Economicwatch

[emmanuel ewumi]

It also revealed that no fewer than 56.3 million adults, representing 64.1 per cent of the adults, currently had no bank account, while only 28.6 million people, representing 32.5 per cent of adults had bank accounts.

It also stated, “62.6 per cent of adult males are unbanked while 72.8 per cent of adult females are unbanked. Also, 76.2 per cent of the rural population is unbanked.”

[emmanuel ewumi]

Originally Posted by emmanuel ewumi

The survey carried out by Enhancing Financial Innovation and Access, an independent Nigeria-based financial sector development organisation, showed that more than half of the population earned less than the monthly minimum wage of N18,000.

This figures are scary, somethings needs to be done if this worsening trend must be corrected.

[emmanuel ewumi]

Originally Posted by emmanuel ewumi

Only 3.6 million Nigerians earn above N70,000 — Survey — The Punch - Nigeria's Most Widely Read Newspaper

With this figure anybody with a networth of 1 million dollars belong to an elite group.

[SpecNomics]

Originally Posted by overload

$10 Billion ‘Hot Money’ Not Posing a Threat - Sanusi - Nigeria Business News


well, time will tell. Abi no be the same sound track Soludo play to us that time?

The Governor stretched the truth a bit o

So long as the inflows from oil revenue @ budgeted price or below are greater than the outflow from supplying foreign currency to importers, the accumulation of CBNs component of our foreign reserves should continue. The increasing stock then enables the CBN to have enough funds to stabilize the naira. High interest rates further support this pre-existing situation by restricting growth in money supply which for an import dependent economy is the same as restricting demand for foreign currency, which of course puts a lid on inflation as it restricts aggregate demand. The output, which fortunately for him is not a KPI for his role, is an increase in poverty and decrease in living standards.

In addition High interest rates also attracts hot money which further adds quantity to the supply side of FX market, but to say all those results are a function of the rates

As for his views that “there’s no evidence that lower interest rates will spur economic growth”, well that’s just ridiculous! That an enabling environment of good infrastructure is required by the private sector is a no brainer, but the initial qualification is just wrong.

I sure hope he has been misquoted. Who here thinks in the absence of high oil prices CBN would still be accumulating foreign reserves by attracting hot money through high interest rates, please raise ur hand.

[hispy99]

Nigeria's 17% loan profile healthy - Minister

[arostuff]

Originally Posted by emmanuel ewumi

With this figure anybody with a networth of 1 million dollars belong to an elite group.

Pa ewunmi are you indirectly coding that you are in the elite group

[nosa2]

Originally Posted by SpecNomics

The Governor stretched the truth a bit o

So long as the inflows from oil revenue @ budgeted price or below are greater than the outflow from supplying foreign currency to importers, the accumulation of CBNs component of our foreign reserves should continue. The increasing stock then enables the CBN to have enough funds to stabilize the naira. High interest rates further support this pre-existing situation by restricting growth in money supply which for an import dependent economy is the same as restricting demand for foreign currency, which of course puts a lid on inflation as it restricts aggregate demand. The output, which fortunately for him is not a KPI for his role, is an increase in poverty and decrease in living standards.

In addition High interest rates also attracts hot money which further adds quantity to the supply side of FX market, but to say all those results are a function of the rates

As for his views that “there’s no evidence that lower interest rates will spur economic growth”, well that’s just ridiculous! That an enabling environment of good infrastructure is required by the private sector is a no brainer, but the initial qualification is just wrong.

I sure hope he has been misquoted. Who here thinks in the absence of high oil prices CBN would still be accumulating foreign reserves by attracting hot money through high interest rates, please raise ur hand.

Na this kind analysis/criticism dey make me come SMN.

[goldsun]

Originally Posted by SpecNomics

The Governor stretched the truth a bit o

So long as the inflows from oil revenue @ budgeted price or below are greater than the outflow from supplying foreign currency to importers, the accumulation of CBNs component of our foreign reserves should continue. The increasing stock then enables the CBN to have enough funds to stabilize the naira. High interest rates further support this pre-existing situation by restricting growth in money supply which for an import dependent economy is the same as restricting demand for foreign currency, which of course puts a lid on inflation as it restricts aggregate demand. The output, which fortunately for him is not a KPI for his role, is an increase in poverty and decrease in living standards.

