Nigerian Currency Collapses After Central Bank Halts Dollar Sales To Stall "Hyperinflation Monster"

Tyler Durden's picture

Having told banks and investors "don't panic" in September, amid spiking interbank lending rates and surging default/devaluation risks, it appears the massive shortage of dollars that we warned about in December has washed tsunami-like ashore in oil-producing Nigeria. Following the Central bank's decision this week to halt dollar sales to non-bank FX market operators, black market exchange rates spiked to 282/USD (vs 199 official) and CDS spiked to record highs implying drastic devaluations loom.

As Reuters reports, Nigeria's central bank is halting dollar sales to non-bank foreign exchange operators and letting commercial banks accept dollar deposits with immediate effect, its governor said on Monday, in an effort to shore up dwindling foreign reserves.

Africa's biggest economy, an OPEC member state that depends on oil sales for about 95 percent of its foreign reserves, has been hammered by a collapse in global oil prices, which has triggered a slide in its naira currency.

 

Godwin Emefiele said the sale of foreign exchange to bureaux de change would be discontinued because they were using up the country's foreign reserves for illegal transactions and selling the dollar at 250 naira compared to the official central bank rate of 197 naira.

 

The currency hit a record low of 282 per dollar on the unofficial market on Monday after the central bank's announcement.

Emefiele said foreign reserves stood at around $28 billion compared with $37 billion in June 2014, and that the bureaux were depleting them at a rate of $28.4 million per week.

 

"This is a huge haemorrhage on our scarce foreign exchange reserves, and cannot continue," Emefiele told a news conference in the capital Abuja.

To avoid devaluing the currency, a stance so far supported by President Muhammadu Buhari, the central bank adopted increasingly stringent foreign exchange rules last year and effectively banned dollar access for the purchase of 41 items, which has also been criticised at the World Trade Organisation by the United States and the European Union.

The CDS market gives the clearest picture of what traded levels for the Naira may be like...

 

Implying at least a 20-25% devaluation of the Naira is already priced in to capital markets and any efforts to stall the outflows will inevitably leak (just as they do in China).

As we concluded previously, of course, defending one's currency is a losing game as not only Argentina most recently, but the Swiss National Bank most infamously, will admit.

"As African central banks place restrictions on access to their dollars, while burning through these reserves to support their currencies, they are also storing up longer-term troubles.

“Few investors will want to put money into a country at an official exchange rate that is not set by the market and which is not seen as sustainable in the long run,“ said Charles Robertson, global chief economist at investment bank Renaissance Capital."

For now Africa has avoided the "hyperinflation monster", the result of an all too predictable scarcity of dollars, however the countdown is on and with every passing day that oil prices do not rebound, the inevitability of a full-on continental currency collapse, with hyperinflation and social unrest to follow, becomes increasingly more likely.

Worse, Africa is just the start: while the manifestations will differ, the mechanics of the dollar shortage, which we recently quantified in the trillions of dollars, are universal, and should the Fed's rate divergence path with the rest of the world continue pushing the USD ever higher, soon this USD-shortage will escape the confines of the world's poorest continent and make landfall somewhere where it will be far more difficult to ignore the adverse consequences of the global commodity collapse and the Fed's monetary policy.

*  *  *

Finally, Nigeria has resorted to desperation, apparently lying about upcomgh emergency OPEC meetings (the same M.O. Venezuela used multiple times last year)...

OPEC will soon make efforts to convene before the next scheduled meeting in June as the slump in oil prices is hurting producers, including the world’s biggest exporter, Saudi Arabia, said Emmanuel Kachikwu, Nigeria’s minister of state for petroleum resources.

 

Even so, there’s been no formal request for an OPEC meeting, according to three delegates who asked not to be identified. And the U.A.E.’s energy minister said OPEC can’t change its policy because of low prices.

“I certainly hope that it doesn’t go below $30 for the sake and survival of everybody” Kachikwu said. “My perception is that we will see it get worse before it gets better.” Oil is seen ending the year at $40 to $50 a barrel, he said.

And then there is this...

  • *NIGERIA'S STATE OIL CO. PLANS FIRST IPO IN 2 YEARS: MINISTER

Well if Aramco can do it!!??

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Perimetr's picture

Wait . . . Nigeria?  Who woulda thought???

