If you missed the live presentation yesterday at Deeper Life Bible Church, Gbagada Lagos, you can watch it below. My presentation begins at the 20:20 time slot in the video below. I spoke on “The Search for Generational Leaders”. God bless you.
I extracted the session of my presentation on video above; the complete program below
South Korea has been making regulatory policies geared toward sanitizing its tech and financial sectors. In a new rule targeting the crypto industry, the financial regulator has mandated more than 60 cryptocurrency exchanges in South Korea to notify customers of a partial or full suspension of trading by Friday midnight.
This is to allow the exchanges to embrace a new regulation that will come into effect in a week’s time.
Under the new regulation, exchanges must register with the Financial Intelligence Unit by Sept. 24, providing a security certificate from the internet security agency. They must also partner with banks to ensure real-name accounts or cease operation.
Reuters reported that exchanges that have not registered must shut down services after Sept. 24, while those that have registered but failed to secure partnerships with banks will be prohibited from trading in won.
“Should some or all services need to be closed, (exchanges) should notify customers of the expected closing date and procedures to withdraw money by at least seven days before the closure,” the Financial Services Commission said earlier this week. It said this should be completed no later than Sept. 17.
The new regulation means many of the South Korean exchanges will cease to exist as they are caught between registering with the Financial Intelligence Unit and securing bank partnership.
Nearly 40 exchanges are set to suspend all services while there is other 28 who have security certificates but are yet to secure bank partnerships. Only four out among the exchanges – Upbit, Bithumb, Coinone and Korbit – have registered and secured partnerships and so will be allowed to make won settlements.
The choice to remain in operation rests on avoiding won trading, so some small exchanges like ProBit, Cashierest and Flybit are opting to stick to digital coins trading until they secure partnerships with banks.
Meanwhile in the U.S., investigations into Binance Holdings Ltd. have expanded, with authorities now examining possible insider trading and market manipulation, Bloomberg reports citing sources.
The latest probe of the world’s largest crypto exchange shows the heightening interest in its activities around the world. As part of the inquiry, U.S. officials have been looking into whether Binance or its staff profited by taking advantage of its customers, said people with knowledge of the matter who asked not to be identified because the probe is confidential. The review involves Commodity Futures Trading Commission (CFTC) investigators, who in recent weeks have been reaching out to potential witnesses, one of the people said.
The question is whether Binance is in a way, abusing its access to the multibillion dollar customers’ fund. Binance runs a massive trading operation where everyday clients buy and sell digital tokens worth tens of billions of dollars outside the oversight of government watchdogs. That gives the exchange a view into millions of transactions, and U.S. authorities are questioning whether the firm exploited that access, including by trading on customer orders before executing them, the report say.
But in response to the development, a Binance spokesperson said in a statement that the firm has a “zero-tolerance” policy for insider trading and a “strict ethical code” to prevent any misconduct that could hurt its customers or the crypto industry. Binance’s security team has long-standing guidelines for investigating wrongdoing and holding workers accountable, with termination being the minimal repercussion, the spokesperson added.
The report said Binance hasn’t been accused of wrongdoing and the investigations may not lead to any official action. The CFTC and the Justice Department have been examining the firm for months and it could be some time before the agencies decide whether to pursue enforcement actions.
The CFTC was already probing whether Binance let U.S. residents buy and sell derivatives linked to Bitcoin and other virtual tokens, and the regulator is continuing to seek information as part of that line of inquiry.
The watchdog, which routinely shares its findings with other federal agencies, has sought internal Binance data and communications that could indicate the firm may have tried to sign up U.S. customers, one of the people said. Binance isn’t registered with U.S. authorities, meaning it’s supposed to bar Americans from trading derivatives, which the CFTC regulates.
If you want to lead Nigeria come 2023, I want to make it clear that saving the Naira would be the #2 priority job, after insecurity. Former deputy governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, who I assume is already running for the high office has many proposals. But one is noticeable: “we can consider dollarization of the Nigerian economy.”
Now Senator Tinubu, Vice President Atiku, Governor Wike, Governor Tambuwal and all of you – what do you suggest? To avoid people saying that I have removed myself, my proposal has been constant: you make the parallel market to become indeed a black market instead of the current alternative FX market it is now, through massive import substitution via modern factories and warehouses.
