Economics, Banking and Finance in Emerging Markets

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Friday, November 13, 2020 / 10:57 AM / by Dr Ola Brown / Header Image Credit: Dr Ola Brown 


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For the past seven (7) years since I moved to Nigeria, I have been taking courses in finance, economics, accounting, and banking. After living in countries like the United Kingdom and Japan, I have been fascinated by the myriad of additional considerations that entrepreneurs and policymakers in emerging markets have to think about in comparison to policymakers and entrepreneurs in advanced countries.

 

My favourite quote from one of my recently published articles is: 'In advanced countries, there is only one set of forces that can act on your business- the market forces. However, here in Nigeria, there are two sets of forces that can act on your business- the market forces and the evil forces.'

 

Emerging markets are much more complex and nuanced, which is why business people, entrepreneurs, and policymakers often find them more difficult to work in. I have been studying at the University of London for my Master's degree in Finance and Economic Policy over the past year, and I'm surprised that even in a city as diverse as London, most of our reading material focuses on developed markets. We read about the US Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Japan, as well as papers and textbooks mostly produced and written by Western scholars.

 

If it's true that business and policy management in emerging markets is more nuanced and complex, then why is so much of economics based around just a few rich countries?

 

Most of what we see in books and the majority of journals and we read about economics are focused on advanced markets. However, most people in the world do not live in developed countries. It is called the G7 group for a reason- there are only seven countries considered to be extremely wealthy on a global basis, out of 195.

 

Working one's way out of poverty is serious business. Still, it becomes even more complicated when we do not have enough academic focus on the strategies, policies, data and research that are needed to do this successfully.

 

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I have read so much about the Bank of England, the Federal Reserve, the European Central Bank, and even the Bank of Japan. I also want to read just as much about the Central Bank of Nigeria (CBN) in academic literature.

 

Thus, the purpose of this book is directed towards the dire need to focus on emerging markets. This is because there is very little information on emerging markets, despite their complexities.

 

From now until the completion of my Master's degree, I have decided to focus my essays on emerging markets. Either I dwell solely on emerging markets, or I try to contextualise the topics within emerging markets. I hope that this book and similar books written by Nigerians, Kenyans, Bangladeshis and Indians will begin to refocus the world on the complexity of entrepreneurship and policy-making in emerging markets.

 

I spent a part of my childhood in London in a place called Hackney. At that time, Hackney wasn't a nice place to live as it wasn't one of the high-end areas. The bus 38 used to stop outside my house. This bus could take you from Hackney to Piccadilly Circus, one of the nicest parts of London. When I was young, I would get on that bus and ride to Piccadilly Circus. Whenever I was there, I'd begin to wonder why I couldn't be one of those who lived in that kind of place. I found it difficult to understand why the people in my environment weren't as affluent as the people just a bus ride away from us. As I moved, I grew up taking my A-levels at a poorly performing public college and thought about it more. How could I compete with the wealthier kids that went to private school when my reality was so different from theirs? When sharing my ideas- I called it the '38 project' - I tried to get people thinking about questions like: "How do we make our lives better?" "How do we get out of Hackney into Piccadilly Circus?"

 

This is exactly what emerging markets like Nigeria, Kenya, Congo, and Ethiopia are currently facing. We are trying to play the same game as wealthier countries, but with fewer resources. We want the kind of progress that will get us out of the metaphorical Hackney into our own Piccadilly Circus. We want to have the kind of GDP that can support sustainable growth in our economies. We want to evolve. We want to have our own Google, Facebook, Uber, and Apple. We want to have our own unique forms of innovation.

 

This book seeks to refocus the world on emerging markets, which are home not only to many of the poorest people, but also to the largest number of people.

 

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In the global economy, only half a billion people earn above twenty thousand dollars ($20,000) a year. Two billion people earn between three and twenty thousand dollars ($3,000-$20,000) each year. However, the majority- four billion people- earn three thousand dollars ($3,000) or less per year. Most of these four billion people live in emerging markets.

 

In spite of these statistics, instead of focusing on the needs, wants and desires of the four billion people that make up most of the world's population, the whole of economics seems to be focused on 0.5 billion people.

 

Therefore, the aim of this book, Economics, Banking & Finance in Emerging Markets, is to try to push the needs and desires of those four billion people forward and get us all thinking about how we can improve their lives as well.

 

Economics is so important because it has an impact on everything. A clear understanding of economics affects the way we vote, the way we spend, the type of business we start, and the kind of things we value. It also affects the way we substitute products for others.

 

I believe that a little bit of understanding of economics in emerging markets can make a big difference to the world's poorest and most vulnerable people.

 

This is particularly important to me because I live in Nigeria, which has more poor people than anywhere else in the world. Nigeria is home to over 80 million impoverished people.

 

Many people think India is a poor country. However, the truth is only 5.5% of India's population is classified as extremely poor, compared to over 40% of Nigeria's population.

 

Entrepreneurs in emerging markets face a number of challenges that would not be faced if they were in developed countries. These challenges are at least, in part, policy driven.

 

In 'Africa Rise and Shine', a book by one of the most successful bankers in Africa, Jim Ovia, he spoke about the condition of the road to his bank being one of the biggest challenges for him, as customers found it difficult to drive on the road without damaging their cars. So he ended up building a road! In advanced countries, it is almost impossible to hear that owners of American or German banks had to engage in road construction or their businesses, as these things have already existed.

 

Similarly, if you take a brief look at Aliko Dangote - the richest man in Africa - you will discover that he also encountered a similar problem with infrastructure. He has built and is continuing to build roads and helping to develop ports so that he can get cement materials to and from his factories.

 

The aim of this book, as reiterated earlier, is to refocus the world's view of economics. It also seeks to ensure that the intricacies and idiosyncrasies of economic, financial, and business policy in emerging markets are projected. In addition, this book attempts to encourage people to think about innovative, policy-based, business-based, and investment-based solutions that can help lift this important, but often ignored demographic of four billion poor people out of poverty and a bit closer to prosperity.

 

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