Monetary Policy in Open Economies | Geopolitics & Business
Full-Time Masters in Management (MiM)
2026-04-25
Sessions in This Module:
| Session | Topic |
|---|---|
| 8 | Monetary Policy, Inflation & Credit |
| 9 | Geopolitical Relations & Business |
| 10 | International Trade & Negotiation |
| 11 | Globalisation & Regional Integration |
| 12 | Global Financial Governance |
Module Learning Outcomes:
✅ Explain how monetary institutions shape business predictability
✅ Analyse strategic rivalry and market access
✅ Apply IPE frameworks to diagnose policy choices
✅ Develop evidence-based managerial judgement
“A strategically minded general manager must understand the evolving relationship between government, business, and society” — GPEB Course Guide
Guiding Question: > How do monetary institutions shape business predictability (inflation, rates, credit, FX expectations)?
By the end of this session, students will be able to:
Important
Core Readings: Oatley (2022) — money and monetary policy; domestic institutions | Eichengreen (2019) — monetary regimes and credibility
Monetary policy is not abstract economics — it directly shapes:
The managerial implication: Firms that fail to read monetary signals are exposed to avoidable strategic risks.
Note
Key insight (Oatley, 2022): Central banks do not directly control inflation or output — they use instruments (policy rate, reserve requirements, open market operations) to influence intermediate targets which then affect final goals.
What inflation does to firms:
| Effect | Mechanism | Strategic Response |
|---|---|---|
| Cost-push | Input prices rise faster than output prices | Renegotiate contracts; diversify suppliers |
| Demand erosion | Real wages fall; spending declines | Reposition toward value segments |
| Debt dynamics | Real debt burden shifts | Lock in long-term fixed-rate financing |
| FX depreciation | Imported inputs become costly | Local sourcing; hedging strategies |
| Uncertainty premium | Investors demand higher returns | Shorter planning horizons; scenario plans |
| Wage-price spiral | Workers demand compensating rises | Productivity-linked pay structures |
Eichengreen (2019): Credible low-inflation regimes reduce the inflation risk premium that firms must pay on long-term borrowing.
Eichengreen (2019) shows that monetary regime credibility is the single most important determinant of:
“A central bank that lacks credibility is like a contract without enforcement — technically in place, but strategically worthless.”
Core Problem (Kydland-Prescott, 1977):
Solutions: - Independent central bank (insulated from political pressure) - Inflation targeting (transparent, accountable commitment) - Currency boards (completely outsource monetary credibility) - Dollarisation (adopt another country’s credible currency)
Nigeria’s Central Bank (CBN) Experience:
Warning
2020-2023 Credibility Erosion: - Multiple exchange rate windows → market confusion - CBN lending directly to government (fiscal dominance) - Fuel subsidies monetised - Result: Naira depreciation >70% in 2023 alone
Business Implications: - Firms refused to price in naira - Dollar invoicing became dominant - Long-term contracts near impossible - FDI collapsed
Reform (2023-2024): - Single FX window restored - CBN independence signals strengthened - Petrol subsidy removal - Still rebuilding credibility
No country can simultaneously achieve all three:
What Each Country Chooses:
| Country/Region | Fixed FX? | Open Capital? | Independent MP? |
|---|---|---|---|
| 🇺🇸 USA | ❌ | ✅ | ✅ |
| 🇪🇺 Eurozone | ✅ (internal) | ✅ | ❌ |
| 🇨🇳 China | ✅ (managed) | ❌ | ✅ |
| 🇳🇬 Nigeria (pre-2023) | ✅ (multiple) | ❌ (controlled) | ❌ (limited) |
| 🇳🇬 Nigeria (post-2023) | ❌ (floating) | ✅ (liberalised) | ✅ (seeking) |
| 🇸🇦 Saudi Arabia | ✅ (USD peg) | ✅ | ❌ |
Important
Managerial Implication: When a country’s impossible trinity configuration changes — as Nigeria’s did in 2023 — firms must rapidly reassess their FX exposure, financing strategies, and pricing models.
