We live in an era of extra

            ordinary challenges and changes. Individuals and organisations need to undergo extra ordinary metamorphosis in order to sustain their relevance in the new paradigm. Surely, complacency remains the biggest risk in our world of uncertainties and wrenching changes.

If you are asked: what’s the greatest challenge facing you as an individual, your organisation, your community or your country? Most persons cannot provide an answer in a sentence showing that they are not concerned with developments and changes around them. They are content living on a day to day basis.

What’s the consequence of failing to understand these macro issues? They simply submit to the directions of the media and their interests, and what’s the interest of the media? They market bad news, because in the media ‘bad news is good business.’

A cursory glanc’e around us shows that myriads of negative traits are struggling for attention. These are evident from news headlines: stock market collapse, Niger Delta. crisis, widespread terrorism, exploding inflation eroding your savings, the gyrating price of crude oil, monstrous

corruption, bank failures, falling standard of education, ozone depletion, business closures and the attendant layoffs, skyrocketing crime rate and on a general note what appears to be a system breakdown.

What happens when an individual feeds himself with these mega doses of negative information without the ability to dig deeper, analyse and sift these information? Chances are that person might start thinking negatively, might make decisions based on fear, and that could dampen the persons spirit, and sometimes the spirit of the entire nation might start sinking., just as is happening now.

We will quickly take a cursory look at some of the news that has been making waves in recent times:

*Global Economic Meltdown

*Outbreak of Swine Flu

*Global Economic Meltdown

*Banks Averted Crisis

*Proposed Deregulation of Petroleum Product Pricing

*Ongoing Strike in the Nations Tertiary Institutions

*Niger Delta Crises

The purpose of this address is not to frighten the listener with cold statistics of failures, but to prove that it is no longer business as usual, that the current economic downturn has a cause, and not a mere historical cycle. Again, you do not need to be terribly smart to understand the trend and reposition. I also believe that the current trend does not portend massive business failure or total collapse of the economy, rather demands conscious effort to make visible difference in our lives and the organisations we manage.

It is within our powers to make positive changes because we have a duty to ensure that the mistakes of the past is not repeated. To do this, an insight into the root of the problem is a necessity.

The global economic meltdown

The United States of America, the Great Britain. Germany, France, Japan, the Asian Tigers and Africa are all experiencing economic crisis of varying degrees. The current crisis tagged ‘Global Economic Meltdown’ is native to America, and like a gangrene speedily spread to the rest of the world.

Beyond doubt, America steers the world, and somehow we have all consciously consented to the belief that ‘when America sneezes, the rest of the world must have pneumonia.’ This understanding unfortunately is behind our submitting to what is fundamentally American.

The current global crisis has an identifiable cause. It is not just a mere historical cycle. It is a product of financial recklessness on the part of the business people in a hurry to make profits, the weak regulators on the side of government and the consumers with unbridled taste fuelling a culture of ‘buy now pay later.’

The average America is guilty of false lifestyle. Their homes, automobiles, electronics, furniture, cooking utensils, wardrobes, marriages, funerals, even their own education and that of their children are all on credit. It has even extended to tourism and leisure activities . You can posses virtually anything .if you can make a little deposit.

All these are going on blissfully, while the productivity of the American worker was at its lowest. The factories cannot compete due to outdated technology and they have been heading to Washington for bailout one after another. Their serv.ice sector is accused of poor quality service delivery and unresponsiveness, rather than improve, they have been perfecting their cost-cutting strategies. Again America has always had the lowest individual savings average in the developed world, currently at zero minus. The Fortune 500 Companies have been silently shedding millions of job on the guise of restructuring. When suddenly the pyramid got inverted, they tagged it ‘Global Economic Meltdown, , to make us believe that they are not alone.

Amidst all these downward spiral, the Bush administration was focused on fighting unnecessary wars in Iran, Afghanistan and other parts of the world on the guise of fighting terrorism. An estimated $16 trillion U.S dollars went down the drain with lots of life gone.

We must however not forget that America has gone beyond seeing themselves as the police man of the world. They see themselves as the world, thus, a Boxing or Wrestling context between two states in America is tagged World Championship. It is not therefore not surprising that when they pulled down their economy, it was tagged Global Economic Meltdown.

The good news now is that America is no longer talking about economic meltdown, they are talking about recovery, and they are really recovering fast courtesy of Presidents Obama’s recovery package.

But why are we affected? The twin factors of Globalization and Information Technology is behind this. First, Information travels today at the speed of light owed to the explosive developments and technical convergence in the sector. Second, globalisation has meant the free movement of capital, people, finance around the world. This, in effect creates a common tie. It was in the late 1990s that we got the first taste of financial globalisation downside:

Thailand’s 1997 financial crisis set off another in Korea the same year, and in early 1999, Brazil was forced to abandon its fixed exchange rate policy. These countries has little in common, yet the financial crises propagated from one to the next like a virus because of the links created by the new global economy.