In addition High interest rates also attracts hot money which further adds quantity to the supply side of FX market, but to say all those results are a function of the rates

As for his views that “there’s no evidence that lower interest rates will spur economic growth”, well that’s just ridiculous! That an enabling environment of good infrastructure is required by the private sector is a no brainer, but the initial qualification is just wrong.

I sure hope he has been misquoted. Who here thinks in the absence of high oil prices CBN would still be accumulating foreign reserves by attracting hot money through high interest rates, please raise ur hand.

my oga, how do you think our economic growth should be stimulated

[emmanuel ewumi]

Originally Posted by arostuff

Pa ewunmi are you indirectly coding that you are in the elite group

I beg, i never reach that that elite group. My personal networth never reach that level, but our combined networth is a little above it. This means my networth plus my wife's.

[emmanuel ewumi]

Food inflation hit 11.10% in October – Report — The Punch - Nigeria's Most Widely Read Newspaper

[Waves]

Originally Posted by SpecNomics

The Governor stretched the truth a bit o

So long as the inflows from oil revenue @ budgeted price or below are greater than the outflow from supplying foreign currency to importers, the accumulation of CBNs component of our foreign reserves should continue. The increasing stock then enables the CBN to have enough funds to stabilize the naira. High interest rates further support this pre-existing situation by restricting growth in money supply which for an import dependent economy is the same as restricting demand for foreign currency, which of course puts a lid on inflation as it restricts aggregate demand. The output, which fortunately for him is not a KPI for his role, is an increase in poverty and decrease in living standards.

In addition High interest rates also attracts hot money which further adds quantity to the supply side of FX market, but to say all those results are a function of the rates

As for his views that “there’s no evidence that lower interest rates will spur economic growth”, well that’s just ridiculous! That an enabling environment of good infrastructure is required by the private sector is a no brainer, but the initial qualification is just wrong.

I sure hope he has been misquoted. Who here thinks in the absence of high oil prices CBN would still be accumulating foreign reserves by attracting hot money through high interest rates, please raise ur hand.

Nigeria's major problem at the moment is that we don't have any competent body or person having a holistic view or responsibility of the economy. SLS is just focussed on Inflation and FX rate and ignoring growth, employment and poverty (not his KPI). NOI either has no intellectual capacity or ideas and is bogged in administrative duties like subsidy payments. The Economic Team is populated by businessmen looking for favours and influence who have no clue about running an economy. Met the President's Economic Adviser at the Nigerian Economic Society two months ago. He is as clueless as his boss.

[MalamImam]

Originally Posted by Waves

Nigeria's major problem at the moment is that we don't have any competent body or person having a holistic view or responsibility of the economy. SLS is just focussed on Inflation and FX rate and ignoring growth, employment and poverty (not his KPI). NOI either has no intellectual capacity or ideas and is bogged in administrative duties like subsidy payments. The Economic Team is populated by businessmen looking for favours and influence who have no clue about running an economy. Met the President's Economic Adviser at the Nigerian Economic Society two months ago. He is as clueless as his boss.

This is an insult to a Havard Phd, former Vice President/Secretary and later Managing Director of the World Bank! Irrespective of our differences in opionion, we must learn to respect those in positions of authority. Not everyone in office is a daft!

[SpecNomics]

Originally Posted by MalamImam

This is an insult to a Havard Phd, former Vice President/Secretary and later Managing Director of the World Bank! Irrespective of our differences in opionion, we must learn to respect those in positions of authority. Not everyone in office is a daft!

I agree with MalamImam on this note, not only, IMO, are NOI and SLS the best of a bad bunch, they are also a very good bunch. Currently reading NOIs "Reforming the Unreformable", a must read for anyone interested in what it takes to implement change in our country, and there is too much intelligence and know-how to say such things about her, Harvard (I thought it was MIT) education and position in authority aside.

Originally Posted by goldsun

my oga, how do you think our economic growth should be stimulated

Humour me. Economists have these things they call identities, these follow the debits must equal the credits concept found in accounting. Let me introduce two of them - sectoral balances and profit identities to show how economic growth could conceptually work – there is also an identity for GDP of which these identities are a component of.

Sectoral Balance states that (S-I) = (G-T) + (X-M)
S= Private Savings
I= Private Investments
G= Govt. Spending
T= Govt. Revenue
X= Exports
M= Imports

What this first identity says is, Net Savings (Investment) in a given economy must equal Govt. Deficit (Surplus) plus Net Exports (Import).

