Nigeria’s Inflation and Exchange Rate to the US $ under President Buhari
April inflation numbers, the last before President Buhari left office, rose to 22.2%, from 22.04% in March, fourth consecutive monthly increase and the highest inflation rate since September 2005. Though the rate of increase has slowed, inflation has not peaked yet.The graph below shows the dynamics of inflation and the Naira’s exchange rate to the US $ under the President. Nigeria’s Inflation Rate and Exchange Rate with the US $ under President Buhari The graph above shows the movement between the country’s rise in the costs of goods and services and the exchange rate to the US $. It clearly shows the results of the three macroeconomic shocks under President Buhari – the one he inherited in 20215, Covid – 19 global economic shock, and the Russian /Ukraine war that would have been net positive or at best neutral if domestic economic conditions and management were right. While the shocks were the source of the macroeconomic imbalances, President Buhari’s catastrophic economic policies made it worse through his Idi Amin’s style monetary policy accommodation, as now evidenced by the N22 trillion “buy now, pay later” inflation tax. Between 2014 and 2016, the Central Bank of Nigeria (CBN) devalued the Naira 8times from N161in September to N305 in Sept 2016, while gaps and arbitrage opportunities started to emerge, as the parallel market rate increased from N175 in Nov 2014 to N431 in Sept 2016. The same patterns emerged after the Covid – 19 and the Russian / Ukraine war shocks. At the May 22 – 23 monetary policy committee (MPC) of the CBN, the monetary policy rate (MPR) was raised from 18% to 18.5%. It had signaled in the last meeting that it will continue to tighten on the expectations that the government will remove fuel subsidy. That is not going to happen anymore. It said at after the meeting, and it has shown again, that the rate of increase has slowed, but inflation is still very sticky. As in other macroeconomic imbalances, the expectation is that the new administration will provide concrete measures to provide confidence that it can stabilise the economy in the medium term. Three of such measures will include a credible economic team, a weak appetite for deficits, and closing the distortionary gap between the I & E window and parallel rates of Naira’s exchange rate to the US $.
Uncharted: How to Navigate the Future
Author – Margaret Heffernan This period, and this season, Nigeria is in Uncharted territory, so it is fitting to read a book with that title. What Heffernan has done in this book is quite interesting. Economists, and certainly me, look out for patterns because it helps us to increase the power of predictability and reduce uncertainty. Oh yes, historically, all the knowledge we often seek is to help us navigate the future better despite its uncertainties. But Heffernan showed with stories after stories that no matter the established pattern of things, random things still happen. Those that are conscious of that navigate the future better. She said, “the future isn’t perfectly knowable and never has been”. As much as greater levels of information like we have never seen before has made us able to plan, and make well informed estimates, “the advent of globalization, coupled with pervasive communications, has made much of life complex: nonlinear and fluid, where very small effects may produce disproportional impacts”. The story quite interesting is that of Irving Fisher, Roger Babson, and Warren Persons, all economists during the 1929 US economic crisis, all contacted tuberculosis, one of the most dangerous diseases at the time in the US and built their reputation on the ability to forecast the dynamics of the markets. However, “only Babson, the least scientific of the three men came out with his reputation enhanced” after the crisis. There are more recent examples in the book – the Donald Trump election and Brexit in 2016. What these stories, experiences, and everyday lives mean, as Heffernan consistently demonstrated, is that we live in a world “where there is a lot of irreducible uncertainty”. In response to a life of so many uncertainties, Heffernan recommends that we see it as probabilities, constantly acknowledging that we can’t know all that the future holds, and with constant experiments to prepare for it.
