Make in Nigeria economics and other stories from 2020
Insights on selected economic policies and key economic developments from 2020
This is better read by opening the link, not through your mail. It is really useful for those curious about policies in Nigeria, from trade, exchange rate, import substitution, employment to many others. It’s a good reference point on key issues as well. Read slowly, then come back to it if you must.
This post is meant to document my commentary on Nigeria’s economy and somewhat absurd policies in 2020. I featured on podcasts, co-authored articles, and wrote so many threads! It’s just easier to write threads.
I spent a considerable amount of time on Twitter in 2020, talking mainly about finance and economics, hence the threads. As you will see, the CBN and its Governor, Godwin Emefiele, featured frequently. Emefiele has to be my person of the year, but the less said about that the better. Now that I reflect on the year, I’m surprised that I barely talked about Nigeria’s fiscal finances. I guess its because its easily predictable and less a mover of financial markets, even in its tragic state.
My approach to this post is to classify articles, podcasts and threads into different sections. Each section will then feature paragraphs with a short commentary on what I wrote or talked about. Even if you don’t open the links, you still get to take a lot away.
The Articles I wrote
I did not save the world in 2020, that was for the brave among us who attended to the sick, the smarts who innovated techniques to cope with the pandemic and the audacious ones who created vaccines. In my little corner in Somolu, I wrote about the pandemic.
I co-authored an article on how Nigeria can minimise the impact of the pandemic on the economy for ONE. This was in collaboration with Razaq Fatai, a former colleague at PwC who now works for the ONE foundation in Abuja. The major points were for the government to support the healthcare system, vulnerable households, sub-nationals and cut wasteful spending. With the benefit of hindsight, it is clear that the government did a little bit of some of those points. The worry was that the size of interventions, reach and speed of disbursement of aid were poor compared to peers.
With Joachim MacEbong, who was an absolute delight to work with and has the best opening and closing sentences in the game, I wrote two articles for Stears. The first was on global cooperation amid the pandemic and the second was on regional cooperation among states in Nigeria. On the first, the point was that such a global tragedy (COVID-19 obviously) could end up uniting the world and it was impossible to emerge stronger without such. I can now say that after the initial panic that led many countries to impose trade restrictions to better support their economy, this was later relaxed. The second article talks about how Nigerian states should work together to boost their fortunes.
I started this newsletter or blog called Stops & Gaps in 2020 as well, writing two posts on devaluation myths and the CBN’s frequent madness, which you can find if you make the slightest effort. Free cookie for anyone who can make the best guess on the motivations behind the title of the blog.
Podcast Features
Hmm…run o!
I featured on four podcast episodes in the year. Three of the four episodes was with Ideas Untrapped. Please check out their podcast if you are curious about high quality thinking around economic development.
The first was a long recording (117 minutes) on several topics as it relates to Nigeria. We covered trade, industrialisation, economic development strategy, institutions, knowledge, among many other topics. Why are african countries worried that AfCFTA will lead to loss in tariff revenues? Why do Nigerians consider trade, at least the import type, to be a waste? We discussed this and more. Listener beware. I have a long-term bearish bias on Nigeria’s economy.
The second was short at 37 minutes, covering my thinking about the pandemic in Nigeria and what this should mean for a serious government. We were forced to do some reforms so I guess we haven’t wasted the crisis entirely. I join my faith with yours in hoping that we don’t have a complete reversal of these reforms before the next crisis.
The third is a must listen, I also have a thread on it in the next section. The episode was about Nigeria’s devastating unemployment numbers in Q2:2020. We waited almost two years for that report. For effect, I have to plug in some charts, please bear with me.
What I want you to see in chart 1 below is that 10.2 million Nigerians suddenly were not available for work, for whatever reason we are yet to understand.
Chart 1: Steep Decline in Labour Force Population (million)
Source: NBS
The second chart is even more worrying. As if by magic (thanks to La Roux for the background music), 15.7 million people disappeared from full-time employment. This has all sorts of consequences, so let your imagination roam.
Chart 2: Steep Decline in Labour Force Population
The other podcast I featured on was the Nigeria Politics Weekly with 3 other people. I talked about some of Nigeria’s trade and economic policies. Oh, lest I forget, I was on the podcast with someone who blocked me on Twitter after I “abused him”, for what I can’t remember clearly, but for which I’m sure was a dumb thing. Who can guess?
Twitter Threads
It’s only natural given the kind of year we had that I wrote this many threads. I’m tired from working for my N2k today, so this will be brief. Also, these are twitter threads which you can consume in 3 minutes or less.
Thread on CBN’s management of the exchange rate and the bank’s communication gap.
This was about how the CBN fails to guide investors and economic agents appropriately and how this worsens everything. It was very timely as you would see.
Thread on Nigeria’s dire Q2:2020 unemployment numbers
I already talked about this. This thread offers other perspectives on the numbers.
Thread on CBN and FG’s development loans and credit risk.
The CBN and FG want banks to lend to risky sectors at ridiculously low interest rates but do not bear any of the risk. I argued that this approach will not do much until they change. Updated the thread after I saw a useful framework from the IMF.
On inflation and treasury bill returns in 2020
Should I say it? Well, see.
On Nigeria’s food policy
Emefiele and Buhari are a devastating duo. I look at the unintended impact of Nigeria’s food trade policy when the importation of maize, for which there is a local shortage, was banned. The result? Disaster. Just like other import substitution policies of the current government.
