A few years ago, Ghana pegged 1 cedi to 1 US Dollars. Today, many things have gone bad; you need at least 8 cedi to get 1 USD now. It did not take long.

But for the Euro, that one is intriguing. For the first time in 20 years, 1 USD = 1 Euro and the USD is already pulling ahead in some exchanges. If Russia does go ahead and pause gas supply to Germany, the EU may be rattled.

There are many lessons here: Africa has no reason to be looking for loans and begging the world for help. Look at Russia, they have the same natural resources that we have – and as Europe sanctions it,  both follow the same trajectory: equal opportunity pains. Indeed, they have built a fairly decent economy that can withstand a high voltage sanction. And that voltage is burning kingdoms, empires and nations, with Russia marginally affected, at least in the short-term.

Sure, not here to praise Russia, but I must note that I am impressed by their economic defense and they did it purely from their natural resource wealth. Africa has no reason not to do better. Simply, Russia’s natural resources have worked for it!

In the Igbo Nation, the elders will say “ochu nwa okuko nwe ada, nwa okuko nwe nwenwe oso” [he who chases a chicken will fall and the chicken will get away]. That can only happen when you have economic resilience. I call on the leaders of Nigeria and Africa to architect a future where we build systems that will lift a generation out of poverty and hopelessness.

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Comment: Context is also important here. Russia has been an established empire for centuries, so straight comparison with fragmented African economies is probably inaccurate. That said, I think I understand the message.

My Response: “Russia has been an established empire for centuries” – that is not relevant here. The USSR collapsed because they failed to build a resilient economy. With oil mess, etc, the empire broke down. Before the birth of the new Russia Federation (RF), many African countries have been around. That messed up USSR, out of it, Russia has risen. If they had not done that, what happened to the old USSR would have happened to RF last quarter.

Africa’s key economies are older than the new RF (yes, post USSR Russia) which withstood the sanctions. That is my message. So, the imperial Russia is not relevant; what is relevant is that the post-USSR Russia did not go down on what killed the old communist empire.

Comment 2: For knowledge sake, how does fiat redenomination help a people’s currency? Does it have any positive impact or value adding? Sierra Leone recently did and I would really want to learn how it benefits a country. Thank you in advance Prof.

Another member Responds to Comment 2: There is absolutely little to no economic value for currency redomination. It is mostly done for accounting or record keeping convenience, or other purposes of cosmetic value. Imagine if you had to be accounting for business using too many digits. It’s also to avoid the Venezuela situation where you would now need to weigh currency notes as opposed to counting them on face value to pay for goods or services. To understand the Ghana situation properly, replace 8 cedi to 1 USD with 80,000 Cedi to 1 USD.

I add that this is only to reflect the actual pre-redomination nominal exchange rate cedi versus the usd. To get the equivalent real value of the usd in Ghana of today, you would have to adjust for purchasing power parity.

Optimism over a possible cryptocurrency market rebound is gradually dying down as the assets led by bitcoin take further pounding. Investors are now doubting if the market could return to bull by the end of the year.

A new survey conducted from July 5-8 showed that the majority of 950 investors involved believe bitcoin’s price could drop as low as $10,000. The survey, which was conducted by Bloomberg MLIV Pulse, also showed 28% of respondents expressed confidence that cryptocurrencies are the future of finance while 20% believe they are worthless.

The question posed was: “Which level will bitcoin trade at first? $10k or $30k? 60% of respondents said bitcoin would drop to $10k at first, according to the result published on Monday.

The poll became necessary as the crypto industry undergoes its worst crisis, losing 40% of its value over a year. The resulting mass selloff has triggered loss of confidence among investors, prompting the debate on how further low they expect the coins to go.

Shark Tank star Kevin O’leary said last week he doesn’t believe we’ve seen the bottom yet. “It’s impossible to know where the bottom is,” he said, “I don’t believe we’ve seen the bottom yet and I have a different view of it.”

Volatility has been one of cryptocurrencies’ biggest concerns. The current market situation which has seen the assets lose about $2 trillion of its all-time-high value has cast a huge doubt on the minds of crypto believers. Further drop in bitcoin price will mean increased pessimism.

What about bankruptcy?

The number of crypto companies filing for bankruptcy is increasing as the market dips further. Last week, crypto lender Voyager filed for chapter 11 bankruptcy over volatility and contagion in the crypto markets.

“The prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (‘3AC’) on a loan from the company’s subsidiary, Voyager Digital, LLC, require us take deliberate and decisive action now,” the company said in a statement.

3AC is one of the most prominent crypto hedge funds in the world, with assets worth about $10 billion. The company’s default spell more bankruptcies for a chain of other companies that their existence depend largely on its ability to stay afloat.  So, just like Voyager, many others are expected to file for bankruptcy if the market does not bounce back soon.

This means that investors’ expectation that bitcoin will drop to $10,000 will mean more harm to the already troubled crypto market. Though bitcoin is expected to return $30,000 by the end of the year, the free fall trajectory may have put a lot of companies out of business.

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