 Welcome back. It's still business insight and plus TV Africa as we dive into the discussion proper with the Naira It's it's been undervalued and of course the foreign situation as it is right now My guest Muqtah Muhammad is an international finance and economic analyst stockbroker CEO finance personal finance coach budget planning and advocate of finance freedom as well as the CEO of Asher investment limited many things for joining me Muqtah at least in person today. Thank you All right, it is indeed a pleasure. Let's talk about this Naira issue because there's been so much talk the CBN governor Was in the news not long ago. He said that the the Naira was undervalued by about 26 percent or 256 while they also said that best macro warning So what's the side the true picture is the current exchange rate actually artificial? I think it's artificial and again It's artificial in the fact that we don't there's no reason why the Naira should be exchanging at 1000 1,000 1,500 in the official market yesterday went as high as 1,000 400 So when you talk about willing by a willing seller, then you also need to look at the side that the government is not looking at Which is demand and supply. Yes, okay I can be willing I can be a willing seller and the man is high You don't expect me I would definitely want to hide because you have two or three people trying to buy my product So that's where the challenge is because we don't have enough liquidity Don't have a no willing sellers because again the most willing seller we need to have is the government because there seems to be the one that Have all the effects that comes in true could or a cells and other So they are the ones who to make sure they make sure that that willing willing buyer I mean willing seller is in the area because so that willing buyer won't have to buy from them So because what you have now is basically Traders trading and once traders are trading speculators will come here And the only way speculators will make their money is to drive the price high because they're only just speculating They're not looking at fundamentals. It's the same thing that happened in any market Once there's a demand of a product is high then fundamentals is thrown up off the way of the window So you need that thing what the government need to do so address that aspect of liquidity Okay, we'll talk about them speculators and hordes much later in this conversation, but let's do stay with this undervalued Naira and of course Real and fair value which people say is higher. So specifically in your opinion What is the fair value of the Naira? I think for now? I think I'll go what the National Assembly did 800 and maybe found to push it a little me between 800 850 I don't think that's so much bad For the never so why it and how did you come to that particular? You know when you look at What we are we are exporting out of the country and when you look at Exchange rate by by other currencies. It's an African exchange to the dollar Definitely, you need to look at that price that that is the price and that's why up to this moment You've seen that the IMF have been silent the World Bank have been silent before now You hear when we do always talk when the Naira is Overvalued but because they know that the Naira undervalued nobody seen anything because again Like I said, it's a factor that we have played ourself into so we need to play ourself out of it We might forget that they were the one that even pushed us into doing the Floating system flew the Naira flew the Naira and I remember then the World Bank at the IMF Promise that they would definitely help in stabilizing our currency if we do the floating But up to this moment we've not seen anything from them So sometime when you see this price being over and so the exchange rate at 1-4 in official 1-5 in the Paralym I was beginning to get scared that hope won't get to how the World Bank IMF push Nigeria into structural adjustment programs are up to this moment Whatever is playing out was was as a result of that policy. Okay fine. I still okay I still need to understand this hope on the valuation before we talk about some effects of use and all of that, you know Who benefits from this on the valuation as it is Who benefit from undervaluation this peculiar toss, okay, because they are the one that are now In the most getting more game from the undervalued nature of the Naira But the the end user which is the man that is to be pay school fees The man that is supposed to buy product after the show of this country is the one that is arresting in the overvalued nature of the Naira But those that are speculators and traders are the one benefiting from it because they are now Trading the Naira a high price beyond is M is normal price. So is the traders that are gaining Okay, there's been a call for the framework of to stop on this effects abuse because in your ends Some people are saying that time this FX actually being abused because sometimes you find that the people even pay with FX here in Nigeria When they should be paying with our local currency So what do you really think about the abuse of the effects in the country? I think that is the government in because some of the government official can't say they are not aware of it After this moment some investors in Nigeria private investing wants to collect dollars some some even poor I mean schools Private schools in Nigeria still ask for dollars. And also it