Our Bank Our Nation

Bank consolidation world wide seem to generate some attendant challenges to the whole gamut of players in the financial sector industry, for a very long period of time. But the Nigerian case seems to provide a different scenario because the means by which these 25 banks survived the process were majorly through M&A. However the challenge of raising capital to levels that will guarantee banks to keep part of Nigerias exteral reserve may offer us the opportunity to see stiff and rigorous but healthy competition in the near future. Indeed,with that, Nigerian DMBs will have the potentials to finance needed projects and attract foreign resources that can revamp the economy from its current status of "globally marginalized capital importing nation and Africas toothless bull dog"

Comparative Analysis As An Economist Tool.

Mainstream economists are increasingly aware of the inadequacies of their methodological orientation for the development of an acceptable physiognomy on the notion and/or subject matter of globalization. This mostly stem from the facts that they are trained in the techniques of microeconomics/macroeconomics and financial analysis and not in the sociology and politics of economic development; and partly because, discourse on globalization is inherently contentious because its social and economic impacts tend to raise ethical issues as well as efficiency and the question of prudence. More often than not, its impact tends to elicit the most discordant views, passions and propaganda.Today, there is the persistent demand that along with both the normative approach and an ethical inquiry into matters of political, social as well as economic behaviours and organizations of nations in a globalizing world, it should be the central task of the professional/practicing economists to search for regularities in socio-economic behaviours and to devise a system of analysis in the context of which hypothesis can be veritably tested which can help us to reach a generalized theory in the light of which our findings may assume a cumulative character. The professional economist should not think mechanically in terms of the “financial programming models” taught in the university and training seminars – a model in which monetary and fiscal policies are shifted to balance supply and demand in which there is no rule for asymmetric information.Thus, comparative analysis is an integral part of such a study. This then suggest immediately the laboratory of a social scientist which provides him (us) with the opportunity to discuss specific socio – economic phenomenon of various nations in the light of different historical and socio-economic background. This suggests variables of a rather complex order that can be dissociated from the cultural background and studied comparatively. Such a simple approach can frequently convey meanings of considerable importance (weight) more effectively than a Jargon of abstractions.More specifically however, the function of this study is to identify uniformity and differences and to explain them. Such an explanation requires the development of theories in the light of which similarities and differences come – so to speak – to life; they then lose their adventitious character and assume a significance that has casual i.e. explanatory characters. Such a study has an important role to play in the more traditional approach to the study of economic phenomenon in which facts and values are interrelated in the scheme of the investigation. Here, the parallel comparism of variables may provide us with important clues about the implementation of values and policies.Comparative study therefore entails the comparism of variables against a background of uniformity either actual or analytical for the purpose of discovering causal factors that accounts for variations. More generally, its function is to appraise policy measures and to identifies problem areas and trends so as to reach a stage were predictions of the institutional trends and process is/ are possible.It is noteworthy to state therefore that comparative study is conceived in this paper as the closest approximation to the social scientist laboratory possible; and the wealth of materials for observation and studies at his disposal is indeed richer than that available to the natural scientist. Thus, his limitation in the processing of this wealth of materials has been, and is, primarily intellectual. Simply put, the mainstream economists have failed to orient their empirical study toward eliciting meaningful and persistent result. More often than not, they have been overwhelmed by the diversity of facts and have been unable to look for, let alone find relationship between them. (Infact) they have not even attempted to establish an orderly way of looking at facts.Such a conception of the role and scope of such study however may appear overambitious unless it is made clear that it calls for a long and painstaking methodological inquiry. Again, instead of an exclusive emphasis on values in a purely speculative and ethical term, or on the study of ideas in terms of their historical genealogy, the role of the theory/approach is conceived in this literature as any that could be found in any “standard macroeconomic text”.Moreover, given the state of nations, most essentially that of Africa in this (our) globalizing world, the development of a unifying theory may seen to be premature or even impossible. The development of a testable proposition however, and the elaboration of concepts are not only possible but also indispensableNaturally, such a scheme need not at this stage claim universal comprehensiveness, but it has to be systematic in the sense that it provides explicitly a coherent, even if tentative scheme of categorization and points to interrelationship of various levels of abstractions and comprehensiveness. The problem oriented approach and the development of classificatory tables and schemes for comparative study may provide us with more manageable type of research without which the collection and analysis of data becomes indiscriminate and/or simply put confusing.The purpose of such approach is to suggest ad hoc relationship for the study of particular problems and possibly to suggest veritable theories. Although, the depth and scope of comparative study are limited when the particular variables are thus arbitrarily restricted, the conclusions arrived at may provide tentative explanations and eventually pave the way to a more systematic and comprehensive approach.Globalization which forms the core of this discourse is changing the determinism of the states; its actions and inactions; what firms and people do; where they do it; how they see themselves, or simply put their identity; and what they (actually) want.Moreover, its accompanying financial transaction, increasing volume of world trade and their decreasing cost as well as reduction in public sector expenditure have put strong competitive pressure on the government world wide to reduce their role in the determination of who get what, where, when, how and why despite the facts of the social irresponsibility of the market economy, particularly as it affects asymmetric information, the delivery of public goods and services, negative externalities (such as pollution and other social costs) within the political system.Indeed, the only truly self – sufficient macro-economy is the world economy itself. Each nation-state within the world economy has something that it can influence for itself, but it has many others, including the markets for its imports and exports and for financial capital that are world - market – determined. Hence, we cannot understand the macroeconomics of a single country along; but we can use the tools of macroeconomics to understand both the behaviours of the economy in which we live and other economies that affects us.However, there is no guarantee that the world will solve the problems of sustainable growth, starvation, material (even psychological) poverty and other pressing economic problems that bedeviled the world today; but even then, there is nothing in modern growth theory and/or existing evidence to suggest that such an achievement is impossible. Thus, the point here is clear and important “technological advance (advancement) transforms our lives by inventing in a new – undreamed of things and making them in a new-undreamed of ways”.Finally however, societies need to think hard about how to best manage the implications of rapid technological changes; it is also important to note that there is little to be gained by confusing the externalities inflicted on our economies as a result of the past injustice brought by the activities of the Transnational/Multinational Corporations (TNCs/MNCs) with the issue of economic globalization which in its core sense refers to the expansion of cross-border economic ties.It is also certainly important to analyze the strength and weakness of the market economies as such and to better understand the institutions and policies needed to make it work most efficiently.

