What has finance got to do with it?

By Ganiyat Adejoke Adesina-Uthman

My inaugural lecture titled: What has finance got to do with it? may receive a simple answer that is FINANCE HAS GOT LOTS TO DO WITH IT OR FINANCE HAS GOT NOTHING TO DO WITH IT. However, there are more to it than meets the eyes. This seemingly simplified answer may refer to the role of finance in the life of individuals, corporate firms, or even governments. Just as it may encompass what finance has got to do with the attainment of my professorial chair and in fact, my personal choice of academic expertise.

I discovered that not just individuals but also that finance and financing have got a lot to do with firms and governments. Talking about Financial economics and economies of finance-Individuals need to finance housing, health, food, transport or means of transportation, clothing, housing, leisure, education, families, friends, and orphans among others. This is ditto for government and firms who are to provide some of these needs and services through financing as well. Then, the question is, why the ECONOMIES OF FINANCE?

ECONOMIES OF FINANCE
Economies of Finance may be linked to monetary target, monetary policies, and types of exchange rates in an economy. Consequently, finances of a corporate organization and individual in an economy have a direct relationship with that of the economies of financing of a nation. It will interest you to know that I am one of those who have contributed and lent my voice to different aspects of economies of financing areas for Nigerian economic growth and development and for global economies such as alternative financing; women financial inclusion; microfinancing; managing foreign exchange risk and financial stability; poverty alleviation; infrastructural financing and investment; economic diversification; income and happiness; financing population; finance-growth nexus; social support financing; tax and economy financing, financial instruments for mobilization and allocation of scarce resources among others.

All these need to be associated with rule of law, strong institutions, standard of living; peace and security; foreign reserves and foreign affairs; all for economic growth and development. Let me quickly highlight some of my policy recommendations based on my searching and researching.

MY POLICY RECOMMENDATIONS
The need for critical analysis of globalization agenda by Muslims for them to address the financial and economic challenges posed by it; Developing the capital and money market so that individuals, corporate and government can have adequate access to quality financing to enhance economic growth; the use of Islamic MFIs to achieve outreach to the poor in the Asian regions in order to reduce cases of the hardcore poor and incidence of poverty; Use of Gold Payment System (GPS) employing Gold Dinar (GD) in bilateral and multilateral trade of Muslim countries first, (just like the way sukuk started) to reduce foreign exchange risk and secondly, to promote egalitarian Muslim societies with financial stability. Malaysians are encouraged to take up motor insurance policy to minimize risk of financial loss that could be associated with motor accident; Deploying Islamic money culture, Islamic financial engineering, and other Islamic mechanism such as zakat-Islam’s tax system- as alternative financing for economic development in West Africa. I call on the Nigerian government then to embrace the paradigm shift for infrastructural development by licensing Islamic banking and financing system because this alternative financing has got to do with development waves not only in Muslim countries but in the West and Europe; I found positive effects of regulations in the Malaysian capital market which have forstalled arbitrage and speculation and that no dichotomy exists in the conventional and Islamic bonds, rather Islamic bond is driven by its profit and risk sharing traits. I find support for Market Segmentation theory in this research.

This boils down to the fact that finance has got a lot to do with investment in the bond market. Individual investors, therefore, prefer a horizon where they feel safe with their money than taking too much risk of losing their funds; Government Is advised to stop financing corruption, but finance growth and development by investing corruption proceeds in financing infrastructural facilities after finding that corruption does not grease the wheel of economic development in Nigeria rather, it put sands in it. Fund mismanagement and diversion of fund is impoverishing the vast majority, therefore, affecting economic development negatively; Infrastructural Development Challenges in Emerging Nations and how Sukuk (Islamic Bonds) can be applied as Solution.

I note that Sukuk Islamic bonds is like conventional bonds in providing long term financing to borrowers and lenders in the capital market. A broad battery of statistical evidence reveals that Sukuk holders’ expectation lends support to Liquidity Preference Theory; Need for responsive collaborative efforts between the government and the monetary authorities in pragmatic policies formulation and implementation that can absorb external shocks and stimulate FDI. Economic diversification for boosting GDP, optimal exchange rate and inflationary management are also recommended to manage further global financial crises.

With these, Foreign Direct Divestiture may be reduced; Implementable policies on diversification of non-oil sectors as productive base of the economy such as agricultural sector, tourism, and mining as well as services and manufacturing is, thus, recommended to the Federal Government of Nigeria and concerned ministries as no diversification can truly be achieved without proper funding of production-based

economy; People with higher income that are gainfully employed and have good health (no matter their gender and age) are happier than those with low-income and low-level of education. Educational sector should receive a boost to produce skilled workers for knowledge-based economy and happier workers to boost productivity. Recession lessons on the global perspectives in terms of strategies adopted for economic recovery in worse recessions witnessed especially by United States of America, India, and China were documented while thorough and religious implementation of Economic Recovery Strategies and avoidance of diversions to achieve quick recovery is recommended.

Women are financially excluded in Nigeria though financial resources for women empowerment always give them a voice in decision-making not only about them but about the future generation. It is recommended that the outreach of microfinance institutions in Nigeria should be upgraded to levels comparable to that of Indian, Thailand, Bangladesh and Vietnam for fast poverty reduction.

Political parties should adhere to the provisions of the Electoral Acts as amended in the electoral spending and violators should be prosecuted to serve as deterrent; Poverty discriminates against women households in Niger State, therefore policy measures should address households’ poverty reduction through girl-child education and women’s empowerment programmes in Niger state and in Nigeria in general.

To kill poverty, finance is the gun.

A stable economy is recommended to attract more remittance funds for investment and economic growth. No economic growth and development without financing. Due to the enlightenment ages, the Modern conventional economic system has been moving away from its religious roots while the Islamic economic system is a systematic way of returning the Modern economic foundation to its religious roots.

Getting sources of financing right is very key. To achieve optimal allocation of resources towards sustainable economic growth, market capitalization and total value of stock traded in the Nigerian capital Market should receive a boost through more entrance of local and foreign investors with huge investment base to increase volume of trading which shows significant and positive relationship with economic growth.

Trade can only be boosted with adequate financing. During COVID19, most preferred financial coping strategy was to take salary advance, followed by going back to work and then borrowing because most households do not have contingency savings. Contingency savings habit, controlling inflation rate and social inclusion are recommendations to the households and government as an important step for returning to normality in terms of price stability.

Social support for stability requires a great deal of financing. Monetary authorities should allow policy decisions to run its course before pronouncing a fresh one on the same issue. The development will also help to avoid policy inconsistency; we suggest that fiscal policy should be leveraged alongside mixed effect of monetary policy and judicious use of rule of law to ensure economic stability.

A male-centred framework as there exists a significant gender difference in human capital development suggests that organizations must have gender orientation objectives and systems for mainstreaming in human capital development. Finally, stopping gender differences in human capital development would assist in elevating all-inclusive national development. Let us migrate the economy from financial capitalism to financial socialism through alternative financing platform of Islamic economic system. In fact, finance has got lots to do with our existence!

AN INAUGURAL LECTURE DELIVERED BY PROFESSOR GANIYAT ADEJOKE ADESINA-UTHMAN,PhD.,ACMA,MNES,FCE,FIFP,FIMEN
DEPARTMENT OF ECONOMICS, FACULTY OF SOCIAL SCIENCES
NATIONAL OPEN UNIVERSITY OF NIGERIA, JABI