it’s not going to recover any time soon until policies around the naira change.”
With far fewer dollars circulating in Nigeria, the country’s banks are struggling to access enough foreign exchange to facilitate imports, settle accounts with correspondent banks, keep up with customers’ use of credit cards internationally and meet maturing debt obligations, according to Adesoji Solanke, Renaissance Capital’s head of research in Nigeria.
The biggest lenders have about 3.4 billion euros ($3.7 billion) in bonds and are faced with coupon payments of 1.5 billion euros this year, Solanke said in a Dec. 21 report. With 24 percent of their loans to oil and gas companies and rising credit costs, banks face lower profits in the next 12 months to 18 months, Moody’s Investors Service said in a report on Thursday.
“It will become increasingly difficult to source enough forex to service debt repayments and a default will trigger a banking crisis,” said Robert Besseling, a Johannesburg-based executive director at business risk consultancy Exx Africa. “If a default is going to happen, it will probably happen this year. It only takes one bank to hit the wall to create panic.”
The biggest lenders have about 3.4 billion euros ($3.7 billion) in bonds and are faced with coupon payments of 1.5 billion euros this year, Solanke said in a Dec. 21 report. With 24 percent of their loans to oil and gas companies and rising credit costs, banks face lower profits in the next 12 months to 18 months, Moody’s Investors Service said in a report on Thursday.
“It will become increasingly difficult to source enough forex to service debt repayments and a default will trigger a banking crisis,” said Robert Besseling, a Johannesburg-based executive director at business risk consultancy Exx Africa. “If a default is going to happen, it will probably happen this year. It only takes one bank to hit the wall to create panic.”