Value in terms of currency has to only do with its demand in world market,much like numbers..that is statistical participation of Users in day trade and how it spurs the world of common market to beat to its rhythm. So people follow dollars because her movement call the shorts in the ‘long’ for traders both local and international.

What we learn in Nigeria concerning money management is no different from what we learn over seas, that you can achieve this stability or equilibrium with (a) series of foreign anchor for Niara(b) prompt payment of debts (reduction of National debt)(c)stability of the clearing (banks).

This was expected to improve the buying power of the unit of exchange within Nigeria and would go the distance of empower the function on debt to earn. The psychology behind this is far too tenous to engage at this response but the merit of this method which has hogged the world is seriously questionable.

Under this arrangement the Niara will perpectual chase these bigger currency e.g US Dollars and the Niara will be arranged in a way that it simultaneous lag behind the Dollars and Euro, leaving Nigeria permanently grid mate and always behind.

My experience over these years _ perhaps fewer in years to that of many -forces me to now accept that those who believed that if the current arrangement is maintained the world will hardly change. Among the major aposltes of that change was a man called Robert Mundell whose pronostics about regional currency or optimiun currency was intended to excision Europe from the the problem of 1945 currency devaluation.

In 1945 America accounted for half of world economic output, in the attempt to stabilize Europe they went as far calling the economy. In doing so, they acquired all the Major industries in Europe whose value was grossly damaged following the 1939-45 Carnage, but this was done with thier own money at thier own Standard.

The 1958 convertibility began a new approach to Europe and 1971 removal of American Dollars as the world market order were all intended to discourage the tendency to capitulate of your own currency and hence your market value. But the investment from Europe did not spread fast enough rather it was the Americans who took initial losses but paved more road into Europe, that came out happier.

Robert Mundell is entirely wrong…the solution to this neccassary loser paraire is entirely mistaken. It was that Want is what drives ‘irrational exuberance’ which is what economics need to explain the need of spendng to stimulate any market economy, hence the need of strong currency. For the sake of Want and its irrational features, economist like Adam Smith and a whole bunch of other greats speak of Savings as pervenue for wealth thereby given money an ‘intrinsic value’ an original value, an Optimum currency. That is to say that this currency has quality before it hits the market, a potential quality levels out opportunities for growth and sucks away any useful potential. For instance the Euro which am certain will not make it.

But I say to you…that what drives any economy is ‘Need’, and for me the calculation and implimentation of ‘need’ is the only magnetic quality of demand. This magnetic quality spells the word Value in any market, and this plays off on price. For the sake of Need which is in terms of ‘money and market’ is only futuristic not past, all existing market can sponsor the room for opportunity, the room for speculation and the room to make money.

Need cultivates its own need and because of need there is redemption, a future. It is the statistics on need that truly stimulate economy. Hence it is true that there is no real difference between value and Price, when there is price in a functional of market, there is flunctuation.

The nature of what people need is personal and therefore conservative, as such the real culture of money is not savings which is only natural to needs rather spending is true of culture of
money. For estimate to be useful your attention will be losses only. The calculus on losses becomes inversely proportional to earnings.

This is however what I think we can do, that if the Nigerian Niara is a satellite for Dollars…the Nigeria Niara can position itself as a loser so long as the number of losses is measured and recorded in terms of Niara. In essence, in terms of currency, positive statistics is good statistics – the leader/the Dollars – but losing statistics when measured in Niara not Dollars is equally a good statistics.

So long we loose to the Pounds, the Euro, the Dollars, the Yen, the Yang, the Rubies, the Rand, the Cedis and thirty others currencies simultaneouly. That includes our West African currencies. We would do what no country has ever done, that is loosing to every single currencies in the world.

We can archieve this by perpectually remaining indebted to these countries, I mean heavily indebted to them. We borrow heavily from every country of the world and invest all that money in that country as hedge for the country’s unit of exchange at a loss. So we perpectually calculate our losses in order to help others gain so long as the business id done in Niara.

If thier agenda still held at 80, what is thier profit when the existing supply penetration cracked at 150 with a South pole to 35 Dollars a Barrel. Such a company will never meet thier target and estimate.