.May the best idea win!
Former deputy governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has weighed in on the current FX crisis that has pitied the CBN against Bureau de Change operators, and most recently, FX rates aggregator, AbokiFX.
The CBN Governor Godwin Emefiele, had on Friday, accused AbokiFX, which publishes parallel market exchange rates using its online platform, of sabotaging the naira by its actions. The controversy ignited by the development forced AbokiFX to suspend publishing of FX rates until further notice.
Weighing in on the matter, Moghalu, who was a presidential candidate in 2019, highlighted many factors responsible for the naira’s free-fall, including the plunge in oil prices, rising government debt and speculation. He also suggested steps Nigeria could take to save itself from the FX crisis, including ‘dollarization’ of its economy.
Moghalu, who was the deputy governor of CBN from 2009 to 2014, urged the apex bank to stop subsidizing the naira and allow market forces to determine the currency’s fate.
The most important determinant of the value of the Naira is whether or not the Nigerian economy is productive and competitive in international trade. That is to say, whether it has a diversified base of complex, value added products it exports and earns forex from those exports. I am not talking about diversification to cashew nuts and yam tubers. No. Those are primary commodities, not complex, value added ones that are the product of serious engineering and innovation. Since we obviously don’t have such an economy, our main FX earner is crude oil, which gives us 90% of our FX.
Unfortunately, we don’t control the price of crude. Its pricing is volatile and unstable as a result of various international political and economic factors. This means that because we are essentially a one- product country, a one-trick pony, we are exposed to instability in our main income source. When the price of oil drops, and as the world innovates toward alternative energy sources, the amount of external reserves we have to back up the international value of our legal tender (our reserves) frequently comes under pressure. It’s those reserves, our main defense in a soccer analogy, that determines the value of the Naira.
This is why, among the five main objectives of the central bank we have: “issue the legal tender currency in Nigeria”, and “maintain external reserves to safeguard the international value of the legal tender currency”. So if we don’t diversify but continue to rely on crude oil as a mono -product economy, the Naira crisis will get worse, not better.
Unfortunately, achieving a diversified, complex economy, especially in a resource dependent economy, is not easy. It requires a high level of knowledge, political will and consistency in economic policy and takes decades to achieve. This was the subject of my lecture a few months ago to the 2021Annual Conference of the Nigerian Economics Students Association (NESA) held at the University of Port Harcourt, and will feature in my forthcoming book in 2022, The Pundit’s Mind.
There are other facts as well that affect the value of the Naira. These include the basic factor of supply and demand (if too much Naira is chasing scarce dollars, the dollar gets stronger relative to the Naira, and vice versa). Others are inflation (a high inflation economy such as Nigeria’s weakens the value of the legal tender), high government indebtedness ( again, our case especially relative to our revenues and ability to pay which will be stretched the more we borrow on poor revenues, and 90 kobo out of every N1 goes to debt servicing). Speculation also affects the naira value, as there are currency traders around the world for whom the weakness of a currency is their very good fortune. Such traders “attack” such currencies for profit, especially where the currency is using a fixed, official exchange rate determined by the central bank instead of the market.
As the Naira is effectively pegged officially to a “reserve” currency (dollars, euros, pound sterling), speculators can attack such a currency for profit if the country (Nigeria in this case) is perceived to have insufficient foreign reserves to meet demand. Because our inflation rates at 17% are way higher than those “reserve-currency” countries, again we are exposed to possible currency attacks. If reserves are weak, and demand for dollars massively outstrips supply, currency devaluation is inevitable, and currency traders who mount speculative attacks profit from this devaluation. Such traders will borrow the Naira from Nigerian banks, convert it to, say, dollars, then buy short-interest paying Nigerian bonds. If, as the speculators anticipate, the central bank devalues the naira, the traders sell the bonds in the foreign currency, convert them into naira, and repay their original loan. The steeper the devaluation the higher the speculator’s profit.
