Ni geri a's
Socio -Political
Eco n o mi c
Environment
QUOTE OF THE WEEK
“
The first lesson of economics is scarcity:
there is never enough of anything to fully
satisfy all those who want it. The first lesson
of politics is to disregard the first lesson of
economics.
“
- Thomas Sowell
WHAT DO YOU SEE?
GOVERNMENT SAYS
• …it has realised the timing of its planned removal of petrol subsidy is "problematic"
and will worsen the suffering of Nigerians..
• Fuel subsidy removal will heighten inflation.
• “Admittedly, the burden is huge and massive and there is need at one point to do
away with the subsidy.”
• “A lot of us in this administration believe that the issue of removal of subsidy should
be handled with utmost care, especially that sufficient planning needs to be done.”
NOT FUNNY
RIGHT?
This Photo by Unknown Author is licensed under CC BY-NC
Governance consists of three dimensions: the
Epistemic, the Social & the Material.
SOME CORE
TRUTHS
The “periodic shows of love” close to elections are
deceitful.
Scholarly disillusionment with political and economic
failure in Africa.
Development as a technical problem, susceptible to a
“managerial fix”. (Leftwich 1993, 1994, Polzer
2001)
A MARKET
•
A market is said to function effectively,
if it creates value and promote the overall
good of the economy.
•
A market is simply a medium that
facilitates exchange of goods and
services between buyers and sellers.
•
A market can be described as a failed
market if the market is not producing
socially desirable outcomes.
This Photo by Unknown Author is licensed under CC BY-SA
8
• There are four main reasons responsible
for the existence of market failures;
WHY
MARKETS
FAIL
• Absence of perfect competition.
• Presence of asymmetric
information.
• Externalities.
• Public Goods.
9
THE ADVERSE SELECTION PROBLEM
• How does an insurer determine the probability of a bad state of nature
occuring and based on that align who is a high or low risk?
• Adverse selection is at play
• when consumers are ignorant of the effect of the various product they
consume on their health or safety or
• when
they do not have full information on the relative merit or
demerits of the various competing consumer items.
• All these creates adverse selection which gives rise to information
10
asymmetry.
EXTERNALITIES
• Externalities are costs or benefits of a market activity borne by a third
party.
• Externalities can either be negative or positive externalities
✓Negative Externalities: Occur when the effects of a decision not
considered by the decision-maker are detrimental to others.
➢Positive Externalities: Occur when the effects of a decision not taken
into account by the decision-maker are beneficial to others.
11
ENVIRONMENTS: Market & Non-market
ENVIRONMENTS: Market & Non-market
“The social, political and legal context within which the firm operates” – (Aggarwal, 2001:91)
BUSINESS ENVIRONMENT
A DEFINITION
• Everything that happens within and
outside the business premises –
internal environment/external
environment.
EXTERNAL
• Is the competitive environment (
within the industry) – socio-political
environment (country environment).
 The firm acts on its environment & vice-versa.
THE DOMINANCE
MODEL
BUSINESS & GOVERNMENT DOMINATE
& ARE RESISTED BY POPULAR FORCES
- IN THE PAST (MARXISM) & CIVIL
SOCIETY AT PRESENT.
THE COUNTERVAILING FORCES
THE DEVELOPING
COUNTRY MODEL
•
Business is powerful and allied
with Government, which is not
as protective of social interests.
•
Society has to petition
government to constrain
business.
ECONOMIC INDICATORS THAT AFFECT
BUSINESS SUCCESS
Consumer confidence
• Consumer confidence
measures the overall
consumer optimism
about the state of
economy.
• Confident consumers
tend to be more willing
to spend money rather
than consumers with
low confidence –
meaning businesses are
more likely to prosper.
Economic growth and
development
• Economic growth means
an increase in real
national income /
national output - e.g.
GNP & GDP.
Economic development
means an improvement in
the quality of life and
living standards, e.g.
measures of literacy,
life-expectancy and
health care…
Unemployment
Inflation
• Inflation normally occurs
when supply of money is
larger than the
availability of goods
and services.
• It is followed by
increased costs of raw
materials, production
and utilities.
• In order to sustain
business, the prices of
goods must increase.
• Consequently, inflation
can reduce the
purchasing power of
consumers, unless
employers increase
wages based on the
level of inflation.
Interest rates
- This represent the
amount that a lender
charges an individual or
business to borrow money.
- Since many small and
medium businesses rely on
loans from banks and
other financial institutions
as a source of financing.
- High interest rates result
in higher total company
expenses.
• This has direct impact
on the purchasing
power of individuals.
• When unemployment is
low, consumer spending
tends to be high
because most people
have income to spend.
• Which is good for
businesses and helps
drive growth.
STRATEGIC IMPERATIVES
STRATEGIC OPTIONS
•
•
Always analyse the options available before
making a choice on what strategy to adopt.
“Become Arbitrageurs: i.e. adopt the mindset
of strategic experimenters; and become
orchestrators of hybrid organizations,
harnessing diversity and ambiguity as a
source of competitive advantage.”
•
“We need to get comfortable with blending
different logics and thinking afresh about how
we create, capture and sustain value..”
A QUICK SWEEP
•
The current population of Nigeria in 2022 is 216,746,934, a 2.53% increase
from 2021.
• The population of Nigeria in 2021 was 211,400,708, a 2.55% increase from
2020.
• The population of Nigeria in 2020 was 206,139,589, a 2.58% increase from
2019.
GDP: increases almost every year before an election.
Recession: Nigerian economy never experiences a recession before
an election year.
A GLANCE
Business Investment: foreign investors may seek safety in some less
volatile emerging markets for 2022, only to return in 2023.
Naira: with the exception of 2014, the naira enjoys boost / stability,
though we also have a mix trend of dip in foreign reserves.
Next Week…
THANK YOU