The Innovation Mandate: The Growth Secrets of the Best Organisations in the World
Author – Nicholas J. Webb While reading this book, I also decided to check the author on the internet. In one of his speeches, he said something remarkable, ‘That, of all those that give thought leadership on innovations, he is the only that has several patents’. It is that extension of confidence and clarity that you will find in the book. What is your organisation’s mandate? What is the most important thing to the organisation and its employees? For some, growth is their mandate, while for some, it is profit. To Nicholas, “making profit is nonnegotiable”. If profit is the topline nonnegotiable, then innovation is the underlying catalyst. You will find in the book that ‘if your organization doesn’t innovate, its headed for early demise’. The history of the world is that of innovation. Successive generations have always sought to improve on the ways, products, services of the previous generation. It is what is defined as progress, growth and responsible for the increasing value creations we see today. But in the last 25 years, it has become even more desperate to innovate as a business. Why? The first is that we are seeing a rate of change never seen in the history of the world. Rapid technological advances have made value of ‘old’ innovations time value very limited. Imagine how long the world used the landline as the means of civil communication over distances before the mobile phone arrived. While the mobile is still with us, I am sure none of us can remember what the first set of mobile phones looked like, just in the space of a generation. The second point is the severity of disruption is increasing. This is a major threat to businesses as it increases competition to levels and at speed never seen before now. Due to a variety of disruptions, new innovations can wipe out a company or reduce it to a shell of its old self. But never mind, Nicholas set out how you can make innovation the ‘rock solid’ mission of your organization, designing a process of innovation that ensures that your business always stays ahead.
The Hard Thing About Hard Things – Building a Business When There Are No Easy Answers
Author – Ben Horowitz If you have just started a business, just became a CEO, or involved in some sort of way in growing and building a business, do nothing else until you have finished reading this book. This book is an articulation of the author’s journey as an engineering staff of Silicon Graphics, NetLabs, Lotus Development, Netscape, and AOL before co- founding LoudCloud, and later Opsware. This journey culminated in the sale of Opsware to Hewlett Packard for US $1.6 billion in 2007. So, Ben’s journey is perhaps not unique for entrepreneurs and many businesspeople because it is full of ups and downs. Every businessperson will tell you that. It is also not unique in the sense that you are invariably ‘married’ to the business, especially at the early growth stages. Of course, it is also not unique about all the functions that you must carry out – hiring, selling, seeking capital etc. But Ben’s story is a 20-year packed and intense waves of “euphoria and terror”. In the middle of it are how things that not within your control shapes the business and its outcomes – the dotcom bubble of 2000. Unlike many other management books, this book does not just tell you about how hard it is to run a business, it shows and demonstrates what those hard things really are. They are not the ambitions, goals, targets, etc. but how to deal with those things that are not taught in all the best business schools in the world – relationships, family, friends, firing etc. But then, it is still the case that “nobody cares” – Just Succeed. Since selling Opsware to Hewllett Packard in 2007, Ben has been the co-founder and general partner of Andreessen Horowitz, a Silicon Valley based venture capital firm that invests in technology firms. This book will humble and inspire you. Above all, it will tell you that “stuff” happens, hard “stuff” happens, and it is how you hold your nerve and navigate those moments that gives you the best possible chance of success.
The Greatest Minds and Ideas of All Time
Author: Will Durant, winner of the Pulitzer Prize and the Medal of Freedom / compiled and edited by John Little What is your motivation for reading a book? Perhaps just like me, for a variety of reasons. But one thing is very clear, reading wide provides one of the bases for a wide perspective of life, business, and nations. Another thing close to that is travels and other forms of exposure. So, the greatest minds and ideas of all time is not a business book per se, but it is largely an account of the civilization we see today, including that of business. It is Will Durant’s ranking of minds and ideas that have shaped civilisations. Of course, he does not expect everyone to agree with him, but he was very clear of his criteria. Particularly interesting are the chapters on “the ten greatest thinkers” and the “ten peaks of human progress”. The criteria for the ten greatest thinkers are those who thoughts “have had an enduring influence upon mankind”. They are Confucius, Plato, Aristotle, Saint Thomas Aquinas, Copernicus, Sir Francis Bacon, Sir Isaac Newton, Voltaire, Immanuel Kant, and Charles Darwin. The section on the ten peaks of progress makes one really think of how things have been taken for granted, because these things come ‘natural’ today. They are Speech, Fire, The Conquest of the Animals, Agriculture, Social Organisation, Morality, Tools, Science, Education, and Writing and Print. Let me add that the book is not even as fascinating as the man. Will Durant lived between 1885 and 1981 and wrote two major books. That is not so much fascinating, right? Yes, but he wrote an eleven-volume book for 50 years – The Story of Civilization. Now, that is someone I think you should read.
