This is now the Nvidia era. Nvidia is to AI what Amazon AWS is to websites. Good People, before this age of AI, Nvidia was just another microelectronics company. When I interviewed for Intel, coming out of PhD, in Ronler Acres campus in Hillsboro Oregon, no one in that panel saw it as something different. A week later, I was in Analog Devices, the conversation was on Texas Instruments, as Nvidia was way off from its focus. I decided for Analog Devices because of an amazing Apple project.

But here we are: Nvidia is now the industry and more. Intel has lost ground to AMD. AMD itself was a failed company which magically resurrected. They say in social media  tech, it is just one click away; I will say in hardware, it is just how transistors are organized.

For Nvidia, though, it goes beyond transistors. Yes, Nvidia’s CUDA (Compute Unified Device Architecture) is a huge moat.  CUDA  allows developers to write code that runs on NVIDIA GPUs (Graphics Processing Units) for various tasks, including scientific simulations, machine learning, and deep learning. By providing a powerful and efficient framework for GPU programming, CUDA has become a cornerstone of NVIDIA’s software ecosystem. You can make better chips, but you still have to beat CUDA.

These companies will power the empires of the future because before those clicks, likes, etc, transistors must fire, and someone must organize them. Borrowing the oil sector for an analogy, these are the upstream players while the social media companies are downstream. Facebook, Microsoft, TikTok, etc will not advance until Nvidia, Intel, Analog Devices, etc have evolved because transistors rule all nations!

This is one of Nigeria’s biggest economic perturbations: “Nigeria’s letter of credit payments has plummeted by 63% in the first quarter of 2024 compared to the same period in the previous year, according to international payments data from the Central Bank of Nigeria (CBN).”

A letter of credit (LOC) is a document issued mainly by a bank that guarantees a buyer will pay a seller on time and in full for goods or services. Largely, with the fall of LOC, it does mean that banks are not offering a lot of those guarantees.

Good People, that is a big problem. But it is expected. Indeed, the problem with our forex paralysis is not that the Naira has lost value, but that it is not stable. And with that volatility, LOCs take a hint, freezing economic activities along the way. Nigeria needs a stable currency urgently.

The deal is clear: FX traders and speculators look at the exchange rate; investors, besides everything, look at the stability of Naira. Naira needs to stay within a variance percentage of -/+ 5% over six months to bring investors back at scale.

One way of doing that is to fix an official rate, and stop the current illusion that Naira can be floated to swim in the waters of international market when it is clear we do not have enough life jackets (factories, services, warehouses, etc) to save it, if it begins to drift, as it is now doing!

Nigeria’s Letter of Credit Payments Drops by 63% in Q1 2024

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.

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).