Dear Subscriber,
The global financial plight is far from over
Full-blown or not, there’s clearly a financial crisis lurking around, waiting to strike. We do not know when or how, but we are certain it won’t be as bad as the 2008/09 meltdown. However, it will be something that no one will forget in a hurry.
In March, SVB, Signature Bank and Credit Suisse made the headlines about their failures. Thanks to the US Fed and ECB swopping in to save the day, investor and depositor behaviours were properly anchored to avoid massive bank runs, capable of swelling to a financial nightmare.
Unfortunately, we are not out of the woods yet. This week, the shares of a US mid-sized bank, First Republic, plunged by over 50% after it released its Q1’23 report, showing it lost about $100 billion in client deposits.
Meanwhile, in Nigeria, higher interest rates are beginning to bite financial institutions as impairment charges rise while net earnings decline. Also, the real sector is not exempt as industrial and agriculture sector activities declined by 4.7% and 1.9% respectively. Harshly, rising interest rates will keep elevating borrowing costs, triggering corporate mortality and threatening banking sector stability.
There’s a legitimacy crisis in Africa
Legitimacy in governance is the recognition and acceptance that a leader has the right to rule. In a true democracy, this accepting and recognizing is done by the “people” through the “electoral process”. Anything outside this, blemishes democratic rule, stripping the people of their power.
Sadly, this seems to be the trend in several African, and Middle Eastern countries, with gerontocracy and illegitimacy on the rise. As a result, these countries have moved from stable to highly fragile states in the past two decades. In less than a year, five elected governments including Mali and Burkina Faso collapsed in Africa, with many characterized by flawed elections, an elixir for state fragility.
In this edition of the FDC bimonthly publication, the FDC Think-Tank analyzes these issues and their implications for the economy.
Enjoy your read!