DeadFred's picture

This is Nigeria so you can still exchange for dollars with enough 'consideration' given to the proper official.

Antifaschistische's picture

Too bad the Indians, Chinese and a handful of nutjobs in the US believe in buying gold.   The place where people should truly be stackers of any PM (heck, throw in copper, nickel, lead and aluminum) are all these second and third world countries.

Budnacho's picture

Well, Im stacking PM's AND Nigerians....covering the bases so to speak.....

 

SoilMyselfRotten's picture

Hey Nigeria, you know that 21 tons of gold you have in reserves, boy have i  got a  deal for you...

Divided States of America's picture

 I am sure there are plenty of Nigerian men thinking about signing up with ISIS. That is what the US wants, isn’t it? A limitless amount of cheap expendable clueless fighters to unknowingly fight for the 'just' cause of the West.

TheDanimal's picture

I know a Nigerian immigrant, I wouldn't trust or voluntarily associate with any of them now.

clade7's picture

Who the hell are you quoting? Bill Clinton?

BarkingCat's picture

I know one also.

Very nice to talk to but not all that bright. 

Also would not trust him. Completely different background and outlook on things.

TheDanimal's picture

The one I know can be nice to talk to, until I question the ridiculous things he says.then he invariably tries to press my buttons one way or another. That's his M.O. and it works on others when they lose their cool so he looks Lily white. I simply maintain my friendly front and say as little as possible now.

eltxamo's picture

what ridiculous things he said? you know we are here for the comedy gold...

dussasr's picture

Or exchange for Bitcoin...

StychoKiller's picture

 

 

Estimated Sir,

I hope this mail encounters you in good health and much largeness of spirit. I am Maneki Neko, a residence of Doggone. Presently, I am living refugely in basement with large varietys of flora and faunas, such as Ugly Spider, Dusty Bunny, Hairy Centiped, and many other poorly but deserving individual.

I am a victim of badly clean and of descent from Harald Bluetooth, Vicking nobility, and a Choctaw womanly of whom little can be known, because she is dead.

I am unsure but I think Harald Bluetooth, he is dead too. He died of death. It is a sad. I was in the basement so who can be knowing what have happen? It is not of my fault, this is all.

I had a singular shock and trauma, which compel me to move from Basment to upper levels, in order to have beer and use of bathroom facility. I would have furthered my cleaning but I have need of beer.

I have always been of work. I am contacting you now because of the present difficult in work, I do not want of work a more but only to drink beer and count to money incoming. This would mean of at least eleven United States dollars (US$11), to buy of case a beer. For now I am having every information and document needed for the
clearance of any moneys for peoples send me, for Beer! You will no doubt be adequately compensated with the knowing that your Money have bought Beer and Happiness for Neko, and you may rest easily in knowledge of clean basment.

Your positive response will give me the greatest joy and relief. God bless you.

Regards,

Maneki Neko

euphoria's picture

Tyler, do you have to use inverted charts? My un caffienated brain can't deal.

falak pema's picture

Well Boko Haram will have their tails up !

This Oil crisis if it spins into a two to more year thingie will have huge repercussions for African nations sucking on (or hoping to suck on) the Oil/Gas tit :

Nigeria, Angola, Algeria, Libya (already there), French Congo, Gabon, South Sudan, Mozambique, RDC and even Egypt.

They have investment programs that will go dead and the civil unrest will crescendo, especially in neighbouring countries dependent on their economic growth (ripple effect).

trader1's picture

that's > 400,000,000 people potentially impacted in the countries you mention by such economic fall-out.

including the neigboring countries, we are looking at upwards of 600,000,000

and some are wishfully thinking the current migration wave into Europe can be stopped or slowed.  

 

BarkingCat's picture

It can be stopped. 

It can be reversed.

All it takes is going back to values that European societies lived by for thousands of years.

In a nutshell - kill the invaders. ...or be subjugated by them. 

falak pema's picture

you don't seem to understand...We went there for land and riches before 1945 as PURE COLONIALS.

Then we went there, after WW2 Euro destruction and "colonialism is bad" UN Logic, as "neo-colonials" with the local ex-colonial army captains named as "heads of independent governments" on the "take"; so that the west could strip them not as colonials but as pardners via our Corporations : Shell and you name it; with trickle down limited to a CHOSEN 1%, all with bank accounts and money in the West. Huge scam.