is especially most corporate is even the true major I mean the those that wants the visa agents most some of these embassies they stay asked for pounds A session of the American Embassy that still takes Naira all of the embassies not takes dollars and nobody's talking saying anything The airlines also are not Charging they give you true rate They give you the Naira it and they give you the dollar it and the pleasure you're seeing I don't sometimes when you look at the Naira Dollar rate you are forced to source for the dollar because it's more cheaper to pay in dollar than to pay in Naira So I think that has to do with our own system We've not been able to just decide that has to do with the physical side coming up with saying look This country medium of exchange is Naira. You have to collect Naira. All right. Okay fine Let's talk about you know, how we can actually show up our forex so that's I will not be having issues with them Supply, you know, besides increasing crude oil production and embracing the non oil sector What other strategies can we actually use to grow the Naira and of course also have in northern Forex The number one strategy we need to use is using our tax to grow our economy Okay, so you need to attract the big players into the economy of Nigeria give them tax holiday They're coming with this effort remember that you're just giving them tax holiday Use this whoever the employer will still have to pay taxes So it's a win-win system Maybe tax holidays for two to three years after that they will pay Taxes and they would have end up not only bringing in the effects that will stabilize your radar so far foreign direct investors unfortunately Those investors are non-existent Assistances the social and presidential moment Buhari at the time it came on foreign investors were almost like between 75% but at the time it was going before the albergue of Ballatino Buhari investors were just 5% and now they keep keep drawing So how do we attract effects? We have said it the non oil sector through agriculture, which is not much the much we get is from crude oil sector The next one we get is from portfolio investors and I mean foreign direct investors They put for sure investors now portfolio investors came into the market the equity market They've made their profit, but the two a system is not there for them to repatriate their funds back So no most personal investors are not coming back to Nigeria So you have the data released by the by the Nigerian and the NGS Nigerian exchange group and two weeks ago shows that Nigerian investors that play in the market is over 95% And this is 15 years low in terms of attracting foreign direct investors in the 15 years So that area is not there that's portfolio investors are not there point that investors are saying they are not there Then Nigerian the diaspora at the point like four years ago before the advent of COVID Nigerian the diaspora alone Accounted what they brought into the economy in terms of effects was higher than the cells of crude oil that we made And that was able to stabilize it now Nigerian diaspora one day just coming up from COVID Some of there's no remittance again and sometimes now when they have to remit They don't remit through the bank because of that gap between the official and the and the parallel market So they have every order they have a different app of people that can now they are using technology I have to just chase through those up those money don't find themselves back to Nigeria What find themselves into Nigeria is naira and that also is one of the things that the CBN is driving inflation You know the IMF saying we have so much naira in circulation. That is what is diving because the liquidity is high So what those are areas they need to bring in those tax only that you attract those investors Nigerian diaspora you created the before the former government of CBN made the five naira for every I think for every dollar you bring you get five naira remittance that's all to attract them But even now the banks are saying if you have an exchange above at about 10,000 dollars You have to pay like about I think a certain percentage that is not attracting them to bring in their effects Because the other point they are going to do it for free so we need to come up with strategy to attract them That will be free and then we need to bridge that exchange rate If you don't bridge that exchange rate if you don't bridge that exchange rate Nigeria diaspora will not bring in remittance If you don't stabilize the exchange rate foreign direct investors will not come in Foreign portfolio will not come in and then you still be struggling to meet up liquidity issues okay aside from the place of diaspora remittances you know Other key player or key factors that we always see when we talk of effects issues is the BDC operators You know so specifically if you were to advise What role can they play vis a vis supporting the CBN to grow the naira You see I have been an advocate that I think the worst thing that happens to us is the BDCs Because if you look at and that what the former governor said before he said that they won't be given effects That was a sector that every week at the point on to the abet of covid We're giving 200 million dollars every week to be I mean as a means of Giving to low end users and when you talk about the low end users talking about the person that's Traveling is coming into Nigeria the person