On Nigeria’s external account problems
I look at what a disastrous year it has been for the most important account when looking at how we trade with the rest of the world. It’s not going to get better anytime soon due to lower for longer oil prices and some import which we have no substitute for locally (services). There is a structural shift in this account, which means Nigeria might need to think differently in the next few years. Expect a more detailed post on this topic.
On CBN’s new remittance policy
We all know what this is about. It’s Nigerian policymakers creating more hardship for people.
On what the transition to cleaner energy means for Nigeria and Nigerians
Still on that boring topic about how Nigeria should think about shifting from oil. This time I look at how Germany is helping affected companies. In Nigeria, the entire country will be affected but as usual, policy-making is on go-slow.
On why low inflation is what matters most for monetary policy
Why do we keep shouting about low inflation all the time?
Some Key Economic data: Nigeria vs Senegal
I bet you don’t know as much about the Senegalese economy. Well, I look at some key economic data, comparing with Nigeria. I shouldn’t have to compare such a tiny country with Nigeria, but the people on Twitter can make you do what is ungodly.
If I tell you the number of Nigerians who disappeared from full-time work in 2020, you will be scared. And this is it: 15.7 million people were out of full-time employment in Nigeria as at Q2:2020. Senegal's population is around 17 million. What a ridiculous comparison.Senegal unemployment rate in 2020 is a whooping 48%...which means almost half of senegalese have no jobs. Nigeria’s unemployment rate is ~27%. I give you a simple assignment twitter search senegal and Nigeria. See which one is getting bashed (not criticsed) more about unemploymtOdogwu Paris @DiKachiiOn Nigeria’s industrialisation and trade policies with neighbours
Why do we feel so cheated by our neighbours and why do we think they are responsible for Nigeria’s poor agriculture sector and lagging industrialisation? I argue that they don’t matter that much, and we are all poor las las.
A thread explaining some of the less understood trends of 2020 in Nigeria’s economy and financial markets
I told people to ask me questions about anything, and I answered all. The offer is still open.
On COVID-19’s impact on global food value chains and our local food policy
See, many people thought the pandemic would have a strong negative impact on food prices due to higher protectionism. As it would turn out, there were more food price pressures within economies.
Lessons from Ghana on managing FX risks and exposure to foreign investors
I stumbled on a report that led me to the conclusion that Ghana is smarter when it comes to managing FX risks. But at least, our music is better.
On the myth of crowding out private investors in the financial markets
We talk a lot about how FG’s activities in the debt market lead to crowding-out: a situation that does not allow corporates to be able to borrow well. The truth is that high interest rates on debt is not the FG’s fault, their issuance is tiny relative to market liquidity. Blame Emefiele for making interest rates really high to attract FX from foreign investors. But even when he made interest rates low, did corporates really access the market? The private (non-government) non-oil sector is around 80% of GDP (N115.2tn). I doubt corporates borrowed up to N1.0tn in bonds in 2020 despite ridiculously low rates. The reality is Nigeria does not have a lot of healthy, large companies that can access the debt market.
Do you know that 99.8% of enterprises in Nigeria are micro? These type of companies employ less than 10 people with total asset size (excluding land and buildings) less than N5m. And 97% of micro enterprises are sole proprietorships. Did someone say poverty entrepreneurship?
Also, do you know that medium scale enterprises (capacity to employ at least 50 people) are only 1,793 in the entire country? Hehe. There were 4,670 companies as at 2013.
Mini sub thread on why emerging market central bank’s support to debt markets should not be interpreted as direct monetary financing of government.
Why is the South Africa Reserve Bank (SARB) buying government debt amid COVID-19? I say why it made a lot of sense and must not be compared with the unconstitutional behaviour of our CBN. Even before the pandemic, the CBN had been funding FG’s spending.
On the weakness of Nigeria’s border closure in curbing smuggling and how the riskiness of smuggling reduces over time
In case you are surprised that you were still eating foreign rice despite our ruler’s claim that they shut all land borders and Nigeria is self-sufficient in rice, this is for you. Smuggling persisted, we only paid more for cheap rice. Anyway, god bless our neighbours.
They aren't though. We are paying twice the costs: 1) there's still smuggling 2) but the venture is now more expensive - prices are higher, still competitive though.I see tweets both claiming the border closure is (1) nonsense (i.e. isn’t making any difference to smuggling patterns, thus isn’t making smuggling riskier) and yet also claiming it is (2) harmful (increases the price of rice in Nigeria). These claims are inconsistent o. 🤷🏽♀️ https://t.co/ZEtHSBHJKZAmaka Anku @AmakaAnkuOn why timely and predictable adjustments to the exchange rate is a powerful tool to shape the investing decisions of businesses.
Timely, predictable exchange rate adjustments or one-time, unexpected steep devaluations: which is easier on people and businesses? Our CBN is once again doing the most.
Exploring one major reason why bad policies are entrenched in Nigeria
Why do bad ideas persist in Nigeria? I provide a plausible answer.
On why agriculture is not the future of employment in Nigeria but manufacturing and services.
If you want to know why agriculture is not the future of employment and why we are better focusing on manufacturing and services, this thread provides a good answer. Stop believing the clowns masquerading as policymakers who tell you to go back to the farm.
That’s all I have on my commentary in 2020. These were my top 20 threads, at least the ones I could recall. Please let me know what you think and ask questions if you have any. Don’t forget to subscribe and share to invite your friends to do same.