 Welcome back. It's the business insight and plus TV Africa to my discussion segment. I have joining me now International Finance and Economic Analyst Mukta Muhammad many. Thanks for joining me on business insights Mukta All right yesterday I tried to do a bit of an explainer of the whole Naira float because it was actually like making headlines Everywhere, but today let me hear from you. You are the economist. Just try and break it down to me What it means to float the Naira? Well, what it means to float the Naira is that Justin can go to any Market and the market now is the bank and then go beside a prudy change and the price is buying In prudy change might be slightly different from the price is buying in the market in the banking But again at the end of the very soon Justin will be buying put what you can go to the prudy change It's five hundred Naira. You can go to the to to the bank. It's five hundred Naira and is ready to be labeled That's all the whole idea of floating the Naira. It's price mechanism Price is determined by demand and supply buyers and seller agreement That's just what it means to float the Naira. No more fix exchange rate. I'll fix it This is the amount is up as of the difference Okay, fine. It makes more sense now, but in the short run right now a lot of people are saying that They are truly buying Naira at a more expensive rate compared to what The official market price used to be so you really think floating the Naira is a bit of an advantage or What would you really say? You could see that happening like what is happening now Let's say the the import is what windows started with Naira floating at a Parallel market price of 750 at the end of the day close at 6.64 Then yesterday I think close at 7.01 and the parallel market is doing I think the product is doing 750 as a today now you expect that to Continue in the short term But in the long term you still stability night all depends on wanting equities Do we have enough of it in the in the in the official market or do we have enough of it in the parallel market? We have enough of it in the parallel market and a lot of people are Fee more comfortable into the parallel market because the slimy nation the slim less Nature of getting those effects. Yeah, you could see that Keep Going that will not be so much supply for them But if we have it in the official window, you know, people can go there and just get it and Transact their business. So it all depends on the availability of the of the dollar Especially the dollar not necessarily the Naira So if you have it available is just in the short term you could see all this market forces and driving it or driving it But they'll come to a point that it's going to be stable We've been this food before and the only challenge that we didn't continue with the floating in 2017 I'm President Buhari came in we had those yesterday they went to hide about 550 and the CBN got no floated and said okay, let's put the Naira the first day of the floating of the Naira It was 550 it went to but later on with the stabilizer And Let's just take it step-by-step and look at the impact on some verse categories of people and of course I'm key players for instance now I have actually gone to the bank to get some effects for my Maybe my nephews who are actually studying abroad and I've actually it was done at the price of the former rate, which was 460 there about term the official rate of the seabed. So what happens now to students are who are actually paying school fees? For those who have actually booked ahead before now and then those who are booking subsequently Now those if I think I need a clarification on that and I got some frustration that if your effects have been approved Before at 400 and something you get it Okay, that's right, but if it has not been approved is in you Maybe you apply that not been approved. Then by the time is approved. You get it at the new rates Okay, let's talk about business is not that you know have taken also some sort of you know dollar denominated investment in the past. How would they be? Affected that specifically from Nigeria that has some foreign debt. Does it mean that we would be paying more going forward to actually service our debts? Exactly will be famous Because at the time we collected at the baby at the last time they were calculating the calculating it at market price of four hundred and seven four hundred and sixty So now it will be calculated today. We want to use what we the close of market yesterday It's seven hundred and one three dollars. So definitely without doing anything without collecting any more debt our debt profiles gone up Wow So there's nothing we really can do So that means that we have to be looking at some other place to look for money to pay our debts Well Yes, but again What happened is that what we think we are losing in terms of the devaluation of the currency or the price mechanism of the currency We will gain in terms of not paying subsidy So that most of the money that we're going to subsidy would end up coming to our To our reserve and so we have enough to pay off some of our debt and also begin to attract foreign direct investor foreign investor remittance and Limitance on Nigeria in the diaspora and also the non oil sector will begin to attract a lot of FS from that sector Remember why we've not been able to attract FS from that stage sector is that when they bring in their effects Collected from them and giving them at the market official rate, which was 470 something and they are like why should I get So some of them created the means whereby you don't get this effects coming back into the system They reinvest it over there and then come back here and collect more effects And also when they collect Naira from CB and do their business and when effects is coming in the final year And so that will stop and you mustn't forget the Rx 200. That's another policy that was really Taking a lot of money out of the Reserve without us knowing the case of what these companies are I'm not at their contributed. I'm not at their collected with this new policy There's a little bit of transparency and so you won't see those Efforts going out and like they used to go