 Welcome. It's time for our very first hot topic. Well, just two weeks ago after President Nubu promised to unify the nation's multiple exchange rates. The CBN has reportedly directed deposit money banks to remove the rate cap on the NARA at the investors and exporters window. That's the I&E window of the foreign exchange market to allow for a free float of the NARA against the dollar and other global currencies. We've been joined now by a financial analyst and the person of Muhtar Muhammad to discuss this. He's joined us from Lagos. Good morning to you, Muhtar. Good morning. Well, Muhtar, first of all, let's give more clarity to this for the benefit of those who would say they are not economists. Let's give clarity to this, and then we'll dive into it fully. Okay. For those that are the economics imputants, what you buy in the black market or the parallel market, whatever name you choose to call it, is the same thing you buy in the official market. So what it means is very soon we have only one market in terms of price. It doesn't mean that they really change. We'll still be there, but it's going to be one market. I can go to the banks and get my dollar at $664, like it's closed yesterday or I can go to the blue, the change and get it at $654. And those rates will market determine rates. What do you mean by market? You buy a seller's agreement and that the issue of demand and supply will come to play. So definitely it's just like any market now. So you just go there, you buy without maybe demand needs some qualification. Maybe if you are paying, if you are getting for school fees or PT or BT or whatever you call it, but then what it means now is that you can actually have it at a fixed rate. Not that Malam is 750 and then the official window is telling you it's for 750. Are we any better for it? Because at the time when Malam was selling for, let's say 750, the banks were selling for 400 and something. And for the laymen, we would think that, okay, if you want to buy, you go to the banks. And if you want to sell, you go to the Malam because you will maximize your profit. So are we better for it? That's what we are trying to eliminate. So it does not bring transparency. You won't attract the flow of liquidity like you want to attract because you are doing that. That's the challenge. And I think that's why the president said you will have a single exchange rate. It's only in Nigeria you have such a type of a scenario where you have Malam outside the street and the banks. And so what happens is that if the banks were able to legitimately meet your supply at 471, they won't have a problem. They will have to continue with that at the end of the day. The Malam may have to draw down to meet up with the bank when you are no more patronizing them. I think the challenge we have is that we seem not to have this available for something. Remember before PTA used to be like a basic travel allowance, used to be like $4,000 on the last one. Bank brought it to 2,000. So we've been taking it to 1,000 because of lack of availability of FXO. Definitely that wasn't working. And that's why the Malam rate also was higher because in the Malam time, you get it as you want it. It seems more or less like the Malans were having more liquidity than the bank, even if that was not true. But what really happened is you look at the SMEs, the MSES, and also maybe it's PTA traders that want 1,000, that want 2,000. The market they normally prefer is the parallel market because it's easier for them to get that timely compared to the banking owner. You have to apply for FX, you have to wait, you have to pay for FNDAT and that. So that is not happy. So most of them were going to that space. And because CBA was no more supplying to that space, demand on that space was high, or supply on that space was not high. So that's why you saw those prices going up. All right. Well, the INE window, which is just one of the windows, has been described by some as the corruption window that made people billionaires overnight. However, this policy has been described as just one step, one step in getting the economy out of the deep hole that is being plunged into. The next challenge should be to prioritize the supply of dollars, isn't it? Well, I don't agree with the one that I said that the INE window was the most transparent window. I had to say the market determined window. I think the ones that made people billionaires overnight is the parallel market, especially the time that the CBA was intervening in that space. The INE window have their own challenge. Remember that I don't think so much fraudulent activities were being perpetrated in the INE window because that was a market determined window. The price was fixed. You get the supply from CBA or you don't have it. For the parallel market at that time, there was a lot of CBA who supplied 200 million dollars weekly and yet the exchange rate was still going high. That's why they were supposed to just make a different of three naira. So I don't think the INE window, the INE window, remember in 2017 when the situation that like what we have now whereby the exchange rate was going high and the CBA came out with the INE window, it was that window that stabilized that exchange rate up to this moment before we had the COVID pandemic and everything went the other way because of we were not attracting more liquidity into the system. So I think the only thing is that we are at the point where we have too many windows. We have the INE window, we have the Arax 200 window. A lot of windows are just coming in from CBA and at the point we even have the hash window. How much you give to pilgrims, at what rate you give to them to travel. So I think all those were the ones that were really creating corruption. So like you said, basically my challenge is we will be able to meet demand. If we're able to meet demand in terms of supply to those that need effects, generate the market we stabilize, that will happen when we in 2017 because we were able to meet demand. So the market stabilized. But will we be able to meet demand now? We need to wait and see how that plants out because if you are going by the data that I got from the INE window yesterday, it shows that we are on the right track because we started at 471, it went to 500, it went to 750 and it closed at 664. And the good news about it was that liquidity was high at 68.3% and all those liquidity were met. And even forward liquidity, what we call forward the transaction last mean that okay, we don't have it in the future or maybe two weeks next week came down by almost 31%. So that shows that there was enough liquidity to meet demand in the INE