Lagos: Supernatural City – Tales of Survival, Spirituality, and the Struggle for Power in Africa’s Biggest Metropolis
Author – Tim Cocks Lagos is the “place” in Nigeria, and the place has perhaps been captured best in this book. A book like this is always a good read because it provides a perspective, often a dispassionate one, of an outsider looking inside. Most times, they are often able to describe a pattern that has eluded those that have been born and immersed in the system. Lagos – supernatural city is a documentation of the “life” stories of seemingly unconnected individuals about lives in Lagos. Indeed, the book describes itself as “an intimate portrait of life in one of the most vibrant cities in Lagos”. The book is about the beliefs and “spirituality” of these Nigerians. That is, how they confronted the myriads of challenges in Lagos by calling on the different gods they knew. Two exceptional features in this book are quite interesting. The characters are known, traceable, and recognized. They are not pseudo characters. Because of that, it was interesting reading what Cocks wrote about these people. The second is that the book is a validation we all have dreams, a burning desire to do well in life. However, in Lagos and broader Nigeria, doing well requires a combination of many things. It cannot be limited to hard work or diligence, family or friends, innovation, or knowledge. For every successful individual, there is that ‘extraordinary’ element and feature about their success. That is why this book is very fascinating, narrating that side of majority of Nigerians. I have a remote personal connection to one of the stories. On page 189, Cocks wrote, “The Conflict for control of Ajah was long, sporadic and often futile”. That conflict led to my wife leaving her banking job in 2006. Based in Ajah at the time and working on the mainland after the banking consolidation exercise, she was always arriving home late. In those times, it was a daily struggle to arrive home safely because of the fight in Ajah. Unable to secure transfer at the bank, she reluctantly left the banking role. Just as policy have consequences, conflicts, no matter how small, have consequences, sometimes, they are tangential. In Lagos today, as it is the case in the whole country, there is now a widely accepted notion that the next few years will require all the “skills” of survival one has ever learnt. The economy is tough, and it is no coincidence that many of those that can leave, are leaving in droves. For those left, please consider one of Cocks final comments in the book, “The venues change (and I will add that the people also change), but the underlying anxiety was always the same. The wheel of fortune is spun by forces no. human has ever managed to control. Wouldn’t you want to appease them if you could?”
The Oil Curse: How Petroleum Wealth Shapes the Development of Nations
Author – Michael L. Ross Did you know that Nigeria’s real per capita income has rarely changed since independence? The graph below shows Nigeria’s per capita income 1960 – 2019, before Covid – 19 and the Russia / Ukraine shocks. It shows that the average Nigerian is better off by just US $1,000, compared to 1960. The global average is three times better. The per capita income was US $1,367 in 1960 and was US $2386 in 2019. Over a 60-year period, average per capita income increased by a mere US $0.16 cents annually, equivalent of less than N80 in today’s Naira. The data is adjusted for inflation using 2010 constant prices. Nigeria’s GDP Per Capita 1960 – 2019 in 2010 constant prices The reason for this poor economic performance is lucidly explained by Michael Ross. It is relevant because, since the 1970s, Nigeria hasbeen trying to deal with the “curses” that oil wealth brought to the country, and a new President trying to do give it another impetus. This book is an inglorious description of all that has gone wrong with Nigeria and many other developing nations that stumbled into oil wealth in the 1970s. It is a political economic explanation of how a combination of factors led to the oil price shock of 1973, including the decline of the powers of the oil majors, squeeze in supply, and the rising nationalization of oil companies in that period, especially after OPEC was established. The historical context was a good reading, but perhaps the most ingenious part of the book is how it explains how oil revenue, as a source of government revenue, the size and scale of it, the secrecy of it, and the capital-intensive nature of it helps shifts economic and social changes in oil wealth developing nations that overall benefit is suspect. Its effects include less democratic institutions, gender inequality, violence, and poor growth. Reading the book, you will make you understand how the size of Nigeria’s government grew, the indigenisation and nationalization policies of industries in the 1970s, the rise of the military in the 1970s through the 1990s, the low ratio of taxation to government revenue, corruption, and the inequality it propels. The good news is that democracy gives us a chance to leverage on the oil wealth, and minimise the curses associated with it. It is a good book to read at this time, so mistakes of the past are not repeated again and again.
