Nigerian Currency Collapses After Central Bank Halts Dollar Sales To Stall "Hyperinflation Monster"
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!!??
(4 votes)
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As my old man always said..."There is a nig(g)er in the wood pile"
The Secret Service code name for the Whitehouse is "Woodpile"
When government says "Don't Panic", they are telling the privilege people in Nigeria to get rid of their Nigerian currency before the bailout people.
Musta been all those clerks at the oil ministry who were willing to share the left over millions in the oil projects for a mere deposit of money in a special account to show good faith. I couldn't paricipate in such plans because I had put the last of my thousands into gold which I unfortunately lost in a boating accident. Must be many rich Americans who profited for just a mere $10,000.
Just ban USD period. make it illegal to hold.... use something else.... that should get things going nicely and spread throughout the world
Turdollars--the more you eat, the richer you get.
This is comedy at its finest; ' scarcity of dollars ' and ' dollar shortage '. Currency wars happening everywhere, but only reported in alternative economics websites like ZH. Scary shit.
Maverick
WTI is trying to break out to $32 per barrell. US futures have all surged an astounding 1% this morning.
All is well.
"The Future's so bright, I have to wear shades"
I study nuclear science;
I love my classes;
I gotta crazy teacher;
he wears dark glasses;
thinks are going great;
and they're only gettin' better;
https://www.youtube.com/watch?v=8qrriKcwvlY
Hip hip hooray. Another once-proud outpost of the British Empire run into the ground by black governments who are now waiting to be bought out by China, because they've finally figured out they're in over their heads but would be too proud to beg the British to come back even if the British had the money.
Colonialism being another of those things that's only bad when white people do it.
Next stop Harare.
I worked in Nigeria and it brought back the Bible's 'if you can find one honest man....'.
B-O-O H-O-O!
Another trash EM currency about to enter the anus, er a, annals of history.
It begs the question "Who gives two shits?"
So sad for the Nigerians. Honest, decemt, law-abiding and hard-working people. Every last one of them.
The Nigerian Naira .... affectionately known .... as the "Nigger" .... is at 250 to the dollar .... a black market, indeed .... why do I love African disaster stories ?
"why do I love African disaster stories?"
Aaaaa, because you be rahciss?
"black market"----nice pun! bwahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah
I just don't get it. The US has been printing and distributing trillions of billions of dollars. So where is all this $$...how can there be a shortage of US paper dollars? Oh, now I remember. They gave it all to GS, JPM and Citi so they all would have a huge reserves of pesos to throw at the problem when all this shit hits the fan. Have you ever seen shit hit the fan? I did when I was in high school and working on a dairy farm in the summer. Idiot was cleaning the barn and not watching where he was throwing the wet manure. Right into the fan and what a sight. Can't wait to see this thing play out
The Third World Nations that have been kept on life support due to Western Companies exploiting their oil are about to fall into chaos and civil wars, revolution and tribal genocide. 2016 will see several new wars and civil war break out in former oil states, Nigeria is a human time bomb, flooded with people with no way to make a living. Soon they will make a break north towards Libya and the exit points to the EU. What will Merkel do then?
darn it... I just got an email...
With all due respect to Jack, the real damage inflicted on developing counties by European civilization was a governing and extraction model that grows large enough, to become unsustainable. Once the obvious becomes manifest, that model falls apart for great loss to the subject population. Nigeria, same as Chicago, same as Greece, same as Puerto Rico, same as Venezula, etc...
I am having difficulty making comments on Zerohedge. They persist stupidly in ignoring the elephant in the room, the Global Debt Facility, which is available to Nigeria, and what is more, everyone knows it. In the Global Currency Reset that is currently under implementation, all of the paper currencies, including Nigeria's Naire, are getting replaced first for currencies minted by each country's Treasury, including Nigeria's, and then by national currencies out of gold in a new technology called "aurum". There will also be local currencies and the end to legal tender laws and usury.
Where we stand is that the citizens in the US are waiting to receive the form to fill in so that certificates can be mailed to them by the Development Committee, to permit the exchange of Federal Reserve Notes for Treasury Dollars held by UBS. I am speaking with the Ambassador of Switzerland in a couple of hours to make sure that he will implement the decision of the World Bank Board of Governors for the Global Currency Reset: https://s3.amazonaws.com/khudes/Twitter4.25.15.1.pdf
For those who are having a hard time believing that the Global Currency Reset is coming to pass, just look at the Department of Defense power transition model, which has been predicting the Global Currency Reset with 90-95% likelihood since 2010, when Elizabeth Coleville and I got our statements about the corruption in the international financial system up on Parliament's website. http://www.parliament.uk/documents/commons-committees/public-administration/Complaints-1-consolidated-13-sept.pdf
This Statement about the Power Transition Model remains up on Sputnik's website: https://s3.amazonaws.com/khudes/Twitter12.12.15.2.pdf
Joined by this discussion on RT's website today: https://www.rt.com/usa/328685-fed-audit-fails-senate/