window. I think for me that shows that we might be heading to the right direction, especially if we can maintain that supply. Even if by that the foreign reserve came to a low of $36.42 billion. So we need to again supply into those reserves. And what this will do is that we may attract foreign investors, both portfolio direct foreign investors, Nigeria and the diaspora, because some of these people won't want to bring their money, they will find other ways to remit their money. But with this, I think it's going to a level free field and transparency will be seen there. You know we have issues whereby they say that a particular business man were giving FX at official rate, others will not be giving at that rate, so supportive of one business to determine of the other. So now the field is clear for you to apply for your FS, get it. And if you have a means of bringing in FS offshore, go ahead and that's what we expect the banks to begin to do, because they have not been asked that they should also begin to sell FX to their customers. And that means I can work into the bank in an FX section of the bank and do my transaction and get my FX and then move in and pay the transaction fee, which is what is obtainable in any part of the world. So market force is determining the rate? Definitely. But what does this mean for the value or strength of the Naira? Is it appreciating or depreciating? Because as it stands today, it has already caused the biggest fall in Naira's history. You see, it depends. You can say it's devalued, but you can say it's price mechanism. What do you mean price mechanism is that we are beginning to get the true value of the Naira. It's not like what the government will say, we have devalued the Naira to social amounts so that we will be able to meet liquidity. No, at this time, like you say, it's market determining rate. It must have taken a fall of about 42 percent, for the 2 percent, like you said. But again, remember, before then it was, before it was higher than that at 755. So definitely we will see the up and down there. At the point, we have the balance, especially when there is liquidity in the system. My main challenge is, do we have the liquidity? If we have the liquidity, then we will achieve this in a price change rate. But if we don't have that liquidity, the Naira may take a lot of part in when market forces have to determine the price. But again, let's not forget that no CBN just floats its currency, especially in the global economy. There are times that we expect the CBN to intervene the market with liquidity to make sure that the market maintains stability. That will be done. Hopefully, I think that will be done to maintain stability. Now, what reduced our thing when we had that long stability from 360 was because CBN had a weekly intervention of about 200 million dollars, 200 million dollars at the shelf between the exchange, even if that was ensured in a lot of corruption. But now, if you are going to distribute such money, you know you are disputing it to the banks, you know you can monitor the banks, you know that that could also bring stability to the banks. And there will be rules whereby the banks, in case the banks falter, most of them will be sanctioned. So I think it's a winning situation as it stands now. There was pressure on the banks, there was pressure on CBN, there was pressure on the bureaucrations. And I'm just wondering, with an economy like us, which does not produce that much and export that much, how will we source the dollar to float in the market for everyone? What's the modality? Okay. I think, you see, the challenge is that it's not that we are not exporting, but you need to look at the export template that was backed up by CBN. It was not transparent that it was not encouraging exporters to bring in their efforts, especially in the non-buyer sector. Because you are telling them to bring in effects, they will transfer transactions with Naira, you exchange it for something, and then they will go out, they will expect them to bring in their effects and bring it at four for something. So what are the most of them finding ways around it? Because again, the effects that the CBN was not able to meet all their demands. So there were some of them that have to search for effects at 751 or 750 from the parallel market, especially maybe in the area of buying one equipment or the other, because CBN was not timely in bringing out or giving them effects. So they were not encouraged to bring their effects into the market. So what will happen now? Because it's a market determining price, you may see them begin to bring in effects that will attract liquidity into the system. Hopefully, that is the non-buyer sector because it has been one sector that has been, we have been striving under the previous administration. And with the kind of policy this administration is piloting, we could see it's striving more. Then secondly, we need to increase oil production. We have not been able to meet our quota. If we are able to meet those quota now, then again, we have the security challenge to make sure that oil types are not as rampant as they are. Then we attract more effects in the system. Remember before we also attract more effects, where we attract in terms of effects payment, we lose in terms of importation of refined petroleum products. That is no more obtainable. So with those two, then you attract effects. Then secondly, totally, I mean, the foreign investors will begin to come, whether portfolio, whether foreign direct investors, they will begin to come. Then Nigeria and the house borough will also begin to do maintenance into the economy. So we have a situation whereby I think we are on the right track, like I said, in terms of attracting effects into our economy, liquidity. I think those are the ways that we are thinking about attracting liquidity and with the policy thus far, I think it's possible for us to do that. Are we looking at a possible review of the assumptions that led to the pump price of petrol and a possible increase in the cost of petrol here? Yes. I looked at that yesterday and I mean, in the similar program, I brought that out. But again, when we look at the templates, the template at that time that the NMPC did, their price was about 600. So if we are doing 600 and then 64, there might be a slight increment. But again, like I said, this market determined that not the fixed rate, we could get a rate up to 650 or 630. Remember before, the lecturers have said that the CBN would want to pick the exchange rate at 630 at the export window. So we might be seeing a truth in that and that's where we are moving towards. Because it was there