Hi, folks, are welcome to my podcast the way I see it.
My name is Kalu Aja and on this podcast, I'm talking money, the
economy and personal finance. Well, the news in Nigeria all week has been
about the Central Bank of Nigeria. Those are rumors that the Central Bank of
Nigeria wants to seize the domsleria accounts of private citizens that hold foreign currency.
That's been the room all week. It's very important that we state right now
up front that the central Bank has denied those rumos. It's called it fake
news, that it has no plans today or in the future to seize the
private foreign currency deposits of Nigerian's That's what the said Center Bank Nijer has said.
So it's important we just talk around this topic. Perhaps that's what we
can learn from this. Right, let's start from Pakistan. In May nineteen
ninety eight, the government of Pakistan went ahead and froze foreign currency accounts estimated
to hold about seven point five billion in what they called an emergency rule in
Pakistan, Right, they sail road don't saved their currency, so they seized
the currency reserves in you a foreign currency of their citizens. They then instructed
the banks to pay the pakistanis right in local currency. So if you're a
Pakistan and you were paid by a foreigner or you end foreign currency maybe as
a gig walker, your dollars were taken away and you were then given local
currency at the rate that was lower than the black market. The effect of
this was devastating to the government of Pakistan. Number one, they instantly lost
all credibility and also lost in confidence in Pakistani government issued instruments. Right no
one wanted to buy them or touch them. So instantly private sector remittances that
flow to packet stand completely dried up. They was supposed to get about two
point five billion in remittances that went away because nobody's going to send money to
a country that's going to seize them and pay your to lower rate to that
ride up completely. Right before, in nineteen ninety in Pakistan, private investments
was six point eight percent of GDP. After the freeze of the private assets
of the citizens, private investment at a share of GDP fell to one point
seven percent of GDP, so from six point eight to one point seven Pakistan's
GDP growth and gross investments also declined. Also, the fund reserves fell from
about a billion to about five hundred million as a November nineteen ninety eight.
I mean, you get the picture. This was bad for Pakistan because once
you kill confidence, it shows up in many ways. No one would touch
your investments, no one would touch your paper, and you would lose more
than you would get in. So Pakistan got the sugar high of getting the
six billion right immediately because they froze the assets. But down the road in
twenty nineteen they still had to go back to the IMF and get a loan
for six billion. So that shot them sugar high. Didn't help them structurally.
They had a problem. They didn't fix the problem. They went after
the cheap, easy dollar assets. They got it, but they suffered for
it. Right, So this is the story that is I might play out.
I won't say might that it maybe raining his head. In Nigeria,
we hear these rumors. It's not the first time we've heard it that the
government's come after the dumb account. A while back, the rumor was the
government was coming out at the pension fund accounts. That never happened because it
was explained to the folks that were talking about using pension funds to pay for
the budget. That this money is not lying around in the bank, it's
already invested in bonds and in shear, so you simply can't come in and
take any trillions away. But let me also give you numbers. The average
funds that flew to Nigeria via remittances, it's about five billion dollars. The
amount that we estimate is foreign currencies in Nigerian banks. That's a hum.
It was all lined in the vaults in Nigeria to be about from twenty five
billion to about thirty billion. So if the government was even able to take
the thirty billions, take the high number thirty billion. That is also they
are just taking six months or foreign currency influence into Nigeria and at what cost.
No one will send remittances to any Nigerian bank or to the CBN again,
so you take six months, you get thirty billion, but you lose
five billion every month. Doesn't make any sense, guys, doesn't make any
sense. So the government cannot do this and they have said clearly that they
will not do it, and we're going to believe that the government will not
do it because they've said it. So that's our policy. On that.
But let's do a side track. Is it possible for the government to get
access to dom accounts in a legal way? Of course, the way they
do it is that they incentivize or they attract the investments from the DOMA accounts
to themselves. How they can issue a dollar bond in Nigeria and pay dividends
in dollars. So what that means is usually usual Federgament bonds in naira.
You could issue a special Federgament bond in dollars and pay your dividends in dollars
at a rate higher than the Federal Reserve pays in America. So if I
have a thousand dollars in Nigeria, right, and I can get a higher
API and appersentage yield which is interested in Nigeria, why would I go to
America and investor moneys. I would put it in Nigeria. So that way
the central bank would attract the funds flows from the Dorma count to the Central
Bank of Nigeria and they're able to solve their problem. If the funds are
there, the funds are looking for a place to be investing into any yield
for the holders. This is how you do it, you can attract you
don't ceasee and this way everyone is happy. The central Bank gets as dollars,
the Nigerians get their returns, and their economy is safe and secure.
But once you touch investments, forget about the loss of confidence. There will
be lawsuits. You'll get suit in New York. They're gonna go after your
buildings in New York and your bank account. So not a very very good
idea. The best way, like I said, issue a dollar bond and
attract investments in Again, we point out the central Bank has denied this,
and we believe the Central Bank of Nigeria. We take them out of their
award that this is not a plan now in the future, and we want
to just say this. Talks like this are bad for Nigeria because it brings
an uncertainty, not just to Nigeria as to no one will bring them one
into an economy. That is a rumor that the government take those funds.
So it's best not to spread those rumors for clicks. It's very unprofessional for
a newspaper to write this and quote unnamed sources. Best not to do it
because we all get hammed in terms of the loss of capital's lows to Nigeria.
So stop saying it if you don't have any proof for if you don't
have any quote, leave it alone. It's not helping Nigeria, right,
So that's the story we're going with now, guys. All right, that's
it. That's a good episode for today. Guys, thanks for listening.
My name is carlu Aja and this is my podcast the way I see it,
where we're talking money, our capital market and of course personal finance.
I'll see you guys next time. Do have a good day and buy