45 years later, that system has not only done nothing for the rural population but has cornered them in favella polluted URBAN centres without infrastructure.

THOSE ARE THE GUYS WHO INVADE US as youth without jobs in the shanty towns...as we (the corporates, the Western governments and the local "bully boys") have stripped their country bare...

When you rob a continent of its riches on that scale... there has to be some blowback from the young and destitute.

Why did those very countries that now cringe the invasion do nothing to help some trickle down feed the local population?  Its been a financial rape of huge proportions and NOBODY IS RESPONSIBLE...

Just like in Syria today. 11 million destitute, a mercenary army of Jihadists, BUT nobody responsible for this awesome mess and spill over!

Guess how this will play out...Its not THEY who subjugate the western people. We NEED their RM and Oil resources. But we or our governments and corporates; give then back NADA in exchange ; except GUNS ! MOAR kalachnikovs etc...

BruntFCA's picture

Your post is partly true partly propaganda.

The population of places like Nigeria has exploded by more than 500% since 1950s. Those countries need to take on responsibility for this. They have been fed by endless streams of aid and charity and there is no end to it, the more aid that is given, the bigger the population gets, needing more aid.

At no point in your post do you mention the responsibility of Africans themeselves only Europeans. You also paint a false narrative that somehow people in Europe were living high on the hog during the period of the British Empire. My great grandmother worked in  factory at 9 years of age. The so called era of colonializm was garbage for most people in Europe.

On the other hand many African leaders have always lived high on the hog by exploiting their population - this they have in common with their Western counterparts. As for money and loans to Africa, this clearly is a scam run by Zionist banks mainly in New York, the same Zionsits have been extracting wealth from the common European people for even longer. Places such as Nigeria clearly need all the BS dollar scam denominated debt written off.

falak pema's picture

I DO ... those guys all bought in from the Commies in Angola to the pro Western leaders of Morocco...

But they all betrayed their own people.

I don't absolve 45 years of complicit rape of locals  by local Oligarchs / West.

But the stage was set and the GAME of industrial nondevelopment and pure RM pilfering was a pure western game. We made the commodity Casino. Like we did in the west.

pods's picture

Hmmm, didn't know they even had a currency.  Figured Z had stolen Africa's whole allotment of paper and ink.

pods

NoDebt's picture

This is the perfect opportunity for the CIA... I mean ISIS... to go in, overthrow the government and take over another country.  In chaos there is opportunity.

An African government running out of money?  That just screams "regime change" to me.

DeadFred's picture

Wait, wait do they have oil? Yes? Okay go with the overthrow plan.

SoDamnMad's picture

Deadfred

It's, do they have oil and gold? If they have both then go with the overthrow plan.  Fixed it for ya.

More Ammo's picture

SoDamnMad

It's, do they have oil, gold or diamonds? If they have any of those then go with the overthrow plan.  Fixed it for ya.

Somewhat Evolved Monkey's picture

I'd love to see Oil go to $10. Can you imagine? Oil at 10 friggin bucks!!! $20 should still be exciting.

 

 

 Fuck it. I will say people will certainly be hurt, but I do not have a problem with anybody employed or financially connected to the oil industry feeling some pain. 

 

pods's picture

I am a bit more apprehensive, as I know there is an oil price that corresponds to people eating each other.

A smart guy graphed it once and called it the Long Pig curve.  The problem is that nobody knows the price until you hit the curve.

pods

codecode's picture

Picture some of the large people blocking isles in your local grocery store hungry and not able to find food on the shelves... Not a pretty picture!

pods's picture

I don't look at them as large people, or fat people, merely barrels of biodiesel.

pods

BarkingCat's picture

Soap...do not forget soap.

tmosley's picture

A couple of years ago I was encouraged to go into the oil and gas industry. I went to the local oil patch, had a look around, and turned right around and came home. The whole thing stunk of a sort of death cult. People working ridiculous hours and spending all they earned like there was no tomorrow, from the bottom right to the tippy top.

So yes, some of us could sense it coming. Kind of reminds me of a descussion on Clerks: https://www.youtube.com/watch?v=iQdDRrcAOjA

pods's picture

There was a lot of gas money around upstate NY (just across the border from PA).  You want to talk about burning the candle at both ends.  