In essence, this company from the beginning was destined to underperform due to matters arising from Forex.

How does that feed into your argument?
Well lets face it, Nigeria under Lukman made some money last year but did not make anymore money from oil in 2008 that they would have made during years when oil is 30 Dollars a barrel. That is if the crude is 30 dollars a barrel today, Nigeria would not be poorer or cheaper.

If it goes up to 200 Dollars today, we won’t be any richer. We are not part of European Market nor part of American retail market. It is Lukman and other permanent members of Opec that see to this transactions.

The reason is quite simple, that the relationship between Nigeria,thier Crude oil and oil companies Like Chevron, Shell, etc is just output.
The oil is bought in Nigeria
oil at an automated quoted price and then the price carries through a whole year and sometimes throughout a two year for the drill country.

Middle managers or Cartels might sell at some derivitives and they usually follow the tick value for three months and then those who buy from the Cartel, use Bi-weekly guage and then the Weekly speculators more-or-less the day trader.

But with a big company like Chevron, you can cut through all these arbitrague while keeping them to ensure ‘uppity’ statistical measure.

If Nigeria has already committed to a year bargain at a certain price like 45 for this year I think, it is has little to gain accept for its Options and time premium. These are vulgar words to use for oil anyway…but you get the idea.

That if we bargain at 45 and oil reaches 200, we are not making a singular penny more than is obtainable at 45. If you place bet on the uppity value, it is entirely our pregorative. So don’t think 150 @ Barrel had anything to do with our country.

If However I50@ B is obtainable, it will only lead to short falls in US Dollars. That is, there is excess Dollars in circulation as already factored, as such Dollars will disintergrate in value as more of it oversea. The short fall in dollars will lead to weaknesses in Dollar, weakness in appreciation and such weakness will yield a stronger Niara.

When Nigeria used Dollars, Euro as Anchor as last two years, I personally felt that Solodu ought to Jettison the Dollars. That is using the Soverign Wealth to play out investment in the US or at least demand more from Crude oil. If Couldn’t do that, try to block foreign currency migration to Nigeria.

Now as at 31st of December 2008, the Crude oil fell to 34 Dollars a barrel, giving Dollars an unexpected rise and with that fall of Crude oil, Nigeria began to operate with a fiscal impairment of price below 80 or thereabout…a negative statistics for 31st of Dec year end which began to seriously reflect on Niara as November 2008.

Negative statistics in terms of major cash item is directly proportional to
our ‘unit of exchange’ but inversely proportional to order of the market, E.g Dollars. This is why Niara fell so much and why there is serious inflation.

If Eterna oil is selling at a Price A for the beginning of the year 2008, they will problem making profit in terms of negative statistics…
irrespective on how good the company is operating. The price of things because of inflation and you can say it goes to our direct copuling with my US Dollars and European Euro.

Is the naira selling at its true value compared with the dollar? The answer to this question is an emphatic “yes.” As acknowledged somewhere in the submission by the questioner, the main reason is that “the relationship between the dollar and the naira is based on supply and demand.” At present the quantity of US dollar at the disposal of Nigeria is believed to have drastically decreased. This is owing to drastically reduced demand for Nigerian crude oil and its average selling price in the world market.

The selling price of crude oil in the world market had climbed to US $150 before falling to its current level of less than $50.0 per barrel. It is observed that the principal reason for the reduced demand and general fall in the world crude oil price is predicated on the current financial meltdown and economic recession ravaging many consumer countries of the product. This development has resulted in a decrease in Nigeria’s total crude oil export earnings, in the custody of the Central Bank of Nigeria (CBN). It is therefore not surprising to see a significant decrease in the quantum of US dollar released weekly by the CBN for sale to Nigerians who are demanding dollar to finance their import of various goods and services. In that circumstance the naira-dollar exchange rate is bound to rise at both the official and parallel markets, due to the supply-demand disequilibrium.