The reason was simple: although the destinations of foreign direct investment were far flung and diverse, the source of the capital was not The Western bank that held Thai baht also held Brazil real. The fund that owned Korean bonds also held Russian bills. In the belief that the IMF, with the United States behind it, was willing to bail out economies that ran into short-term trouble, many of these institutions has loaded up on these assets. Once a crisis started, however, these institutions has to reassess the risk of their entire emerging market portfolios. Such a reassessment would precipitate a progressive sell-off, with assets in the weaker countries going first.

This accounts for why in the face of the meltdown of the US economy, they had to dump their investments in the Nigerian Stock Market. Further, the factory and business closures that greeted America meant less demand for Nigeria’s crude oil, thereby reducing our crude export amounting to less revenue for our country.

The global economic order

Its commonplace to say that we live in a period of unprecedented change. Today, sweeping economic change threatens older industries, traditional ways of living, and social and national cohesion by exposing economies and societies to new and powerful competitive forces.

Emerging nations and former communist countries, once only loosely connected to the global commercial and financial system, feel the shock waves of periodic economic crisis resulting from the rapid exodus of foreign capital and sudden adverse shifts in international trade flows, which lead to large numbers of lost jobs and bankruptcies. Some individuals, groups, and regions initially benefit greatly from expanded opportunities like the ability to sell more abroad, work for foreign companies in their own countries and overseas, or obtain foreign capital [or their business. Others, however the least educated and least skilled, feel left behind, and disenfranchised.

The global trend today appears to have headed for a disorder which is opposed to first President Bush idea of a ‘new world order.’ That order was largely based on two assumptions: first, that a healthy economy and sound financial system make for political stability, and second, that countries in business together do not fight each other.

U.S. foreign policy number one priority was clear: to encourage the former communist countries of Europe and the developing nations in Latin America, Asia, and Africa to adopt business friendly policies. Private capital will then flow from the developed world into these countries, creating economic growth and jobs. The argument is that when free enterprise takes hold, traditional grievances, resentments, and hostilities would fade.

This policy was backed with lots of money, in the form of direct aid, loans and multilateral lending institutions such as the IMF, and a liquid market for governments to issue bonds to international private-sector investors. The message from the D.S to the developing nations was adopt economic reforms, and we will be there to bail you out if your economy gets into trouble.

This reform path, often called the ‘Washington Consensus, involved fiscal discipline, trade liberalisation, privatisation, deregulation, and expanded property rights through legal reforms. Promoters of these reforms hoped the changes would make developing countries more attractive to foreign investment and would integrate these countries even further into a competitive, but peaceful, global economic network. In its most extreme form, the vision became one in which these developing countries become part of a liberal, open world economy that promoted western values such a democracy.

Amidst protests from our elite class, Nigeria keyed in like most of the developing countries, hence the several reforms in terms of deregulation, privatisation, liberalisation etc. It seemed more dangerous to stay out of the trend than to plunge in. By August 2000 the member nations of the WTO has risen to 139.

No sooner did economic watchers and analysts discover that the package and promises sounded too good to be true and so it proved. The new world order of Bush which Clinton sustained were soon replaced by the ‘new world disorder’ of the second Bush.

From order to disorder

It was in 1990 that we got the first taste of financial globalisation downside: Thailand’s 1997 financial crisis sent off another in Korea the same year. The economic virus spread to Russia the following year, and in early 1999, Brazil was forced to abandon its fixed exchange rate policy. These countries had little in common, yet the financial crisis propagated from one to the next like a virus because of the links created by the new global economy.

The reason was simple. Although the destinations of foreign direct investment were far flung and diverse, the source of that capital was not. The Western bank that held Thailand also held Brazil. The fund that owned Korean bonds also held Russia. The belief is that the IMF supported by the US was willing to bail out economies that ran into short-term trouble.

At first, the IMF stepped in to help, but the costs of repeated multilateral bailouts became less and less affordable. Eventually the Russian government defaulted, rendering worthless the almost $40 billion in domestic government debt held by financial institutions and more than having the $100 billion value of Russian equities. The bailout to Russia by the IMF managed to provide just a month solvency, and people began to question the ability of developed world to supply economic support to the developing nations. The developed world on their part began turning off the tap.

The second President Bush put the final nail on the coffin of the new world order. Even before September 11, the administration was signalling that it has a very different vision of international engagement from its predecessor’s, one based on security, not economic concerns. And security was now defined not just in the narrow Cold War terms of  safety from attack from a hostile, though stable, superpower, but very broadly to include safety from terrorism and weapons of mass destruction, as well as vital economic inputs such as oil.’

In May 2001, President Bush and Vice President Cheney’s national energy policy stated, ‘Energy security must be a priority of the U.S. trade and foreign policy. We must look beyond our borders and restore America’s credibility with overseas suppliers. In addition we must build strong relationships with energy-producing nations in our own hemisphere, improving the outlook for trade, investment, and reliable supplies.