If you agree that investment spurs economic growth, then the next question is how to fund it. There are two options, Savings or Borrowing. Most will agree that funding from savings is better than funding from borrowing. So the question is what sectoral balance profile is required to bring about Net Private Saving. At the most extreme end of the spectrum inferred by this identity, a Govt. Deficit and Net Exports would lead to net private savings. And then if the environment is stable the private sector could use their savings to fund investment.

As things are, a stylized sectoral balance profile for Nigeria is more akin to a Net Private Investment caused by Govt. Surplus and Net Imports. And I think the biggest culprit for this is corruption.

Corruption means a vast amount of scheduled Govt. Spending goes into private accounts, creating a scenario that resembles a Govt. Surplus. Corruption creates an unstable environment, at least one that does not encourage investment. So the funds that go into the private accounts, are thus more likely to flight out of the country than provide funding for investments. Thus we are left with a private sector Net Investment position that can only be funded by Borrowing from the Banking Sector.

So, fighting corruption by ensuring implementation of government budgets would go a long way to reducing unemployment and stimulating growth in manufacturing sector.

The second identity i.e. profit identity, is closely linked to the first. It expands the original identity by further breaking the private sector into its component parts, as it’s currently stated it includes Firms and Households.

(Fs -Fi) + (Hs-Hi) = (G-T) + (X-M)

By substitution you can arrive at what makes up Fs

Fs = Fi – (Hs-Hi) + (G-T) + (X-M)

Fs = Firm Savings = Profits
Fi = Firm Investment
Hs = Household Savings
Hi = Household Investment
*Other variables are as defined in first identity – sectoral balance

Firms are able to reduce unemployment and stimulate growth when they are profitable. This profitability encourages further investment. This identity clearly shows what drives TOTAL Firm Savings (Profits) in a given economy. From the insights gained in analysing the sectoral balances, I said the stylized facts would indicate that we have an “actual” Govt. Surplus caused by corruption, which impairs local supply (read businesses) and sustains import dependency. You can now see the transmission mechanism to total profits. Govt. Surplus and Imports reduce potential for Firm profits and clearly when we (Hs) save our consumption reduces and so do firm profits.

So, again, there is no getting away from it, corruption is at the heart of our economic failure, but I’m sure no one needs to be told that. So when SLS talks about mass redundancy of civil service and reduction of govt. size, look at it from the point of view of what impact it’ll have on govt. corruption in the long run. Better still read NOIs book for some excellent anecdotal evidence of its impact on our economy.

Besides this exercise in economic speculation (whose bases is provided by the Stock Flow Consistency school of economists for those interested – google Nicholas Kaldor or Wynne Godley) some people are of the opinion that the CBN component of the external reserves is, predominantly, responsible for the current state of high unemployment, high inflation and continued struggles of the manufacturing sector – search for LES LEBAs articles.

CBN is of the opposite opinion (well at least some CBN staff are – I make this qualification because their write ups in the Economic and Financial Reviews represent personal views not that of the bank). They believe the accumulation is necessary as our current reserves do not sufficiently cover Import requirements, Foreign Debt servicing expense, amongst other items.

The accumulation of external reserves is not restricted to only Nigeria, the Asian economies have been accumulating theirs since 1990s, I think, as a tool to defend their local currencies against over-valuation and increasingly to devalue it to support their export dependent economies. I think I read somewhere that China and Japan together own 80% of world external reserves, and it’s about $1trln – ours is less than $100 bln, I think $68bln or so.

Obviously the Asian economies cannot be said to be struggling economies with high level of unemployment, inflation or a struggling manufacturing sector, so the case that reducing or stopping the accumulation of reserves by CBN might not be the path to alleviating these economic issues in Nigeria.

However, I understand the case against continued external reserve accumulation by CBN. If stopped, and high oil prices persist, the value of the Naira could appreciate significantly and that could improve the living standard of Nigerians in short run, but could introduce again the macro-instabilities (high inflation, large budget deficits) of the past should oil prices fall, which were the main reasons for adopting it in the first place.

I think NOI has a good grasp of the challenge and hopefully she will not be excused out of the role before her plans come to fruition. The budgeted benchmark price of oil, the SWF/ECA, the push to reform the civil service, privatisation, support local food security, customs and tariffs regime, etc are all part of the fight against corruption and the fight to put the economy back on the right track. And in all fairness to SLS, his part is a small one so it’s understandable if he believes sticking to his remit is wiser than pushing the issue and pursuing policies that might jeopardise other more important efforts.