denied at that time. You know in Nigeria, there will always be a denier. But you remember that Daily Trust came out that it stands by their news and nothing happened. And so you could see that. I'm just saying you could see that getting to that point. Then when you come to PMS, remember, it has to be demand and supply. As it stands now, it's all about demand and supply. If you are getting more demands into, you are getting putting a lot of demands into the market and a lot of people are coming for supply, then you could see. But now what do you mean? But now if you look at it, even the petrol stations, if they have been complaining that they have been low patronage. So there's not so much demand of petrol and product because Nigeria are finding ingenious way of adapting to the new strategy. You don't have to go unless you have to go and that. So demand and supply will always play its role there. I'm not expecting any major increment from LNPC as it stands now because I'm sure most of their product that they imported into the country like they always say will last for the next one to two months. So and they imported it based on that template of 600 Naira, the exchange rate. So we might get that at that price. But if you are having new import into the system and the rate is the important at 670 or 700, then that price fluctuation will come to be. Remember, the whole idea of a deregulation is that market forces also determine prices and what are varying with supply. Until we begin to meet our local refining petroleum consumption, we'll continue to have this challenge. But by the time we begin to meet local consumption, we could see a stability in that. Even if dangutri will be buying at all the LNPC or dangutri or whichever refiner we have, we will be buying at a particular rate. I mean, they will be paying the Nigerian government in dollars. But again, there are other variables like some of the charges that are obtained when breaking the supply in products will be cut off and so could have the price come down. But as it stands now, as long as we're importing and if we continue to import, once there is a deep exchange rate between the Naira and the dollar, definitely the price of PMS has to go up. Okay. As we talk about dollar in Nigeria, the Kenyan president won less circulation of dollars in Africa. Is that something we should be looking at or we should still be talking about dollar strengthening, dollar Naira prices and all that. What's your take on this? Our politicians, African politicians are very sensational. So when you come up, you just feel or you could just make a sensational statement without even looking at the structures or looking at whether how work it is. I ask one question, how many transactions does Africa and Africa has within themselves in terms of trade transactions? So when you are seeing a trade with you, with my local colleagues, how many transactions do we have with Kenya in Nigeria as the largest economy in Africa? I think one of the only major transactions we have in Kenya might be with Kenya Airways coming to Nigeria. Outside that, this rarely we go to one place. You see made in Kenya goods here in Nigeria. So when they say such things, they just say it and they don't look at the technicality of the work. Sometimes you have those, could have those local colleagues like, what have the Eurozone, because of what? Because of the trade volume that they do within themselves. So as long as Africa's a nation, it's not trading more within themselves. It will already become a mirage for you to be saying, okay, I bring my Naira there, you get your Kenya. So how many of Kenya goods will come here for me to get them? Kenya, Naira, with Kenya shillings, turn to Naira. And then how many of Nigerian goods will go to Kenya, Naira will go to Kenya, turn to Kenya shillings. And how much of that will be accepted all over Africa? So we mustn't deceive ourselves. It's not working now because we are not doing most trades within ourselves. Okay, before we go, for the Nigerian who does not really need forex or anything, the only thing he'll probably be hearing is that, so this is going to make feel go higher now. How do you explain this to him that things are going to get better? How do you allay his fears? Well, I think for the other Nigerians, one thing they always say is that they want supplies to be steady. And so we see the foreign consumption, we see that supplies have steady. Now with this policy, we really raise costs of goods and services. Ordinaryly, it should not. But you know, this is only Nigerian that things go up and never come down. Now, let me give you the scenario. Most of the manufacturers that bring in goods into Nigeria bring it and get their efforts from the parallel market at several fifty. So that's why some of these goods are very high. Now, if you are going to get that good at a lower rate, which means you can get to the banks or you get to the IE windows or even go to the parallel market, the Malan and get it at 6650, 630, or even at the current rate, 664. Ordinaryly, that means the cost will have to come down. So it's a Nigerian problem now. Those traders are the totalists in the market ready to bring down the output. They are there to minimize profit or they still want to maximize profit. And again, it also also depends on how much you got your goods when it was coming in. If you got it at 750, before you begin to say you want to begin to enjoy the rate as if those goods have to be finished. But the long and short of it is that in the short term, we could see those fluctuations. But in the long term, we have stability, we have price, then you'll be able to price stability will come. Once you have stability in the exchange rate, then you have price stability. And once you have price stability, then the ordinary Nigerian will be able to plan. And remember, government is still saying that we are going to increase your salary. And we still have the most inflation that we are dealing with. We've not even talked about that one. So there's a lot and a lot of what government should do. There's a lot. There's a lot. I would say that they're hitting the ground running, they're hitting the right buttons as it stands. Yeah, that's a good place to stop it. There's a lot to do. They're hitting the right buttons. And we're watching and our fingers are crossed. Thank you so much, Muhtar Mohammed, for your time and insight on this topic. My pleasure. Thank you. Muhtar Mohammed has joined us to take a look at the the forex and the new policy concerning it from the CVN. You're still watching The Breakfast on Plus TV Africa. We'll be back with our second hot topic. Stay with us.