August Events are Rare, but Significant
I’ve not written much about the financial world this year, and it’s probably because nothing significant has occurred to motivate me to write a piece or commentary on the state of global finance and economy. However, this has changed with the August global selloff. Coincidentally, the month of August is my month of birth, and as the saying goes; ‘an august visitor is a rare visitor’. Sometimes, I think it’s more than a coincidence that extraordinary events happen during this month; events with such magnitude of significance that it shakes the whole world, and its effects are far flung to its extremities. About 20 years ago, in the month of August, the much loved princess of Wales, lady Diana, passed away, as well as the Mother Theresa, the celebrated catholic nun. However, my write-up is not about world history, but about trends in the global economy and how it affects Nigeria.

Major Happenings so for this Year
The past two years have been mixed for different groups of world economy. The United States experienced a rapid boom in their economy, with strong GDP, low unemployment rate, and capital appreciation unlike any other in the turn of the 21st century (all thanks to quantitative easing and access to cheap credit). The Greek debt crisis had a ripple effect on the other countries in the Eurozone; the crisis was strong enough to prompt the ECB (European Central Bank) to take decisive and drastic action in the form of quantitative easing. And of course, the slump in global oil prices. Countries like Nigeria and Venezuela that depends mainly on crude oil exports for their revenues have experienced an economic downturn, to say the least.

The Giant is Wounded
Earlier this month, the Chinese government devalued their currency, the Yuan. The currency has been held artificially for a long time, giving China an edge over competitors in exports. The clamor by superpowers such as the United States, and to a larger extent, currency pressures, induced the Chinese government to devalue the Yuan. The unintended consequences of cascading events could not have been anticipated by even the most sophisticated economic analysts. As with most complex interdependent systems, other aspect of the Chinese economy started collapsing like dominoes. After the devaluation, the stock market collapsed, wiping out billions of dollars of investors’ money on a single day. Last Monday is now termed the Black Monday. Investors panicked and hurried to get their money off the market, and this further escalated the downward spiral.

To be continued……..

Nice write up & i will be hoping to read the rest

How to float and Sink at the same Time.

As expected, the woes of China was not limited to the most populous country on earth; the financial crisis spread to other markets like a contagious disease. That same week, the share prices of stocks in other Asian countries started to tumble, and it wasn’t a surprise that the US, European and other world markets followed suit. It doesn’t take rocket science to figure out that whatever affects the largest consumer/importer on earth will affect the world economy. Subsequently, more than $6 trillion was wiped out from world equities in just a few days.

And the nightmare is not over! The fundamentals that created this present crisis in the first place hasn’t been addressed by the Chinese government. The devaluation of the Yuan, which was the catalyst for this crisis, is not enough to address the root issue. Although the yuan has been devalued, it’s still being held artificially. What this indicates is that as long as the Yuan does not float, further currency manipulations is on the horizon. And according to the United Nations, if China floats the Yuan, it would mean an accelerated loss of competitiveness with dangerous consequences for the regional and world economy. What a dilemma!

How does this affect the price of garri in the market?

We often look at Nigeria’s economic situation in isolation, but globalization has made isolationism virtually impossible. China is Africa’s largest economic partner, and when china sneeze, Africa catches a cold. A slowdown in growth in China will curb demand for the natural resources needed to fuel economic growth. Exports of natural resources from African countries, including Nigeria will decrease (The Financial times reported 40 per cent year-on-year dip in Chinese imports from Africa). Chinese investments in infrastructures in African countries will also decrease. Although this ‘contagion’ is not limited to Africa, but our focus is on Africa, especially Nigeria.

To be continued……..

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Rubbish.