[BLOG] The future is Africa
Ph.D. Chief Economist and Chair Editorial Board BusinessDay.
Three things happened in the global market space last week. First, China signalled its intention to change its focus from reining in inflation to pursuing growth when it reduced its banks reserve ratio for the first time in three years by 0.5 percent.
Not significant, but instructive. Second is the reduced cost of Europeans banks’ access to dollar funding, led by the US Federal Reserve and supported by the Central banks in England, Canada, the European Central Bank and the Bank of Japan.
Third, Standard & Poor’s (S&P), the global rating agency, lowered the rating of top US banks but rated top Chinese banks higher. The agency says it has modified its rating to accommodate country risks.
So, in a matter of days, we have symbolic, and some will argue, substantive measures to combat the ongoing economic crisis. But we also have a judgment passed on some aspects of those measures by S&P. The critical thing about all this is that it does not solve the critical problem of structural deficits and debt problems in Europe, and by extension, does not resolve the most pressing problem of economic uncertainty in the region. The longer the problem persists and uncertainty remains, the more isolation of the European economy may begin to seem a possibility.
At the Renaissance 2nd Annual Emerging Markets Investors Conference in Hong Kong, the vibrancy of such a conference could not have happened just five years ago. European economic powers, though still huge, are diminishing in relation to that of Asia. This is power of economic growth and transformation. This year, the International Monetary Fund (IMF) forecasts that growth in the developed economies will average 1 percent, while growth in emerging economies will average 6 percent. In 2011 and 2012, many emerging economies will post growth three times larger than the best growth rate in Europe. The global economic dynamics are changing fast, as the pace of growth in Asia and Africa is underpinned by the growth in trade and the movement of capital among these economies.
Beautiful economic stories are all about transformations, and the story of Hong Kong is no different. I had access to two fantastic books about Hong Kong during my trip. The first, ‘Beyond the Metropolis: Villages in Hong Kong’ and the second, ‘Hong Kong: A Moment in Time’. In the second of the books, there is a fascinating quote which reads: “I never had a toy in my life, but I was quite happy playing in the streets. Now my daughter is at university and she has a bedroom full of stuffed toys. I just can’t relate to that. What does she need them for?” But it is really the first book on Hong Kong villages in the 50s and 60s that made a huge impression on him. Within a 30-year period of constant growth and economic transformation (still taking place, by the way), those that lived in those times cannot recognise the country in which they grew up. Indeed, a 67-year-old cabbie who picked me up from my hotel one morning spoke of the same transformation.
Hong Kong has moved from a collection of villages around Kowloon and Tsing Yi to a global capital space, with the exchange ranking third after New York and London. A visit to Hong Kong will make you wonder how they have managed to fit 7.1 million people into a tiny place. Although a motivation for this piece, it is actually not about Europe and Hong Kong (China). Rather, it is about Africa - indeed, about Nigeria and Africa. Our future must certainly begin now. But that future must start with another quote from the book I read, and it says, “What escaped me for many years is that elections are not really very meaningful if the elected representatives cannot govern”. Ha ha. Elected representatives must govern, and that governance must be about the transformation of poor Africa to a prosperous Africa. It must be about Africans that lack to Africans that have many economic options.
How does Nigeria fit into this changing world? I am not sure any country is better placed to take advantage of the changing global economic dynamics. We have a sizable population, big enough for an attractive market, and manageable enough through hard work to avoid serious population problems. For the next three decades, it is estimated that our 15 – 24 year olds will increase by about 15 percent annually, so the demographics that favour the trend can ensure the investment in human capital is met. We have natural resources, and all we need to do is optimise the revenues and the exploration of these resources. Also, because of the same changing economic dynamics, the projected oil price is good for us if only we can ensure that the resources are turned into investment and a platform for future and sustainable economic growth.
Essentially, uncertain times often reflect the pace of change, and usually present opportunities as well as fear. My experience in Hong Kong is that there are a group of people, countries and investors that are looking seriously at the opportunities and not the fears. And they are looking at Nigeria and Africa. So it is up to us to seize the moment.
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This article was originally posted on Nigeria Business Communities