The National Income equation Y=C + I + G

It is important by stating what Gross Domestic Product (GDP) means. GDP refers to the total income in an economy and the total expenditure on the economy’s output of goods and services. GDP (denoted as Y) is divided into four components of expenditure: consumption (C), investment (I), government purchases (G), and when we add the net exports (NX) which is very important, we have Y = C + I + G + NX This equation is an identity because every Naira (National currency of Nigeria) of expenditure that shows up on the left-hand side also shows up in one of the four components on the right-hand side. Because of the way, each of these variables is defined and measured, this equation must always hold. A closed economy is an economy that does not interact with other economies.Y = C + I + GThat was exactly what you statedIn particular, a closed economy does not engage in international trade in goods and services, nor does it engage in international borrowing and lending. Of course, actual economies are open economies, i.e. they interact with other economies around the world. Nonetheless, assuming a closed economy is a useful simplification by which we can learn some lessons that apply to all economies and for the exact purpose of your question. Moreover, this assumption applies perfectly to the world economy. Because a closed economy does not engage in international trade, imports and exports are exactly zero. Therefore, net exports (NX) are also zero. In this case, we can write Y = C + I + G This equation states that GDP is the sum of consumption, investment, and government purchases. Each unit of output sold in a closed economy is consumed, invested, or bought by the government. To see what this identity can tell us about financial markets, subtract C and G from both sides of this equation. We obtain Y C G = I The left-hand side of this equation (Y C G) is the total income in the economy that remains after paying for consumption and government purchases: This amount is called National Saving, or just saving, and is denoted as S. Substituting S for Y C G, we can write the last equation as S = I This equation states that saving equals investment. To understand the meaning of national saving, it is helpful to manipulate the definition a bit more. Let T denote the amount that the government collects from households in taxes minus the amount it pays back to households in the form of transfer payments. We can then write national saving in either of two ways: S = Y C G Or S = (Y T C) + (T G) These equations are the same, because the two Ts in the second equation cancel each other, but each reveals a different way of thinking about national saving. In particular, the second equation separates national saving into two pieces: private saving (Y T C) and public saving (T G). Consider each of these two pieces: Private saving is the amount of income that households have left after paying their taxes and paying for their consumption. In particular, because households receive income of Y, pay taxes of T, and spend C on consumption, private saving is Y T - C. Public saving is the amount of tax revenue and spends G on goods and services. If T exceeds G, the government runs a budget surplus because it receives more money than it spends. This surplus of T G represents public saving. If the government spends more than it receives in tax revenue, then G is larger than T. In this case, the government runs a budget deficit, and public saving T G is a negative number. These two equation static model with government expenditures and taxes, has variables: C consumption I investment G government expenditures T taxes Y real GNP; witha,b known constants addedIn this model the level of government expenditures, taxes and investment are fixed. The purpose of this model is to study the fiscal policy options of government, that is the effect of G and T on Y and C. This model is the simplest model of this type. Equations: Y = C + I + G ________ (1) C = a + b(Y - T) ______ (2) This model is slightly more realistic than the two equation model in that it contains a government and consumption is based on disposable