The journey of a thousand miles starts with the first step.
This summarizes the new global order which has been empowered by the recent
victory of the populist movement’s across the globe.
Donald Trump is now the President –elect of the United State
of America, soon to be in control of the worlds most advanced super power with
an annual spending on defense in excess of $500bn. Theresa May came to power upon the
resignation of former Prime Minister David Cameron after suffering a shameful
defeat to the pro- Brexit group. Marine Le Pen in France is now receiving a
boost to her Presidential bid following the victory of Trump and the general
wave of populism sweeping across the world, shaking to its root establishment
domains and de-mystifying them.
The effect of rapidly
evolving improvements in science and technology is that these create several
connections which invariably help to change the very nature of any objects from
even products being sold through social media. The internet and social media
have contributed to these immensely, as connections go beyond creating networks
of trade, finance and even DNA.
Without fully comprehending the daily improvements in our
lives, we are gradually being left impressionable and vulnerable to the unseen
hands that move the clock in commerce, medicine, politics, religion and all
other areas of our lives. The tide seems to have shifted as the world traverses
one of its longest and most stubborn recessions since the great depression
(1929-late 1930s) which has consistently strengthened its immunity to many efforts
by Central Banks and governments globally since the subprime mortgage fiasco
broke out in 2008.
The US government has expended trillions of dollars on
uncompleted wars from Afghanistan, Irag, to Libya and the Middle East which have
elevated anti US sentiments to an unprecedented level. Diseases such as AIDS, HIV,
Cancer etc. have continued to ravage both the world’s poor and rich. The Arab
spring which saw the leaders of several Arab countries being toppled was a
pre-cursor to modern day events in politics. Income levels have experienced the widest gaps
post world war 2.These are all consequences of utilizing old tools to tackles
new problems.
Africa’s largest economy Nigeria, has also not been left out
as the Arab spring successfully arrived at its border following the victory of
the APC in 2015 which displaced PDP (even though the PDP had often boasted of a
60 years reign). The APC had made the promises to right all the wrongs inflicted
on Nigerians by the PDP which Nigerians were enamored by. However, almost 2
years after the story is different, although the new government should not be
blamed entirely for all the problems bedeviling the nation. The mono product
structure of the Nigerian economy has reduced our competitiveness during this
period of depressed earnings from the oil and gas sectors and signaled the end
of easy money. The recent ban on importation of vehicles through land borders
and proposed increases in data tariff may be some of the ways the Federal
government seeks to cover the budget deficits.
Relentless and not to be left out, many have found solace in
get rich schemes such as MMM and a host of others which promises a 30% return
monthly. Loans from family, friends and even corporate loans are quickly being
diverted to MMM to earn a quick buck to survive. A friend told me about his acquaintance
in the banking industry who has started helping his customers to circumvent the
system by opening multiple MMM accounts, and eventually ended up diverting his
house rent to this purpose.
It is interesting to see that MMM and other Ponzi schemes
of this sort have won a cult following only in developing and poor countries.
This has become a major source of worry for Banks and central banks globally.
In Nigeria, Access Bank and others have sent warnings to customers and other
members of the public to desist from patronizing such Ponzi schemes as they may
lose their money in the long run and why not? My take is banking products are
seriously suffering such that a lot of funds are moving from the banking system
to the shadow economy, and the already burdened banks are groaning as the
supposed “transfer of wealth” is not giving them comfort. Bitcoins (Virtual
currency) have also gained prominence following the Foreign exchange debacle in
Nigeria which saw the Naira take a deep fall after crude prices fell
significantly and the naira was thought to be overvalued, yet the government
maintained its unrealistic official peg and ‘’sitdon’’ look stance. Many arbitrageurs
saw blood and went for the jugular!
The US dollar was such a scarce commodity that trading in
bitcoins and other substitutes became so lucrative. This was another threat to
the financial system as the CBN has no control over transactions and it had
become the preferred means of payment for criminal activities.