Reforming the Unreformable – Lessons from Nigeria
Author: Ngozi Okonjo-Iweala This is not a new book, but it is perhaps the most relevant book for Nigeria today. While “why growth matters” provided the successful reform story in India, this book provides the first-hand experience of the challenges of reforms in Nigeria. There are so many reasons why this book is relevant for today’s Nigeria. First, it is a major account of why, how, and the results of the set of economic reforms carried out between 2003 – 2007 during President Olusegun Obasanjo’s second term in office. Second, it provides great context of what happens when economic reforms are not sustained. Third, it is a reminder that reforms are never easy; they are complex and are not always successful. Fourth, and I think this is the most painful part, it shows that when reforms are not sustained, they will have to be repeated in more painful circumstances. Oh yes, the economic management team, as explained in the book, was also determined to remove fuel subsidies at the time. NOI says in the book, “In late October 2004 …we all heard the announcement of an increase in gas prices at the pump. Demonstrations and marches on Abuja immediately ensued, led by labour (led by Adams Oshiomole)…The demonstrations went on for a few days and unfortunately turned violent…and six people were killed.” Then, the subsidy was just about US $1 billion. Now, the same Adams Oshiomole has helped to stop demonstrations by labour this time. Reading the book again reminds one of the concrete and genuine progress this group of people made on reforms in Nigeria, such as: So, the question is that, following the success of the reforms and the institutions established, why did we fail to build on them since 2007? The answer is that there is a difference between the letter (law) of economic reforms and the spirit of reforms. Between 2003 and 2007, the team, though trying to establish the institutions of reforms, as mentioned above, they had the spirit of reform. Since 2007, and especially in the last eight years, there was no clue what reforms was about. Otherwise, it is irreconcilable to have borrowed N22 trillion from the Central Bank of Nigeria (CBN) when there was MTEF, FSS, and the Fiscal Responsibility Act. Finally, because the success of the first set of reforms have been squandered, especially by the disastrous last 8 years of President Buhari, President Tinubu must start all over again. As then, and now, as NOI said in the book, “our first order was to establish credibility, fairness, and social trust”.
