Leadership (Abuja)
John Akpan
11 October 2008
opinion
We can very safely declare that the poor state of the Nigerian economy has had nothing to do with the collapsing global capitalist markets of the western world. The plea of global village knock-on effect? Naw! That would be pure copycat syndrome.
There are certain fundamentals in the current market crash which we must grasp in order to have a fuller understanding of any danger, if indeed there is for Nigeria. Those Nigerians in the financial industry ought to know better… that our economy (not of our doing) in truth, hasn't been integrated into the world's economic credit system. Period. We are not there. Those who are expressing fears and calling on the federal government to imitate the Bush administration in America by releasing billions into the system should be asked to bring forth more detailed explanation.
Perhaps, with the exception of South Africa (and they have denied it) Africa generally isn't involved in the looming doom of the global capitalism. Ours has been peripheral, because we could neither successfully immerse our waddling financial industry in the twirly waves of pure market economy of the western world, nor can our gross national earnings from foreign markets add up to any significant global reckoning, i.e., when you take away crude oil.
First, we should note: The whole idea of the credit-based economy is about the role of financial institutions to determine the direction, manage and facilitate the flow of funds in the system. Such activities involve the workings of "easy" lending mechanisms that ensure that institutions and individuals have "easy" access to funds as well as financial risks management, which networks operate beyond national boundaries. As noted earlier, aside South Africa, I'm not too certain of any other that has successfully latched on to this system, and certainly, Nigeria is outside the loop of the real global capitalist credit market. Therefore, the turmoil of its collapse will remain an echo for sometime.
Second, we should note: The global economy has been classed into two broad spheres, namely, the brick-and-mortar, i.e (heavy) manufacturing and the service industry (knowledge) economies. Representing the former are China and Brazil , while the latter category is run by the nations like U.S.A, Europe, Japan and India. And so, you can see that Nigeria is not involved. In both global economic worlds, their point of engagement is the international financial market from where they borrow to produce what you and I consume in Africa, and in other least developed sections of the world.
Over-borrowing in the name of some dubious ventures, especially in the U.S., Japan and Europe, often meet with willing and eager-to-give banks. If you add that to the scandalous insider dealings and jumbo remunerations, entitlements and rewards of chief executive officers, ceos of big industry players, then we should understand that the implosion at the international credit market was bound to happen. Very few of those things apply here. In terms of lending, for instance, we know that it's mainly tycoons and big-time politicians who can access credit facilities in Nigeria and, most times, such don't go into any productive ventures.
We are then left with the task to explain the reasons for the recent dip in Nigeria's capital market. But then, we also have to note that, ultimately, all markets are prone to manipulation. Any self-respecting capital market player with sufficient depth will tell you that the capital market in Nigeria, for a long spell, had been bullish for no clear rational reasons. The popularity of investing in stocks by all manner of people was a development that needed caution. What really were the honest market fundamentals, or the tangible economic dynamics that drove prices of equities in the Nigerian market for that length of time?
Hyping about and playing big in the stock market, especially in a system that neither produces reasonable volume of exports nor boasts of cheap funds to sustainably drive the wheels of the economy, is a dangerous game. For practitioners and admirers of the market place wisdom, markets themselves are always sensitive. In Nigeria's instance, the market hasn't got to the stage of being sensitive to the general dynamics that drive the economy, not even when the Nigerian Stock Exchange DG got entangled in the Obama dinner palaver - the market didn't react. Or did it?
Companies have continued to declare huge profits in an economy that hardly produces at full capacity. Why? Quoted companies return to the capital market, ever so often, to raise more funds, sometimes with no commensurate investments in the real sector to enhance national productivity. Why? Has the CBN made up its mind to standardize what companies must do with over-subscribed funds after every public offer? If not, why?
The orientation and the experiences could prove beneficial for the current intervention of Nigeria's capital market makers, but shouldn't we have found out, first, what drove the market down? If you were to tell me that the NSE fell because of the global credit market failure, I should find that difficult to swallow.
Let Nigeria and indeed other least developed economies learn from the current economic jolt of the West. Market forces have been overwhelmed by greed and the criminality of the players, as well as the inherent falsity of their wisdom and invincibility. Rather than devote our time to play the market and extol its forces, we should work our farms and run our industries to produce for ourselves and for others who don't have as much as we do.
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