that is going out of Nigeria That was what this means to you to exchange for five thousand dollars ten thousand dollars Well remember this most are doing as high as hundred thousand one fifty thousand dollars Because the in our money laundry came more people who send forms there to CBN was able to regulate them and I think you saw what happened now for me Is only Nigeria you have be brewed a change on the route So if we need to bring them back to the system then we need to regulate them We need to treat them like the way you treat the banks because that's how Because if we have the formal system we have the The deposit money banks and all of that. So do we really need bdc? You need bdc because again in every economy all over the world there are all these means of bdc If you go to united albert united arab elmer, they have bdc But the difference between their bdc and what we have here is that these bdc are in the building You have to walk in there. You have to sell some document that you want to collect These effects that is one and secondly some of these bdc's are owned by the major banks All right, so it's an arm of banking also That is where I keep saying that why has the CBN not been able to mandate banks? Some of these banks have a lot of offshore effects Could bring into this country to create a competitive market with the brewery change now What happened is that immediately you suspended the brewery change You did not create another market for those people that used to assess the brewery change To begin to assess and that is why the demand on the brewery change goes high And then that's what is driving the price high We need to create that market for the people that so somebody that want one thousand dollars But they want five thousand dollars one that want ten thousand dollars Most of the people that are trading the autonomous foreign exchange market Are high end users that are looking for hundreds of millions of dollars I mean fifty million dollars thirty million dollars one million dollars The small end users now become more that attract into the brewery change area And that is what is driving that price Demand is there supplies not there Okay, let's still talk although we mentioned it in passing We talked about speculators in as much some people would say that In as much as some people say that speculators are not they're just actually doing business That businessman as it is but how do we handle that How should government be addressing these issues of speculators And holders who are piling more pressure on the Naira So as you answered that as we close that so The current administration has actually introduced several measures to show up on the ball of the Naira And there are several accolades to that but what would your assessment be Just to take those two back to back Okay, let me take the last one I think the assessment they've tried they are trying to One of those things is to pay off the back work And I can tell you if they are able to achieve that that will stabilize the currency But when you say what they've done it doesn't drop Because you're looking at Bank the banking space alone they are weighing them about about nine billion dollars And they've only been able to give them about two thousand two million two billion dollars It's a far cry of what they want so until you do that then you are You're throwing a lot of liquidity even the airline companies They've given them about almost like four million dollars if we are trying to add up What the previous administration of the management of cbn and the current have given to them But they gain is still far cry because they are now saying that by the day these Keeps increasing but that's a topic from that day because most of these airline companies Are no more collecting Naira and you collect dollar and now you are now filing to collect To collect dollars from cbn I think that is one area the cbn that's where they are I'm happy that they say verify effects so they need to verify really If really you've been collecting Naira from Nigerians that is one Then when you talk about the speculators and hoarders Look they are part of the financial market any part in the world You have speculators you have hoarders they are part of the market The only way you can deal with them is to to make sure that you have a better product than them In this case you flood the market with liquidity they will be forced to play by your own game So there's no other way addressing speculators and hoarder than to To you also come out a better strategy that's why they say saying that Fiscalators will get their fingers bone in the long run But that all it's always ultimately demand on liquidity demand and supply If speculators are striving now because of the demand If they are going to get their fingers bone when when demand goes down They are forced to pay to sell it at a giveaway price Thank you so much Monta that's as much as we can take on the show today Would you appreciate him the wonderful insight that you have brought to this And Forex issue because I can't imagine either you know Forex The dollar exchanging for about 114 Naira that's just so so so so high It's 1400 That's just wonderful, many thanks once again there Monta Thank you for having me All right and that's the size of the show for today I am Justin, at the New Business Insights will return to your screen Same time once again thanks for being a part of the show Bye for now