Great feedback on the post on how we financialized Nigeria without the making things components and put the nation on an economic descent. Even a senator sent a note to a village boy with “…my staff forwarded your post to me. We will look into this”. Good People, I told the senator that Nigeria has made Naira a “commodity” which can be bought and sold like any product since people pay fees with POS (post of sale) agents during withdrawals and deposits. Simply, because of our institutional deficiencies, we’ve created a business sector to “tax” the Naira by non-government agents.
Let us continue the financialization of Nigeria conversation. I have noted that between 1989 and 1993, Nigerian financialized its economy. Nigeria has not recovered from what happened in those four years. Let me add another vector to what we have already discussed. It was in 1989 that Nigeria introduced Bureaux de Change (BDC), creating a meaningless financial institutional category that was mainly designed to “tax” the citizens.
Simply, like the POS business which has turned Naira into a “commodity”, enabling the buying and selling of Naira, BDC and POS share the same genes.
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Yes, I want N10,000 and you can take N100 if you can give me this money as a POS agent. I want to deposit N20,000, please this N500 is my fee. Magically, Naira is now a commodity where to withdraw or deposit, someone has to pay a fee. When you model that the central bank noted that more than 90% of cash in circulation is outside the banking sector, and a big chunk goes through this POS system, you will agree that it is indeed a great sector. Under that system, how do you convince a young man to start a poultry business when he can insert himself with a POS merchant in the village market to tax the citizens?
That is financialization which is possible because Nigeria has not given banks an ultimatum to reach all local governments and wards to be called national banks, 15 years upon licensing. Because we have allowed banks to operate where they can make profits and avoid where they cannot, we then shifted the “losses” to the citizens.
If this village boy is to be a decision maker, I will give all national banks in Nigeria to be present in all local government areas. We do not want to see those huge profits when Ovim people do not have a decent banking product there!
BDC like the POS offer marginal production value and are products of a financialized Nigeria. But while POS is focusing on Naira, BDC is an international vector. Yes, BDC plays with the national currency, and with that vector, Nigeria created a business sector which can only thrive on the volatility of the Naira! So, more volatility, better gain. (People who invented POS did it to help in payment of goods and services, not for selling and buying currencies.)
Just like that, we created Naira billionaires for doing largely nothing but get USD from the central bank and sell to the citizens! Tufiakwa! And in a system where that happens, why do you need to create a soap business or start a farming business? In other words, if volatility brings economic gains, why do you think people will not work towards creating it?
Our banks cannot be allowed to choose where they operate to declare huge profits; they should be pushed to go rural, spend the profits, but over time, they will deliver value to themselves and the economy. That will ensure we reduce the POS agent “tax” in our economy.
Also, we need to pay attention if it is time to make everything aspect of BDC operations 100% digitized. In other words, any operator receiving funds from the central bank will get it in a digital form, and the ones in airports or ports must be better regulated with higher accountability. Yet, over time, what BDCs do must be folded into what banks do.
And let me add that POS and BDC have united in Nigeria as you can also engage POS agents when doing your thing with BDCs. In those cases, Nigeria introduced two layers which offer marginal value (and remain necessary because we have not fixed foundational things).
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Everything in the piece screams Reset! Reset! There is really no way to patch this economy, you have to go for complete overhaul. Forget the yammerings, you do not treat a dead person, rather you bury him. What we call Nigerian economy is so messed up and broken, any attempt to patch it makes it worse.
Financial services has failed us, it’s time to rethink everything and change direction. You are not growing when your banking industry is the most profitable, you are simply telling people to forget about production. Our incentives are always perverted, we reward terrorists and miscreants, and then punish law-abiding people. It is always those that do actual work that get punished the most, and we think we are normal.
You go round and see rich people, what do they do? Exchange! What a warped way to grow wealth. You are never going to get people to do hard stuff if you make soft things very lucrative, human nature will naturally go in the direction of least resistance. The only way to get humans to do hard things is by increasing the incentives, else nobody will care.
Reset this darn thing, if we want to ever stand any chance of competing. Every single day we waste trying to patch this thing sends us deeper into the abyss.