How powerful is the invisible hand?

How powerful is the invisible hand? The law of demand and supply or the price mechanism does tell us there exists an invisible hand that is responsible for the allocation of prices in a system. This is allured to the fact that when it comes to price determination, the market knows better. This was what the Scottish Economist Adam Smith in his 1776 book "An Inquiry into the nature and causes of wealth of Nations" meant when he said that "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” I have what you want and I want what you have, so therefore let price find its place in the contest of the intensity of both our wants. The Nigerian Foreign Exchange Market has been dominated with a large number of buyers than sellers, consequently tilting the weight of chain-saw to the demand side and raising prices upwards. This has been a concern for not just the country but also for Foreign Investors and the global community at large. Let’s look into the matter at hand. In line with the economic sense of the market determining prices, the Central Bank of Nigeria has acquiesced to the requests of Economists, Analysts and Businessmen in taking out currency controls which had been maintained for 16 months. On the 16th of June, it released its guidelines for players in the Forex market and indicated its decision to supply the market through Foreign Market Primary Dealers (FMPD). In ensuring a smooth process of availing forex to the public, the monetary authority would be using about 8-10 FMPDs and would also provide a Secondary Market Intervention Sales (SMIS) mechanism to end users. The FMPDs are to serve as retailers (duly regulated) to provide buyers with the needed Foreign exchange. Necessary to say, that the new system adopted excludes sale to the BDCs (Bureau de Change) and the 41 items excluded from assess to forex remain ineligible - hurting manufacturers who are in need for production. The workings of the Futures market is a welcome development as it promises to conserve scarce Forex and prevent any unnecessary panic demand for the dollar. The CBN has unveiled the tenors available for the OTC Futures market and these include; 1M, 2M, 3M, 6M, 12M, 18, and 24M. It will actively pursue the OTC Futures market applying rates from the FMDQ and employing the NIBSS as its active agent. (For more on this, please see the CBN article “How the CBN Naira-settled OTC FX Futures Market will work) Africa's largest economy worth NGN 94 trillion though facing economic woes of rising inflation of 15.6%, unemployment rate of 12.1% and at the brink of an imminent recession is however capable of overturning it's negative economic woes with quality leadership, strong-will and a stroke of good fortune. It is obvious already that we need to strategically diversify and focus on sustainable agricultural investment as the year 2016 has taught us that if the Glut in the Oil market doesn't bring difficulties in revenue by crashing down prices, the Niger Delta Avengers (NDA) and other unpatriotic coalitions, could do its own bit in bringing the nation’s foreign earnings to its knees. More so is the economic debate on the competence of the leadership style of CBN government in taking reactionary stances to challenges that could have been addressed long before their convolution. Donald Kaberuka's comment bears an optimistic view "A flexible exchange rate was needed. But time was lost, hence the need for a supportive fiscal stance. A good start". Fitch, a global rating agency, has also seen a ray of optimism after endorsing the decision of the CBN to take off currency controls. “Naira devaluation could lead to a further spike in inflation, which rose to a six-year high of 15.6 per cent in May. But we think the inflation pass-through from the official rate is limited and a fall in the parallel rate would be deflationary, which along with the increasing availability of hard currency could lower inflation." What would be the reaction of the Nigeria foreign exchange market to this new development? We'll keep our fingers crossed as trading officially resumes on the 20th June, 2016.