The implication was clear: security in this case, energy security, was now the foremost consideration in US trade and foreign policy. The National Security Strategy of the United States of America published in September 2002 shows that the thinking developed from there. It then became clear that the Bush administration defines international engagement in terms of bilateral relationships with strategically important allies  and unilateral confrontation with almost anyone else.

This understanding is behind the war in Iraq, the removal of Afghanistan’s Taliban, and urder of Saddam Hussein, hoping that this will murder to a stable Middle East which will in turn ensure a steady supply of oil especially if Iraq’s reconstruction goes well. This is also responsible for Russian government under Putin aligning with America for economic and diplomatic interests.

With this new stand of the United States, there is no more encouragement for developing countries to pursue reforms.

The nigerian experience

The major challenge before our political and business leaders is to identify where our competitive advantages lie and create an enabling environment for us· all to build on it. This is exactly what other developing countries have been doing.

What we have witnessed in Nigeria in the past few years is an addening misallocation of scarce economic resources to the financial sector. It all started with 9/11 which prodded the US Congress to enact the Patriot Art with its panoply of anti-money laundering structures. Suddenly, the Bin Laden dividend reached Nigeria’s shores. Thieves who stole from both the public and private sectors could not easily wire their stolen funds outside, meanwhile, the EFCC was watching over their shoulders. As a result, they have no place to easily hide their stolen loots except in the Nigerian Stock Exchange and Real Estate. That explains the meteoric quantum rise in stock and property values in Nigeria in recent times. Those who followed the case of the disgraced former boss under Obasanjo’s Administration may recall that he invested his stolen loot in the Nigerian Stock Market and Real Estate.

Meanwhile, oil revenue flooded Nigeria, and banks conducted several rounds of public offerings and raise huge sums, first to satisfy the new mandatory recapitalisation requirement by the Central Bank of Nigeria, and went again and again to raise huge sums for the balance sheets. And while all these were going on, weak stock market regulation added to the speculative frenzy as bankers who also doubled as investment bankers engaged in self dealing and hyped up stock market investing. The fix was on and our stock market was blasting in full throttle. Everyone was investing in the stock market.

Suddenly the stock market capitalisation that was in excess of 15 trillion naira fell to a little over four trillion, and because no condition is permanent, the market is gradually bouncing back, and our enthusiasm is gradually being rekindled, then the news of the averted bank crisis.

The bank crisis

The recent revelations by the Central Bank of Nigeria on the debt portfolio of 5 major commercial banks in Nigeria is a pointer to the irregularities in the system as it affects the private sector. The almost one trillion naira non-performing loans by these banks within a few years of recapitalisation and repeated rounds to the stock market for fresh IPOs has exposed their inefficiency in managing large sums. Their response has been attempts at raising fresh deposits through aggressive marketing, road shows and many innovative packages.

Thanks to the discerning leadership of President Yar Adua that quickly responded with a bail out of N420 billion. While the EFCC stepped in to assist with the recovery of the bad loans.

It is also worthy of note that Nigeria is not alone in the issue of failed banks. In the past one year, the United States has lost about 89 banks to bad loans, and some more are joining the cue.

The Niger Delta Crisis

The militancy in the Niger Delta, and the failure of successive administrations to manage the situation successfully has added them conspicuously in the list of the nations problems, especially with the effect on the revenue generation capacity of the country. Interestingly, the amnesty which is currently in force has made it possible for our crude oil quota to increase from 1,200 bpd to 1, 700bpd .

All stakeholders must make frantic and sincere effort to stem the tide and find lasting solution to the crisis.

The striking Nigerian Tertiary Institutions

Ideas have been described as the currency of the 21 st century economy. This is because business has moved from the hierarchical Ford Motor Corporation of the 1920s which employed a large number of people to perform repetitive tasks in precise rapid ways to achieve a consistent objectives. This was the operational style of all organisations in the industrial age. Sad to say, decades into the information age many organizations including our tertiary institutions still carry on with the operational styles of earlier glorious but no longer relevant generation.

The essence of authority of ideas can be best appreciated if we understand the role of learning institutions. If we take Harvard University for example. At Harvard, we consider it an extremely important accomplishment when a 25 year old student who has been there for just 18 months makes a discovery that disproves the pet theory of a 55 year old professor who has been there for 30 years. Indeed, the professor whose theory has been disproved might be the first to congratulate that graduate student.

The notion that of the community’s most junior members would be applauded for upending the life work of one of its most senior would seem exceedingly strange in many organisations and countries. Yet it is fundamental to what Harvard and other American universities are about. And if you look at the organisations in the economy where the greatest value is being added, they are increasingly the organisations that share the values and character of universities.

Organisations that foster an environment where creativity is rewarded, that prepare themselves to respond to challenges and execute their strategy in a nimble way, and that discourage rigid adherence to hierarchy will best be able to meet with the challenges.

To be contd

Godswill C. Onyekwere