[MalamImam]

Nigeria Seeks Farming Boom With $3 Billion Rail Plan: Freight - Bloomberg

[MalamImam]

Food for thought:

I recently spoke with some key Northern leaders. The summary is that, it is time for all reasonable people from the north to join forces and unite against violence in the region. While the rest of the country seem to be advancing economically, the North is still saddled with negative forces of disintegration. With this, it is obvious that the development train has since left the North behind. Let truth be said, religious fanaticism, crises and intolerance cannot develop us, but cooperation and collaboration with peoples of various shades of opinion. Allah abhors violence and encourages love and peace. The North and indeed Nigeria needs peace to progress!

[goldsun]

Originally Posted by MalamImam

Food for thought:

I recently spoke with some key Northern leaders. The summary is that, it is time for all reasonable people from the north to join forces and unite against violence in the region. While the rest of the country seem to be advancing economically, the North is still saddled with negative forces of disintegration. With this, it is obvious that the development train has since left the North behind. Let truth be said, religious fanaticism, crises and intolerance cannot develop us, but cooperation and collaboration with peoples of various shades of opinion. Allah abhors violence and encourages love and peace. The North and indeed Nigeria needs peace to progress!

if north is peacefull every nigerian will prefer to stay in the north

[Waves]

Originally Posted by MalamImam

This is an insult to a Havard Phd, former Vice President/Secretary and later Managing Director of the World Bank! Irrespective of our differences in opionion, we must learn to respect those in positions of authority. Not everyone in office is a daft!

As Spennomics.mentioned, it is MIT PHD. And that is exactly where the problem begins. An Ivy league PHD does not say much about a persons capacity for running the economy of a developing country. I thought that was a settled with the experience of Asian Tigers and China. Actually, you need to go back the Chicago boys of the 70s in Chile to get a supporting evidence. Certainly India's experience is a recent reminder. Guess I have passed the level wehre a person's CV intimidates me

Anyway, let me use one issue to illustrate a point. Do our Economic Managers really believe that increasing the so called 'Capital' expenditure of our budget and reducing recurrent expenditure will lead to growth? This is an unhelpful concept. Do people really believe that spending £1 billion to build a ring road in Abuja or N16 billion to build the VP's official residence will boast our economy? Actually, I am currently studying the economic impact of such project and the result is shocking. More than 80% of the cost of such projects leaves the shores of the country to help another economy. The project itself creates very few temporary jobs and ofcourse a road is not calculated as part of the capital stock of an economy. What do you think drive our local economy and provides jobs? Is it the salary that is spent on garri and okro or the imported products used to build Abuja stadium? By the way, has it ever occurred to our Economic Managers that any so called 'Capital' expenditure will in the following year create a 'recurrent expenditure'. Atleast you need to maintain the road or stadiuim. If the VP house is Capital this year, next year will be recurrent. How do you reduce recurrent when every year, your last year's Capital has generated more recurrent and the size of the budget is not growing? So when our economic managers talk about the ills of recurrent expenditure and the benefit of so called 'Capital" expenditure, just remember this is Ivy league hangover based on a westerrn economic model. Building a road in America affects more inddustries and creates more jobs than building a road in Nigeria.

I rooted for NOI's return but anyone who has related with NOI recently will understand what I am talking about.

[netotse]

Originally Posted by Waves

As Spennomics.mentioned, it is MIT PHD. And that is exactly where the problem begins. An Ivy league PHD does not say much about a persons capacity for running the economy of a developing country. I thought that was a settled with the experience of Asian Tigers and China. Actually, you need to go back the Chicago boys of the 70s in Chile to get a supporting evidence. Certainly India's experience is a recent reminder. Guess I have passed the level wehre a person's CV intimidates me