out with that. So they'll find that we settle down the reserve And once you have enough of that effects in the reserve then you'll be able to Intervene let me tell let me make people clear Floating of the Naira does not mean that the CBN will not pump liquidity into the system when needed And it's a recipient feel that the Naira is underpriced They will put in liquidity into the system, but they will not be the one to fix it They also will be like a market player in the system. Also, that's what it is Okay, so basically what you're telling me that there's a good side for Investors specifically those who are actually exporting but it will actually discourage importation, right? It will I mean it will encourage It will discourage importation Is in a way, but again the government also have to have a woman face that we cannot produce all All we need just like the Kenya experience You could look at some of the goods that you think we normally need very well Again, then you begin to remove duties on them and they look at some of the goods That you think we can produce if we have the enabling environment But that is the most great enabling environment and begin to charge high duties on it like again You don't need to I mean the 41-pound items Instead of you burning them from having effects You just tell them that they pay high duty for bringing in those cost of goods and services That will encourage them to begin to think of Establishing it here in Nigeria instead of you telling them your band they'll find other ways to gain effects And most of these 41-pound items are items that Nigerians generally Want to make use of so you you need you need to also look at that also So it's a it all depends on the Implementation of this policy Alright in my head I'm thinking that another set of people that would actually be smiling to the bank or Would benefit from this Maybe the state governors are they likely to get more from their federal allocations Because I don't I hear that it is expected to increase by about 20% all things being equal. Do you actually agree with that? Exactly, exactly it will increase for them because again Like I said the RX 200 funds also that normally goes out will find his way into the reserve NNPC have not remitted a single cover for the past night almost over a year now Because they say they are using it to pay subsidy so subsidy is gone So those money will find their hand into the state coffer But hopefully we believe that they will be able to use this money where that's my only challenge But definitely the state government will end more now with a move out of subsidy All right, I'm okay. I know you and I had talked about the Naira devaluation when and this unified exchange rate Actually come on spring. Is that what is the case right now? And there are the effects because just yesterday the NB has released Inflation rates are for me and that we has dropped to twenty two point four one percent How do we see all of this impacting on the economy generally specifically? Inflation and that would are now the value or be devalued much later Okay, let's look at the let's look at inflation. I must say that inflation will go up the marginal increase that you see here now Was remember the president came in this inflation reports from me President made the announcement in May 29 So we just maybe just two days of those record added to the van of me and yet you saw those figures So by we will see a full Impact of his policy the mobile subsidy magnification of the exchange rate when the June the June Inflation a figure comes up now So when you look at that the strong will say okay inflation will go up because you have floated your currency is selling at it It's been gotten at a high high rates now, but don't forget that Over 90% of the manufacturers those that have FSO turns out their business getting from the parallel market, which is at 750 So it's not supposed to cost so much any so much impact on the inflation a figure because that is already priced in Now the other one that may be a challenge is those that normally have from the gop of men's side official window So they will have to hike their prices, but how many of them remember? The manufacturer Oh Then So what we see now if they are able to assess official market, which I think will happen Definitely some of these goods price will come down In the long run so before we let you go now for the common man in the streets who does not really Understand all of all this macroeconomic issues are almost to bring it to the microeconomics level Should they have anything to worry about in terms of food prices and all of that? Well, they should have something to worry about in terms of food prices when I said the price in I told you about Those important goods we price it in but those that produce good locally we look at the transportation Okay, because transportation has actually come up so they were pricing into their goods So definitely we'll see those price hike in Household items, especially those that are produced here because of the transportation as a result of the mobile subsidy Where price have gone up a transport and know that a majority of our transactions Transportation means a 2 pms. That's not my petro. So definitely you see price come up I don't expect them to be a total pass some of those boarding Onto the country muscle goods we go up But when we start having stability maybe when the palliative comes in whether political coming area of Reduction in order of taxes, you know, so you could see a drop in a food price But in it in it's a junior MBS report. I expect to see a Height inflation is parking inflation of a thing, but not so much like people think it will do Well, thank you so much a book time. All is a pleasure getting all of this useful Insight and analysis about economy from you would do appreciate all of them Thank you so much. Justin. I'll be pleasure week You too book time. Well, that's the size of the show for today I must say a very big thank you to all of you who have actually sat back to watch the show from Monday to Friday Business Insight will return to your screen 9 30 a.m. On Monday. Do join us again and have yourselves a wonderful weekend Bye for now