It is short presentation to explain velocity of money in Nigeria context and also suggest the immediate approaches to increase velocity and by implication enhance economic growth

1. THE OBSCURITY OF ECONOMIC
REALITY: A CASE OF VELOCITY
OF MONEY IN NIGERIA
BY
Edamisan Ikuemonisan

2. Session One: Introduction
 The growing world population is an indication of an impending danger
Globaleconomyisunhealthy
 The big economic powers are exploring and exploiting opportunities
everywhere including outside earth space
 The most dreaded threat now is not death but hunger, food insecurity and
sickness
 The future clock economic growth tickles in the direction of Africa but I
doubt if they know about this
 Nigeria must quickly address her fundamental economic challenges to
partake in the global competitiveness.
 It is by simply taking away all the theoretical encumbrances about
monetary policy and let the people relate with it as simple as possible.

3. Introduction
 The presentation is organized thus:
Globaleconomyisunhealthy
 Session Two: Any lesson learnt so far from the bursting of dotcom bubble
and housing bubble in 2000 and 2008 respectively?
 Session Three: Is global economy really healthy as we have been made to
believe?
 Session Four: What is the big issue about Nigerian Economy and monetary
policy?
 Session Five: Way forward and Conclusion

4. Session Two:
 Dotcom bubble bursting of 2000 was about the dismal crashing of the
investment in the tech sector between March –April, 2000.
 At this period, many stock value got evaporated resulting into huge lost of
investments and many companies never recovered till today
 Why the crash? Simply say, be careful when life is made too easy and fast.
 The ease with which ambitions translated to reality were too amazing to
think there was need to have a second thought.
 Research about how to sustain the platform was not only slow but not well
coordinated to address today’s worries about the platform.
Globaleconomyisunhealthy

5. Session Two:
Globaleconomyisunhealthy
 Housing and Credit bubble bursting of 2008 was also about the
unprecedented crashing of American Stock Market Index (S&P 500) in 2008.
 S&P 500 declined from 1576 in October, 2007 to 676 in March, 2009 (57%)
 And again we ask, why did this happen? Simply say, over reaction to prevent
what happened in March 2000.
 The regulatory bank kept short term interest rates low for an extended
period to increase savings. Trust DCs, they also increased their reserves too.
 Global Investors became frustrated by low returns and elected to take above
average risk in over-securitized AAA-rated securities. The rest is history now

6. Session Two:
Globaleconomyisunhealthy
 These two global economic phenomena also symbolize the danger in
inadequate and over bearing influence of most regulatory organs
 It again shows economic researches are not having sufficient smooth edges
to nest the past with the present and project less haphazard future.
 It is not sufficient to discover new things everyday but we must we make
better the opportunities at hand.
 Economic indices are physical and concrete that we can relate with. No
matter how well it is padded, the result will show in reality.
 Now, any lesson learn so far from these global crisis? Find out.

7. Session Two:
Globaleconomyisunhealthy
 The debate now is how and when will the regulatory agencies know the limit
and extent they should go to regulate the secular economy;
 That again is hanging on the economic research because there can never be
a straight jacketed rule to that;
 Researches all over the world are going too academic; too beautiful to be
applied and practiced. Researches need to be more scientific and enduring.
 Researchers and research contractors are not as reflective as they should be.
While policy makers are becoming more of entertainers. Say what sounds good
 Failure to pay attention to problem solving researches, world economy may
not escape from further economic bubbles so easily.

8.  Is global economy really healthy as we have been made to believe? Though, it
is a perspective issue but, I am not sure if it is healthy.
Session Three:
Globaleconomyisunhealthy
 Feelers across the globe have shown that the risk of possible derailment is
high
 Big export economies are seriously retracting deliberately or impulsive response to
low production. Investors are still also jittery…….what? Mkt are faintly predictable
 Secular economics have been over rated and the results are living with us
 There is need for a convergence among stakeholders to tweak the economic levers
to reflect the reality
 Economic giants in Asia and America have discomforting stories to tell about the
growing apprehension…there is need for reality check.

9.  At the global level, the direction for growth stimulation may be a genuine
reconciliation and synergy between financial and monetary policies
Globaleconomyisunhealthy
Session Three:
 The approach may not be uniform though
 Addressing the foundation is very imperative to birthing a sounder footing
 Emasculating the market economy will further complicate growth.
 The high population of illiterate and poorly educated is in itself a growth inhibitor
 At the Developing Countries(DCs), they have got to be sincere to themselves

10.  What is the big issue about Nigerian Economy and monetary policy?
Globaleconomyisunhealthy
Session Three:
 The salient things about the economy has been shrouded in secrecy or
people did not just put interest in it.
 A network of economy growing communication can open up all the
misunderstanding about buying made in Nigeria goods.
 That is an invitation to inflation. Therefore, encouraging value addition
is a call to increase spending on domestic products
 Increasing money when there is less domestic production will not only
reduce transactions but will affect income velocity of money.
 High nominal GDP to money supply is a reflection of growing economy

11. Globaleconomyisunhealthy
Session Three:
 Concept of velocity of money (see Friedman, 1959; Selden, 1956; Van
den lngh, 2009)
 It is measurable but not visible: 𝑀 =
1
𝑣
Y
 The two strong schools of thought: one, holding to the constancy of
velocity and output and the other feels strongly that velocity varies
 That establishes the relationship between average cash balances
during t period to the level of income in the same period.
 Recent evidences tilt towards the latter. To assume constancy of
velocity of money is to accept a premeditated and spurious prediction
 Several studies have established that economic growth and interest
rate are positively related to velocity of money.

12. 0
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60
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2014
Session Three:

13.  Over the years, a lot of money exchange hands without concrete service
rendered yet we presumed the economy was growing. By mere injection?
Globaleconomyisunhealthy
Session Three:
 What are the lessons to learn there in?
 Further studies have also shown that it is not a wise counsel for CBN to
continually release money into the economy without proper reality check.
 It therefore behooves on all to increase exchange transactions with a view to
creating traffic in the velocity of money.
 It may surprise us that growth rate of stock market capitalization in Nigeria has
negative relationship with income velocity of money
 Nigeria must add value to her economic activities both for local and foreign
consumption. The entertainment industry has proved us right in that regard

14. Way Forward and Conclusion
 CBN must deepen her research on the use of monetary targeting framework
Globaleconomyisunhealthy
 Nigeria GDP in relation to her potentials is a reflection of weak economic
functionalities. Too many bureaucratic bottle neck affecting ease of doing biz
 Over pricing (appreciation) of the local currency every time is a big challenge
that CBN must overcome
 It is not sufficient to produce or sell raw materials, there must be that
deliberate efforts to add value to what Nigeria produces
 Diffused spending on varieties does not create inflation but over
concentration on limited goods does…therefore, need to research more.
 Above all, knowledge is required. A reflective type of education is just
inevitable. This will produce creative thinkers and sound entrepreneurs

15. Globaleconomyisunhealthy
 Add extra value and finesse to a unfinished or semi finished good then get
more income from both domestic and foreign fronts
Session Five: Way Forward and Conclusion
 Royal-Agro-Tourism Biz Model
 Non-Government Economic Bureau as advisory organ to both government at
various level and private sector players
 Conditional Grants/Credit Transfer to Students/Graduates to finance
coordinated scientific researches
 Vocational Schools for Exceptionally Gifted Art and Science Students
 No room for idle money. All money due for transfer or exchange must be
attached to a value in return

16. Thank you for listening