LBS EXECUTIVE BREAKFAST SESSION – DECEMBER 2023 (Re: 2024 – A year of the unknown unknowns and the general theory of the 2nd best)

Dear Subscriber,

As most economists and investors wonder how we survived a tumultuous 2023, only four words come to the lips of all – Oh! What a year!!!

Q1 – Old Naira in new colours & election palaver

In Q1’23, there was the advent of the “Old Naira in New Colours”. POS operators were bilking the people and making out like bandits with a cash premium of 20%. If you give them 10k by transfer, they pay you 8k in cash. When asked, some claimed that they did not ask questions about the cost of COVID tests, please don’t ask me any questions. If you want money, pay the fees, if not please “Vamus”, I can’t shout.

Most urban dwellers hoped for election liberation only to find out that democracy only means 100 fools cannot make a wise decision. They saw that INEC was not OPEC and that BVAS had become “No MAS” – meaning “No More” in Spanish

Q2-Q3 – Inauguration, litigation & celebration

Subsidies are Gone with the Wind. The celebrations that followed the bold reform statements were short-lived. Expectations that subsidy was a silver bullet that solved all problems was followed by frustration and a crisis of false expectations. Most citizens yelled – “take us back to the past”. The political capital of the slim mandate of Feb 25 was now wearing thin. The people felt that palliatives were for the pockets of politicians, and it was more about sharing spoils.

Q3-Q4 – Investor road shows with no dollars to show

The leadership team had vigorously marketed the reform agenda across most financial centres in the world. At first, in what sounded like a fairy tale, like most frontier market currencies, the Naira rallied temporarily to N900/$ based on promises of new money during the Independence Day broadcast. It finally fell to N1,250/$, which is far less than its real value (PPP) of N810/$. Many investors have moved from renewed hope mode to saying “whatever”.

2024: Its either slow recovery or lights out

Moody’s has upgraded Nigeria’s economic outlook from stable to positive even though the credit rating is still Junk.

The president’s men now have no choice but to roll up their sleeves and do the heavy lifting. They need to address the fundamentals and remember a few rules of economics:

  • Economic policies matter only in so far as they make people happier – Andrew Oswald (1953)
  • That there is a reason why diamonds cost more than water – The paradox of value.
  • Population growth keeps us poor – (As there is not enough food for all, some die from hunger).
  • Unemployment is not a choice.
  • Distortions may be linked, and it may not be possible for the government to remove some of them – The general theory of the second-best
  • Robert Solow, the Great Economist says that “over time, all countries will be rich”

Therefore, as we go into 2024, a leap year that should bring good tidings, the trend must be your friend.

In the latest LBS Breakfast session, Bismarck Rewane and the FDC Think Tank analyzed these economic events, providing insights into the challenges of 2023 and an outlook for 2024.

Enjoy your read…