This simple explanation herein proffered points to a more serious situation and challenge. The CBN, the Federal Government, and the managers of the Nigerian economy cannot continue to allow the situation to recurrently bug down the national economy. The reality is that Nigeria depends on crude oil export for an estimated 85% – 95% of its total foreign exchange revenue earnings. The country is virtually a one-product (crude oil) export dependent economy. Agriculture that was once the backbone of the economy has been allowed to die, on the advent of wealth from crude oil production and export. Virtually everything that is currently manufactured in Nigeria is dependent on imported raw materials and machinery. Virtually every consumer in Nigeria prefers and patronizes imported products. The imported consumer items are mostly paid for in dollar. Very few “made-in-Nigeria” products use 100% local raw materials. The country’s taste and liking for imported products have for long remained almost insatiable. The country urgently needs a change in the structure of production and consumption in the national economy.

One can hardly point to anything that is made in Nigeria that has no significant imported input. In a situation where almost everything that is consumed in the country is basically imported in US dollars, the demand for US dollars cannot be anything else other than high. Regrettably the Government and its officials hardly patronize products that are made in Nigeria, as a matter of deliberate policy. This is generally the case even where and when some of the local products are competetitive or better than their imported counterparts. Many local foods and agricultural products, including textiles and related clothing/wearing items, among many others, are glaring examples of the items that are victims of this negative bias. In addition to this unhealthy situation is the fact that the cost of labor in Nigeria is among the highest in Africa and countries on the same level of economic development. Anything that is made in Nigeria can hardly be exported competitively, mainly because of high labor costs and those of utilities (electricity, gas/oil, water, communication, etc.) due to poor state of infrastructure nation-wide.
As already mentioned, every consumer in Nigeria, including labor, is virtually dependent on dollar-financed imports. Now that the value of the naira is heavily losing to the dollar, it is not surprising that in order to cope with rising cost of living; organized labor in the country is demanding an increase in national minimum wage. Unfortunately this is happening at a time when government oil revenue and budgets are in trouble.

It is observed that comparatively, the levels of basic salaries earned by the high echelons of Government and public office holders are outrageously high. Their fringe benefits and pecks also look enviable to labor. Government officials who will be negotiating with labor will likely face hard time convincing labor to soft-peddle on its demand for increase in the level of national minimum wage. Nevertheless, the Government should find a way to make labor appreciate that if input costs, including those of labor are excessive, businesses will economize on high-cost inputs, labor cost input inclusive. Parties to the negotiation should give due consideration to all the realities on the ground, including national interest, existing general level of labor productivity, employer ability to pay, mutual survival of both the employee and the employer establishment. In order to ensure business survival and avoid loss of jobs in many countries nowadays, organized labor is seriously negotiating with their employers along the lines of reducing production costs. Managements of some corporations are also reducing their remuneration levels for similar purposes. To assist businesses save existing jobs and possibly create new ones, many Governments are formulating and implementing business promotion incentives.

The labor relations issue raised in this comment is believed to be germane to the country’s current problem of deteriorating naira-dollar exchange rate, which is the main focus of this intervention. Having said that, it is necessary to suggest that one effective way to bring down the naira-dollar exchange rate is for Nigerian authorities (the CBN in particular) to intensify their management and influence on the people’s demand for the US dollar. In this regard, an extensive campaign for, and positive encouragement of increased consumption of made-in-Nigeria products is called for. To deliberately promote increased consumption of locally-made goods, the Government should provide exemplary leadership. It should give incentives to local buyers of made-in-Nigeria goods, possibly through reduction in, or total removal of sales/VAT on the affected items. The policy of encouraging local producers to also import and sell the same type of products, which they are manufacturing in the country should be discarded. Through appropriate fiscal and monetary incentives, the Government should reduce local manufacturers’ costs, besides assisting them to increase their local production capacities to meet shortfalls in the demand for their products. It is necessary that the Federal Government pursue administrative reforms more seriously. This will ensure that imported and smuggled products do not crowd out locally made products like textiles, motor vehicle tires and tubes, locally processed fruits and vegetables, etc, leading to business closures and job losses.

While the CBN should continue to regularly adjust its level of weekly supply of foreign exchange to meet the import demand of Nigerians, the Federal Government should focus more on promoting the production of products that mostly utilize Nigerian agricultural raw and petrochemical materials.