It is very clear that the gulf between the rich and the poor
has significantly widened in Nigeria such that income inequality is no longer
the issue, rather the silent changes effected by globalization over the last
few decade, upgrades in technology, and automation have taken away many jobs
which could have existed for the middle class. The rich and super rich are
moving much faster up the ladder. An example of the utilization of old tools to
solve new problems occurred when the US Federal reserve decided to undertake
its quantitative easing program and expanded money supply.
This is an age old
concept which ordinarily should create demand and kick start the economy by
releasing funds for spending. However, today the money flow has changed and the
rich are better positioned in terms of financial education, information and
advice to tap these funds. Also spending patterns in rich countries show that a
lot of people started to delay spending/consumption because of the deflationary
cycle in a false anticipation that prices would further depress, whilst savings
and investments were made more across the upper class which got the lion share
of the funds.
Think of it the middle class and the poor are the biggest
spenders while the rich save and invest which may not be too good for economic
growth. Give a rich man an additional $1 and he will save it. Give a teacher an
additional $500 and he will spend it. The benefits of a loose monetary policy
accumulated to those who already had excess money (Among other reasons because they
were connected to networks of credit, investment and information that elude
most citizens)
This inverse flow of funds despite Trillions of FED dollars pumped to attack the recession
failed, because there was no trickle down as the rich became richer , the poor
in other countries and machines were taking the jobs to the detriment of the
once middle class. The flip side of the coin is also that this cheap money also
created excess supply and excess capacity as
entire industries were created from the boom such as fracking, many
new rigs were financed, new mines around the world and then prices collapsed.
Ever wondered how AirBNB and Uber were able to unlock once
unused assets? Empty car seats and spare rooms in homes which had once been
relegated to store status have now become income generating assets.
The new world order which had been ushered in toward the end
of the last decade but recently recognized after Brexit, Donald Trump’s
unexpected victory and a host of others will displace old Institutions and
enthrone the former underdogs. Consumers will no longer see the giant
corporations as Kings as consumption styles change and people switch to better
cost effective way of doing things.
In Nigeria, the recession has woken up a sleeping giant and people
have become more innovative out of necessity. Our government needs to move with
the tide and become more protectionist. We need to help our local industries
and a good set out point is to revisit trade agreements that can benefit our
local industries. Knowledgeable, smart and patriotic professionals/deal makers should
be appointed to key positions to help us get the best bargains based on our competitive
advantages, from fashion, agriculture, arts and a lot more.
I was in a conversation with an uncle who opined that the
government should create on a regional level several super Billionaires like
Dangote and allow small businesses to feed from the value chain, I beg to
differ. I am of the laissez- faire (minimal government intervention) school of
thought and I think all that is needed are the right infrastructure, rail, roads,
telecommunication, security, access to long term low cost funding( with an
efficient capital market ) and innovation will begin to thrive. The multiplier
effects from these will eventually create many more billionaires as the winners
consolidate and gain new territory (gain more power and suppliers confidence,
gain confidence of buyers , create more industries and outpace competition etc.).
We could even begin to remodel after the Japanese by reverse engineering and
eventually get better than the bigger brands by setting up a sport lottery
whose proceeds will go to low cost funding of Star SMEs to be handled by the
private sector.
A major issue in Nigeria especially is that we have quickly
adopted the make belief lifestyles of the American hip-hop artists and
inculcated this into our daily living. In marketing, this has earned us the the
mantra “Aspirational market” and that is why all the brands want to be here.
Look at the astronomical success of Shoprite, mostly sourjouners window
shopping who end up buying a bottle of coke just to enjoy the ambience and be
seen, while others who have just seen an escalator for the first time are
taking pictures and taking several free rides on the escalator. I won’t be surprised
if the management begins to charge for those rides.
A national re orientation towards building and consuming
Nigerian brands will be in order whilst some aspects of welfarism by the world
powers to reduce automation and help people get back to jobs (mainly the middle
class) so that they too can consume our exports from Nigeria.
The painful period of near stagflation could actually be the
blessing in disguise provided we manage it well and we may be closer to the
1000th step than we know.
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