Why Growth Matters – How Economic Growth in India reduced poverty and the lessons for other developing countries
Authors: Jagdish Bhagwati and Arvind Panagariya This book has been around for about a decade, but a good book to read nonetheless in the week that Nigeria has a new President and a new impetus for economic growth in Nigeria to understand again how India pursued economic growth through comprehensive reforms since 1991. First, a quote of what George Akerlof, a Nobel Laurette in economics 2001 said about the book, “the lessons from the spirit of 1991 are not just relevant for India today; they are also of prime importance for the billions of citizens of low-income countries around the globe.” And that is exactly what this book is all about. First, the book traced the potential of the Indian economy since independence in 1947 and why a mixed bag of socialist policies and extensive licencing and regulations did not deliver growth beyond an average of 3.5% between 1950 and 1980. At this growth rate, the level of poverty grew. But between 2005 and 2021, India’s growth has lifted over 450 million, more than twice the size of Nigeria’s population, out of poverty. At independence, the hope was that India will grow and develop dramatically afterwards because, as the books says, “India had inherited a splendid civil service, a fiercely independent judiciary, a relatively free press, and above all, politicians who had fought for independence and put social good ahead of personal profit.” But, as history has demonstrated, while these elements are important for sustained economic growth, it is policies that matter. The book also compared India and China’ failure in the same period and reached the following conclusion about their growth record – “China because of ruinous policies with disastrous economic policies prompted by Marxist doctrines that required autarky and regimentation of the economy, and India because of a disastrous economy policy framework that undermined the productivity of its investment efforts.” However, sustained reforms have led to growth in India, Brazil, and China. It is reforms, also when sustained, that will lead to sustained high level of growth in Nigeria. The book argue that two things lead to sustained economic growth – liberal policies ad reforms in the Indian economy. They highlighted two set of reforms, calling it track 1 and track 2. Track 1 set of reforms are reforms that produces growth and directly impacts on poverty. Track 2 are those that are aimed at providing health and education. In “why growth matters”, you will also find how data is used to dispel the many myths that critics associate with the reform and growth process. There are many lessons in the book for Nigeria. Let’s look at a few of them. Reading the book is like reading about Nigeria today – same challenges, but also same great opportunities to transform the fortune of this country if only we are bold and courageous enough to carry out reforms that improves the productivities and returns on the investments in the country. The starting point, as I have argued this week, is Macroeconomic Stability.
Cobalt Red – How the blood of the Congo Powers Our Lives
Author: Siddharth Kara, Associate Professor of human trafficking and modern slavery at Nottingham University, UK. This is a book about the Congo, Africa, minerals, policies, leadership (responsibility), and raw capitalism. Siddarth, following three-year research in the Congo, has provided a detailed account of how the search for a better life and environment by the world, led by developed economies and some of the biggest companies in the world, has left the Congo, and particularly the Copper belt regions of Katanga in ruins, poverty and environmental mess. What one will so much like about the book is that it provides detailed contextual and historical descriptions of how we arrived at this point in the Congo – political exploitation and instability. For many decades, from one political reign to the other, with sizeable influences from the West, political instability has provided the breeding ground for Congolese exploitation. The exploitation of children, working as artisanal miners, is not new. It is a new dimension of the rape on the country. What is also interesting about the book is the documentation of how global historical business, political and policy dynamics is now shaping the demand for colbalt in the Congo. Cobalt is used in the lithium-ion rechargeable battery in the world – “The demand side is driven by the fact that colbalt is used in almost every lithium-nion rechargeable battery in the world”. This ranges from the mobile phones we use, to tablets, laptops, e – bikes, e- scooters and other forms of consumer electronic devices. But if that was not enough underlying demand, Siddarth explained how the drive for a global cleaner environment and the consequent need for electric vehicles has dramatically driven up the demand for cobalt. Consider this quote from the book. “For the forseeable future, there will be no avoiding cobalt from the Congo, which means there will be no avoiding the devastation that cobalt mining causes the people and environment of the mining provinces of the DRC. Even after battery designers find a way to eliminate cobalt from rechargeable batteries without sacrificing performance or safety, the misery of the Congolese people will not end. There will surely be another prize slumbering in the dirt that will be made valuable by the global economy. Such has been the curse of the Congo for generations. Unspeakable riches have brought the people of the Congo little other than unspeakable pain”. This is not different from what has happened in the Niger Delta in Nigeria. For about 60 years, unbelievable amount of oil wealth has been extracted from the region to meet the world’s demand for oil and Nigeria’s successive government appetite for it, but the region continues to face environmental degradation and neglect. Finally, the book is a summary of the effects of failures in leadership and policy on the African continent.