It is noted that for a long time since, the Government has been declaring the policy objective of diversifying the export base of the national economy. But there has been limited evidence of substantial achievement of that objective. Now is the time for it to take more serious actions to fully realize that important objective of export diversification, which will wean the country from perpetual dependence on crude oil, as Nigeria’s chief foreign exchange earner. Nigeria should note that many industrialized crude oil importing nations are currently working hard to rid themselves of dependence on foreign oil. If they succeed, as certainly they will, what will be the fate of Nigeria’s crude oil export? It is critically necessary for Government to resuscitate the county’s existing local refineries, and establish new ones to meet domestic demand for petroleum products. If this is done, a lot of demand for foreign exchange needed for the importation of petroleum products will no longer be there. To further enhance its foreign exchange demand management, the Federal Government should fully implement the policy of restricting overseas trips by public officers to essential and inevitable needs only. It should ensure that adequate medical health, education and training facilities are provided in Nigeria to make it unnecessary for Nigerians to go overseas for such services.

Until the policy measures and programs herein discussed are effectively implemented, the problem of excessive demand for foreign exchange will persist, along with that of anomalous disparity or exchange rate between the naira and the dollar.

The issue conerning the “intrinsic value” of any currency is a very tricky one. All currencies of the world as you know are printed with chemicals. So Dollars, Pounds, Euro, Niara, and so on are mere Chemicals. I magine these chemical paper fabrics imported to Nigeria.

But of course these are not papers but are “legal tenders”, the socalled I owe receipt. In essence, for business to take place we have to exchange note. If you give me ten Niara I will say give you ten bags of cement.

The question is, how do we know that 10 bags of cement is equal to 10 Niara? That is, can I obtain in Nigeria commodities equal to 10 bags cement using ten Niara…at a profit. That’s the whole question.

Because of this problem of estimate, we then resolve to use a standard like Gold, oil, etc whose transborder value is basic. At the absence of these instruments also called Physical money, we can use a third party like Dollars.
Because we patronise Dollars in this way it becomes a standard.

All the principles of economics from Adam smith, Ricardo, Says,List, Jevon, Marx*, Keynes, Piguo, Hicks, and latterly Fienstien, Greenspan, Vockers, Taylor, etc come under two words demand and supply. It is infact two schools more or less the same…especially Demand. Demand, I have realised is the real language of Value, irrespective of the ‘intrinsic value’ of goods, Demand is equal to Value.

So why can American Dollars become a standard instead of Gold? it id because Americans realised that thier strategic investment in your country gives them one reason to trade with you and you can operate at a loss (not of thier own making since they are merely seeking profit) if only they have multiple trading partners.

By have having the same product made in different countries, the common exchange becomes the currency between these countries without knowing it and only this time it is American currency.

Using a real life example, US drills for oil in 178 countries of the world. These 178 countries of the world like Nigeria place thier bait on the Dollars. They have no choice since US is thier major trading partner but Nigeria is not the only country.

So when you have to send money to Nigeria using any foreign currency like say Dollars, the currency statistically gains against the Niara. It is a question of demand which is shown by level of participation in that currency which is equal to the value of that currency ‘irrespective of its intrinsic’ quality.

So crude oil becomes equal to Dollars, one representing supply and the other demand. Oil has a limit inspite of its supply but the printing of Dollars!…well you get the idea. At this level we operate with a stability but this stability is relative to the price of oil.

Oil prices go up because of Demand, US Dollars comes down. When US Dollars comes down Nigerian Niara picks ups like what we discovered last year.

Now the reverse has taken place
excuse.

It this it true, it means that the sudden rush for the dollar is not based on economic fundamentals .

This reminds me of the situation early last year when the price of oil suddenly started increasing rapidly, from $80 to almost $160 a barrel. A friend of mine pointed out to me that their was no underlying fundamental economic reason for this. While world wide oil demand may have grown slightly in that period, it in no way matched the steep increase in the price oil. In the newspapers, analysts were predicting oil could soon hit $200, but my friend predicted it would crash. True to his word, it did. Now oil is between $35 and $40.

I see the same in the dollar. The US is currently acquiring more debt. Many hedge funds are currently betting against the dollar by investing in Gold. I expect the USD to drop in the long term.