A lot of money to be made, but it almost seemed like pro sports.  They lived like it was always going to be like this.

pods

ThroxxOfVron's picture

Short WTI.

Long Long Pig.

El Dorado's picture

Love or hate the Oil & Gas industry at least they produce something that we all need.  Whether its the extractive resource industries like timber, mining, fishing, oil & gas or industries like manufacturing, we need all of the above in the United States and less of the frickin service sector!

Somewhat Evolved Monkey's picture

I am sympathetic to this view point to a degree, that they produce things that people need.

 

On the other hand, the Oil industrial complex has been highly complicit in manipulating governments and using propaganda to achieve untold wealth for those connected to the industry. 

 

Some crazy amount of subsidies for oil versus other resources I read about once. It was something like $650 billion in subsidies for Oil, just in the USA, and for other resources combined it was ~$100 bill.

 

 

El Dorado's picture

You bring up some great point and I understand where you are coming from.  However is that corruption to be blamed entirely on the oil companies or the politicians that accept those bribes.  In many cases the governments act like the Mafia, requiring the companies to pay them off before they can operate.  If we had more private property in the USA and around the world I often wonder if this would be as big of an issue.  Instead of the oil companies buying or renting land directly from private property owners like they do in North Dakota, these companies often need to deal with dictators or agencies like the BLM or Forest Service.

More Ammo's picture

El

"In many cases the governments act like the Mafia"

In what case do they not?

Ghordius's picture

the total of all world's government's subsidies for fossil fuels, chiefly oil and coal, has been recently calculated by the IMF as of 5'000 billion USD (equivalents). or, if you prefer, 5T

in contrast, the "green energy" subsidies are around 180-200 billion. which is hilarious if you look how loud the fight for this piece of the cake is (including the sounds from the "Church of Two Degrees")

Lucky Leprachaun's picture

Workers in the oil industry are producing something that the world needs to keep going. Almost all of them work hard, often under very diffcult physical conditions.

Now if we look at bankers.....

E.F. Mutton's picture

Does this mean the money that the Nigerian Oil Minister promised me is in jeopardy?  I better email him back...

Farqued Up's picture

Yeah, at least give me back my deposit, something happened to my account and I need the money.

JustObserving's picture

Obama's war on oil has taken out $3 trillion in revenues from oil producers.  That is a big chunk of the global GDP of $60 to $70 trillion.  

The fall in oil is affecting other commodities too.  Developing economies are screwed.  And Africa will remain screwed until oil prices recover.

Winston Churchill's picture

Just got an email from a Nigerian prince asking for his $70m back.

Kirk2NCC1701's picture

Or everyone grows a pair of balls, says "Fuck it!" and ditches the Petrodollar entirely. 

You then have either a basket of currencies for pricing, price it in gold or silver, or use a stable currency like the CNY/RMB.  CNY?  Oh, wait... not w/o having it backed by AU, lest you have just another fiat Ponzi.

Point is, SOMETHING has got to give: it's the CBs or the People. Pick one.

 

p.s. Tip to people and politicians/ploticians: People can live w/o bankers, but Banksters cannot live w/o People.  All parasites need a host to survive and thrive, even though they ultimately kill their host, and their offspring seek out a new host. As in Nature, so in Human Nature.

Enterprise out. (did you get the double entendre?)

MadVladtheconquerer's picture

Except w/ the repeal of the oil export ban in the US, the petro-dollar is alive and about to go ballistic.  Check out the collapse in the spread btw/ WTI and

Brent.  Last yr, it was still several dollars and before the price collapse started in 2014, it was 10 or so.  Now, 65c. 

Pomp more oil, send it to Houston via pipelines and export it to a glutted and soon to be more glutted marketplace.

Fuck the Russians, the Saudis, the Iranians, Venezuelans, Brazilians.  Oil exports will now be a US foreign policy tool. 

Moral of the story:  own mid-stream infrastructure. 

More Ammo's picture

fuck 0bozo and his war mongering handlers.

Selling dollar at the hole oil for over $100 for years? How much money have they gutted us little guys at the pump for? to fight wars?

We are all slaves to the bastards.

Fuck em all in the ass with a gas nozzle.

1stepcloser's picture

As my old man always said..."There is a nig(g)er in the wood pile"