As I have said before, and say again, we have two options. One is to let the Naira find its level in the market. In order, words, the central bank should stop subsidizing the currency. While there will likely be an immediate spike in the price of the dollar, this move will have two advantages. The first is that, because Nigeria has a big, profitable economy and market, dollars will likely swamp the market seeking profits for investors. When this happens, the laws of demand and supply will work in favor of the Naira. Alongside this, maintaining different exchange rates for different kinds of transactions must end. This is called rate convergence.
The second, and more important benefit is that, since the current practice of the CBN pumping dollars in the FX market (from the reserves, which also depleted them) is essentially a subsidy for imports, which has made Nigeria more and more import dependent, letting go of the subsidy on the Naira will refocus the economy towards exports.
This will create an incentive for complex production of a quality that can be competitive in the international market. Accompanying this must be the right trade policies to support and create such incentives for massive exports of finished, value added goods from Nigeria.
If we don’t want to go this way, perhaps because of the political risk of an immediate further drop in the Naira value (which will recover in the medium to longer term if the right policies are pursued), we can consider dollarization of the Nigerian economy.
Here the dollar officially becomes a legal tender in Nigeria, either replacing the Naira or alongside it. Countries such as Panama, Liberia, Ecuador, Zimbabwe have done this. This’ll lower interest rates and help deepen the financial sector because we are a high inflation country. But this carries serious consequences too. Nigeria will lose monetary autonomy (our central bank will no longer be able to take independent decisions on interest rates for example). The CBN will lose seigniorage, the revenues it earns from issuing currency from the difference between the face value of the Naira and its production cost. And of course, this will involve a loss of national prestige and independence. You could argue, of course, that what value is your prestige when your national economy is in tatters? So, there we are, the simplified A-Z of our FX crisis. Either way, tough decisions have to be made. Politics is easy. Real leadership is not.
Thread – The #Ifekaego FX Tutorial:
The most important determinant of the value of the Naira is whether or not the Nigerian economy is productive and competitive in international trade. That is to say, whether it has a diversified base of complex, value added products it exports— Kingsley Moghalu OON (@MoghaluKingsley) September 17, 2021
Since the Central Bank of Nigeria announced its intention of probing the activities of the Aboki FX, a platform that provides foreign exchange information, based on the perceived influence the information had on Naira valuation in recent times, Nigerians across the world have been expressing mixed reactions.
Professionals in the country believe that the decision of the apex bank is not appropriate considering the fact that there are other fundamental issues that the bank and other stakeholders need to address, not tackling the currency spectators or operators of the Bureau De Change.
One of the professionals said in a recent conversation with a local newspaper that “AbokiFX might be influencing the forex market, depending on the size of the forex transactions it conducts, the operations of the platform was not the major driver of forex scarcity and Naira devaluation. As a general principle, I disagree with that approach. Of course, markets need to be regulated and have boundaries, but I think that it is too easy to blame markets when sometimes the problem might be from within.”
In another engagement with a local newspaper, another revered professional walked the stakeholders through stages employed by currency spectators to attack and affect Naira value. Some hours ago, our analyst had to the conversation on the appropriateness of the apex bank’s decision, exploring the possible influence of the Aboki FX’s activities on the currency.
The piece has received a number of great counter and alternative reactions from Nigerian. Like previous and ongoing national issues, two schools of thought have emerged. There is a school which believes the fundamental issues should be addressed not following a particular organisation, using it as a scapegoat. In this regard, the Central Bank and concerned political leaders should do the needful by concentrating on fixing macro and micro economic problems that enhance the dwindling of Naira every day.
The second school believes that Aboki FX cannot be totally exonerated from the fall of the currency. This is hinged on the fact that buyers and sellers access the platform before making decision. It is also possible, according to some members of this school, because national newspapers use the platform in their reportage of the currency depreciation and appreciation daily.
It is interesting to note that from the two schools, the counter and alternative comments have deepened the ongoing discourse on the currency performance. However, it is imperative that members of the schools embrace constructive and restorative narratives in their comments. There is a need to address issues instead of personalities as we continue to have great conversations on the issues of national importance towards sustainable development in Nigeria. The big questions that need the big answers from concerned stakeholders asked in some of the reactions are reproduced below.
The Big Questions from the Public