Anyway, let me use one issue to illustrate a point. Do our Economic Managers really believe that increasing the so called 'Capital' expenditure of our budget and reducing recurrent expenditure will lead to growth? This is an unhelpful concept. Do people really believe that spending £1 billion to build a ring road in Abuja or N16 billion to build the VP's official residence will boast our economy? Actually, I am currently studying the economic impact of such project and the result is shocking. More than 80% of the cost of such projects leaves the shores of the country to help another economy. The project itself creates very few temporary jobs and ofcourse a road is not calculated as part of the capital stock of an economy. What do you think drive our local economy and provides jobs? Is it the salary that is spent on garri and okro or the imported products used to build Abuja stadium? By the way, has it ever occurred to our Economic Managers that any so called 'Capital' expenditure will in the following year create a 'recurrent expenditure'. Atleast you need to maintain the road or stadiuim. If the VP house is Capital this year, next year will be recurrent. How do you reduce recurrent when every year, your last year's Capital has generated more recurrent and the size of the budget is not growing? So when our economic managers talk about the ills of recurrent expenditure and the benefit of so called 'Capital" expenditure, just remember this is Ivy league hangover based on a westerrn economic model. Building a road in America affects more inddustries and creates more jobs than building a road in Nigeria.

I rooted for NOI's return but anyone who has related with NOI recently will understand what I am talking about.

Oga Waves,

Allow me to come in with my layman's understanding of the issues, It seems to me you're implying that reducing the money we spend on recurrent items like salaries et al and increasing the amount of money we have available(I'm giving room for corruption) to spend on capital projects like power plants, affordable housing, irrigation projects etc.

I dont believe comparing a road being built in america and one being built in nigeria can be done at face value, we need to look at the reason behind the roads being built:

In nigeria, short of a dangote or the like pushing, the reason for building the road will probably have to do with someone trying to show a section of the populace that he is working(possibly his kinsmen), we would hear things like dividends of democracy and the other usual punch lines, The idea of them building a road to facilitate farmers transporting their goods or to build an industrial park is way above our heads.

I believe NOI has decided/realized it isn't her job to fight the corruption head on, hence the indirect way she's going about it(subsidy, MDA lodging funds in banks etc), instead she is trying to focus on reforms that will yield fruits in the long term like the SWF et al.

For me, what I like about her is that she has pedigree that she has built up and seems to be working to safeguard, I dont care if she is ivy league or ginseng league.

BTW, are you saying she has a say in deciding how much should be spent to build VPs house or banquet hall?

[Waves]

Originally Posted by netotse

Oga Waves,

Allow me to come in with my layman's understanding of the issues, It seems to me you're implying that reducing the money we spend on recurrent items like salaries et al and increasing the amount of money we have available(I'm giving room for corruption) to spend on capital projects like power plants, affordable housing, irrigation projects etc.

I dont believe comparing a road being built in america and one being built in nigeria can be done at face value, we need to look at the reason behind the roads being built:

In nigeria, short of a dangote or the like pushing, the reason for building the road will probably have to do with someone trying to show a section of the populace that he is working(possibly his kinsmen), we would hear things like dividends of democracy and the other usual punch lines, The idea of them building a road to facilitate farmers transporting their goods or to build an industrial park is way above our heads.

I believe NOI has decided/realized it isn't her job to fight the corruption head on, hence the indirect way she's going about it(subsidy, MDA lodging funds in banks etc), instead she is trying to focus on reforms that will yield fruits in the long term like the SWF et al.

For me, what I like about her is that she has pedigree that she has built up and seems to be working to safeguard, I dont care if she is ivy league or ginseng league.

BTW, are you saying she has a say in deciding how much should be spent to build VPs house or banquet hall?

I used the example of cliche 'Capital vs Recurrent' to illustrate the point that you need a very local perspective to apply a western concept. You need a.much deeper level of analysis to determine the quality (not the classification) of the spending. Which of the spending helps create jobs, has multiplier effect or reduces poverty. Most states (especially the Northern ones) have a better Capital / Recurrent expediture ratio than the FG. That is why any traveller to the North from the South is usually amazed by the level of infrastrucutre (especially roads) in th North. But look at the people and the quality of life they live, level of umemployment and poverty and you may have an idea of what I am talking about. I used to work for a telecom company and part of my brief involves looking at revenues on an LGA and State level. If you assume that Telecom spending is a good proxy for wealth and business activity, then you will be amazed what you will see if you trend the numbers over the last 10 years side by side with the so called Capital expenditure.. You may begin to question the idea whether infrastructure spending in Nigeria really boosts growth and employment. The biggest ticket item in FG's capital budgets is usually roads and that is why I used that example.

I don't think Madam can be held responsible for spending on the VPs house. But by going about talking about 'Capital Expenditure', she may well be reminded that the house is a major part of the FGs capital expenditure. NOI is rather disconnected now and is not the NOI that served OBJ. She is either disillusioned or simply tired.

[Dicobody]

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