Restoring trust and confidence in a time of crisis

And the Lord said to Moses, “Why do you cry to Me? Tell the children of Israel to go forward (Exodus 14:15)

The Argentine economy was one of the worst hit by the emerging market crisis of the 1990s. It officially slipped into a recession at the end of 1998, imploded in 2001, and went into a depression in 2002. A long history of corruption and waste, plus the overvaluing of its local currency, the peso, had made it particularly vulnerable to external shocks. But the government of the day rose to the occasion. It pursued a path to recovery through a series of clear, decisive and disciplined efforts that boosted investor confidence and got the economy back on track. The peso was devalued, import levies were increased, and export was made more attractive. The effect was the boosting of local industry and employment, trade surpluses and the accumulation of huge foreign reserves, leading to Argentina’s first fiscal surplus in decades.

In 1991 Finland also suffered an economic crash. The Finnish economy had huge export exposure to the Soviet Union so that when it collapsed, it wiped out over 30 percent of Finnish exports in one fell swoop. But something curious happened. Contrary to what happens elsewhere, under such circumstances, suicide rates in Finland reportedly declined. And part of the reason is because the Finns united in solidarity to tackle the problem. The government took tough decisions that steered the country back to growth, investing hugely in education and R&D.

South Korea, in October 2008, saw an unexpected 5.1% slump in its economy, plunging it into a tough economic downturn. The government immediately announced billions in tax cuts and €36 million in fiscal spending measures to prop up the economy, and the central bank set about vigorously cutting interest rates: 3.25 percentage points within a couple of months. Lee Myung-bak, South Korea’s president, encouraged the chaebol companies – Samsung, Hyundai, etc – to see the silver lining in the recession. The government threw more money into R&D programmes and gave tax breaks for companies in that regard. The result was a boom in product development, exports and subsequently the economy.

The truth is, no country is completely immune to the boom and bust cycles of the economy. What differentiates nations, however, is how they respond in the event of a crisis. Beating an economic recession requires the intelligent rallying of human and investment capital. And rallying capital demands that leadership inspires trust and confidence. As Richard Edelamn said, “Trust is key to restoring investor confidence. Rebuilding trust requires business to think and communicate differently.”

Economics is not an exact science as some would say. What worked in one country, may not necessarily work in another. The local context and peculiarities of each country calls for unique, thoughtful and dynamic approaches to dealing with local economic problems against a global backdrop. But principles are universal. One clear thing most of the countries in our examples above did when faced with their respective economic crises was to shore up the manufacturing sector, which over the years, is almost non-existent in Nigeria. Poor infrastructure, inadequate power supply, access to loan facilities, etc, have all contributed to strangle manufacturing across the country. In the last one year numerous businesses have folded up, about 14 airlines alone have left the country. This calls for adequate attention to research and inward thinking, with the aim of producing a policy that would provide the needed stability to improve the economy.

We appreciate the dogged efforts the government has been making to tackle this many-pronged issue. We encourage, also, the Nigerian people to find the sense of solidarity the Finns found to confront the problems facing them with a united front. I have no doubt in my heart that Nigeria will yet pull through. Our best days are ahead of us.

Nigeria Has A Great Future