income. As models get bigger they attempt to capture more of the behavior of the economy. These simple models are solely for instructional purposes. Substituting 2 into 1 , we haveY = a + b(Y -T) + I + G Y = a + bY - bT + I + G Subtract bY from both sides Y - bY = a + I - bT + G Collect terms (1 - b)Y = 1(a + I - bT + G) Y = k(a + I - bT + G) where k = 1/(1 - b) The solution to this model has the same form as the simple two equation model. In policy work the analyst is interested in considering the impact of a change in G of T. Using the same type of algebra as for the simple two equation model we can obtain the following equations. Þ(Y) = kÞ(G) Þ(Y) = kÞ(I) Þ(Y) = kÞ(a) Þ(Y) = -kbÞ(T) The first shows the impact of a change in government expenditures, the second the impact of private investment, the third shows a shift in consumer confidence, and the last indicates a shift in tax policy. The government has direct control over G and T and indirect influence over a and I through incentives and its policies. Now consider how these accounting identities are related to financial markets. The equation S = I reveal an important fact: For the economy as a whole, saving must be equal to investment. Yet this fact raises some important questions: What mechanisms lie behind this identity? What coordinates those people who are deciding how much to save and those people who are deciding how much to invest The answer is: the financial system. The bond market, the stock market, banks, mutual funds, and other financial markets and intermediaries stand between the two sides of the S = I equation. They take in the nations saving and direct it to the nations investment. The terms saving & investment can sometimes be confusing. Most people use these terms casually and sometimes interchangeably. By contrast, the macroeconomists who put together the national income accounts use these terms carefully and distinctly. Consider an example. Suppose that THLIZA earns more than he spends and deposits his unspent income in a United Bank for Africa or uses it to buy a bond or some stock from a corporation say, Dangote Sugar Refinery. Because THLIZA’s income exceeds his consumption, he adds to the nations saving. THLIZA might think of himself as investing his money, but a macroeconomist would call THLIZA’s act saving rather than investment. In the language of macroeconomics, investment refers to the purchase of new capital, such as equipment or buildings. When Austin borrows from the bank to build himself a new house, he adds to the nation’s investment. Similarly, when the APT Corporation sells some stock and uses the proceeds to build a new factory, it also adds to the nation’s investment. Although the accounting identity S = I shows that saving & investment are equal for the economy as a whole, this does not have to be true for every individual household or firm. THLIZA’s saving can be greater than his investment, and he can deposit the excess in a bank. Austin’s saving can be less than his investment, and he can borrow the shortfall from a bank. Banks and other financial institutions make these individual differences between saving & investment possible by allowing one persons saving to finance another persons investment.

Globalization

The celebrated academic Marshal McLuhan’s “global village” is here already. Can Africa be a house, a block or to be more specific, be in the village without being marginalized or excluded? This definitely is a pertinent question “in sync” with contemporary Africa’s predicament. The answer to this has to be an urgent, yet a resounding yes! How credible!Africa should not enter the arena of global competition to depend on luck. Africa should simply match her wits against others, with her entire constitution springing up to action; every fiber from the innermost recesses of her being to the fore, become combative in a synchronize zeal to achieve what belongs to her. With this strategic stance, Africa is never going to come off the arena (of global competition) a loser. (Augustine Pius THLIZA, December 2004: Globalization…..African Economy…..Implications, Challenges and Socio-Economic Consequences of Strategic Stance.)