A Second Hand Conjecture

(photo: William Bedzrah)

One of the traditional problems of economic development in sub-Saharan Africa is that internal African investment dollars tend to be spent outside the continent. Thus it’s interesting to see Nigerian investment in Ghana has now reached $580 million. Something that has sparked quick calls for a Nigeria-Ghana Chamber of Commerce and further liberalization of trade laws.

[George Kumi, Ghana’s High Commissioner to Nigeria] noted that what Nigeria and Ghana need is increase in trade investment and not foreign aids, said the business cooperation between the two countries would go along way in alleviating poverty.

“We need to move away from the old way of over protecting our internal trade. There should be free flow of goods from Ghana to Nigeria and vice versa.”
(BusinessDay)

Good stuff, to be sure.

One of the factors that makes these two countries compatible investors in each other is monetary policy and the (new) tendency of their currencies to retain value. Nigeria’s inflation rate which was as high as 16% in 2005, fell to 6.5% this year (comparable to Chile). Ghana has been experiencing an equally dramatic fall in inflation, from an astronomical 26.7% in 2004, to 11% in 2008 (better than Russia).

With falling inflation of this kind, the temptation to send your profits to Switzerland as soon as you make them is substantially reduced.

Tags: Africa, Chile, commerce, George Kumi, ghana, inflation, investment, monetary policy, Nigeria, profits, Russia, Switzerland, trade

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