To move from a linear to a parabolic (or exponential) economic growth, one thing MUST happen in every nation. Today, Nigeria is not even making any effort on that – and that means, you cannot expect a huge economic growth in the nation. That thing is catalytic and until it is done, nothing will change. Check the marks (see plot) and read the national histories of the nations; the marked inflection points in the USA and China happened because the “one thing” came to pass.

Prof Robbins defines economics as a social science which studies human behaviour as a relationship between ends and scarce means which has alternative uses [check every chapter 1 of WAEC recommended economics textbook, that is the safe definition to memorize!]. He is right but when you move into development, you will notice that economics has one core element of “certainty” that no country can ramp up development without doing that “one thing”. So, it goes beyond social science because that “one thing” brings the certainty of natural philosophy in economic development.

I have studied many countries on how developments come (I won a Book of the Year award chronicling it: “IGI Global Announces Winner of 2010 Excellence in Technology Research ‘Book of the Year’ Award”) and I can write that Nigeria’s development paradigm has not started. Yes, we are way off because that “one thing” is inexistent.

I am also using this to announce a new work coming out in Harvard Business Review which looks at industrialization, development and urbanization in sub-Saharan Africa. You are going to like it; expect it in August.

If the cost of living in Lagos continues with no policy to hit the brakes to pause the drive of inflation, I predict that in the next five years, Lagos will lose a significant number of its population. The nation’s commercial capital has become increasingly expensive.

Yes, as Nigeria battles inflation, Lagos is seeing a new dimension of it: “Regarding food inflation, Lagos had the highest year-on-year rate at 30.37 percent in June, followed by Kwara at 30.8 percent, and Kogi at 29.71 percent. In contrast, Zamfara had the slowest rise in food inflation at 21.38 percent, followed by Sokoto at 21.60 percent, and Borno at 21.75 percent.” Those numbers are high across board.

Why has Nigeria struggled to combat inflation despite years of trying? Answer: we have not invented a policy tool that can work for Nigeria; the typical tools which are postulated in Western Economics textbooks cannot work for us.

Our policy of raising interest rates has worked to reduce supply which we actually need to increase, to re-adjust the price in the demand-supply curve. In other words, since Nigeria’s consumer credit system is largely non-existent, any interest hike affects corporate credit more. And when you do that, companies cannot borrow cheaply (at high rates, most do not take loans), resulting in lower production output. If output is low, it does imply that supply has reduced when demand has not been affected. Magically, price attains a higher new equilibrium point on the demand-supply curve.

(In Europe and US, they can use rates to reduce inflation because they can influence DEMAND via rates on credit cards and broad consumer credit. Nigeria  is not a consumer-credit economy, and you cannot influence demand directly with rates).

The unexpectedly brisk growth of the U.S. economy is buoyed, in part, by continued consumer spending made possible by debt that’s already locked in “ultralow interest rates,” The Wall Street Journal notes. That means many American borrowers who took out mortgages and car loans before 2022 are largely immune to the Federal Reserve’s rate-hike campaign, which has pushed rates to a 22-year high. Coming off of the first quarter, Moody’s Analytics data showed just 11% of outstanding household debt had variable rates that hinged on the Fed’s benchmark figures. (LinkedIn News)

What can work then? Nigeria’s main chance is to find ways to reduce interest rates for producers and SMEs.  And that means, we have to abandon the typical postulations in Western economics textbooks.  If we do reduce rates (not an easy task, I will explain below), we can boost SUPPLY, and if we do that, prices will drop based on the fundamental economics of higher Supply will reduce  price, assuming that demand remains at the same level. More so, there is a need to boost VC investment in Nigeria as that investment will also help to deepen supply.

Reducing rates may not be easy for the Central Bank of Nigeria. Why? Managing inflation and strengthening the currency could be defined as the core roles of any central bank. Yes, central banks work mainly to stabilize or strengthen their currencies (to reduce inflation) and create employment by managing interest rates. While they can make lending rates low, they also need to consider that easy money can ravage their currencies. 

And with that, it comes down to having a balance.  That balance would be offering only working capital financing at low rates to ensure only actual producers and makers have access to cheaper capital.

This is key as Nigeria’s central bank is not doing well on two key tenets of central banks: improving employment and stabilizing the currency. Which means, they have to go bold and bring new tools.

The reason why it is not working is because the inflation we are battling is cost-push. The cost of production is high and the economics states that battling it is hard and raising interest rate is not one of the solution to it. The solution is to bring down production cost.

— Adekoya Temidayo ???? (@AdekoyaTemiday3) July 23, 2023

Comment:  Yours truly studied banking and finance to doctoral level (funded amazingly by the world’s finest bank ever established – Diamond Bank Lagos ) and my specialty is global trade and currency. You can read my lead paper in the African Union Congress. I have written briefs in this domain because right now as a container importer, I like to understand what happens in the high seas and the trading floors of banks