How monetary policy reaches firms:
| Channel | Mechanism | Speed | SSA Importance (1-10) |
|---|---|---|---|
| Bank Lending | CB rates → bank funding costs → loan rates | Medium | 9 |
| Balance Sheet | Higher rates → lower collateral values → less lending | Slow | 7 |
| Asset Price | Rate changes → equity/property prices → wealth effects | Fast | 5 |
| Exchange Rate | Rate differentials → capital flows → FX → trade | Fast | 8 |
| Expectations | Forward guidance shapes firm investment plans | Immediate | 6 |
Note
Why Credit-to-GDP Matters for Business:
Exchange Rate Regimes Spectrum:
| Regime | Examples | Pros | Cons |
|---|---|---|---|
| Currency Union | CFA Franc, EUR | Certainty, credibility | No adjustment tool |
| Currency Board | HK Dollar | Near-full credibility | Imported monetary policy |
| Fixed Peg | Saudi Riyal | Predictability | Requires reserves |
| Managed Float | China CNY | Flexibility + stability | Credibility risk |
| Free Float | Nigeria (post-2023) | Absorbs shocks | FX volatility |
Warning
Nigeria’s 2023 FX Reform: - Moved from multiple windows to unified float - Naira fell ~70% in weeks - Firms with dollar liabilities faced severe balance sheet stress
FX Risk Management for Firms:
| Risk Type | Definition | Horizon | Mitigation |
|---|---|---|---|
| Transaction Risk | FX changes on specific transaction | Short-term | Forwards, Options |
| Translation Risk | FX changes on financial statements | Quarterly | Netting, Balance Sheet Hedging |
| Economic Risk | FX changes on firm value/cashflows | Long-term | Operational Hedges, Currency Debt |
| Competitive Risk | FX changes on competitive position | Strategic | Geographic/Product Diversification |
Nigeria’s Monetary Trilemma (2015-2023):
Sector-by-Sector Impact of Nigeria’s 2023 Monetary Changes:
| Sector | Primary Impact | Secondary Impact | Adaptation Strategy |
|---|---|---|---|
| Manufacturing | ↑ Input costs (imported raw materials) | ↓ Consumer demand | Local sourcing; price increases |
| Banking | ↑ NPLs from rate-sensitive borrowers | ↑ NIM on existing loans | Repricing; asset quality focus |
| FMCG | ↑ Distribution costs; import costs | ↓ Volume as prices rise | Sachet strategy; price-pack architecture |
| Oil & Gas | Dollar revenues vs naira costs | ↑ Revenue in naira terms | Minimal hedge needed |
| Telecoms | ↑ Dollar capex costs | Tariff approval delays | Regulatory advocacy |
| Aviation | ↑ Dollar-denominated fuel, leases | Revenue in naira | Route suspension; pricing |
| Year | Event | Category |
|---|---|---|
| 2015 | CBN pegs NGN at ₦199/$ officially | FX |
| 2016 | Recession; multiple FX windows emerge | FX |
| 2017 | IEFX window introduced | FX |
| 2019 | Gradual CBN rate adjustments | Rate |
| 2020 | COVID shock; MPR cut to 11.5% | Rate |
| 2021 | Rising inflation; inaction controversy | Controversy |
| 2022 | CBN begins hiking: 11.5% → 16.5% | Rate |
| 2023 | Tinubu reforms: FX unification; subsidy removal | Reform |
| 2024 | Rate at 24.75%; naira stabilises partially | Rate |
Key Framework from Globalizing Capital (Eichengreen, 2019):
Historical Evolution of Monetary Regimes:
Tip
Eichengreen’s Core Insight:
“Countries cannot simultaneously maintain fixed exchange rates, free capital movement, and independent monetary policy — but the choices they make reflect deeper political economy bargains about who bears the costs of adjustment.”
Africa’s Monetary Architecture:
Important
LO5 Application: Build an early-warning system for monetary risk
Key Indicators to Monitor:
🔴 Danger Signals: - Inflation > 15% and rising - Real interest rate strongly negative - FX reserves < 3 months imports - Fiscal deficit > 5% GDP - Parallel market premium > 20% - Rapid credit expansion
🟡 Caution Signals: - Inflation 8-15% - Real rates marginally negative - Reserves 3-4 months - Fiscal deficit 3-5% GDP - Some exchange rate pressure - Rising NPL ratios
🟢 Favourable Conditions: - Inflation < 6% - Positive real interest rates - Reserves > 5 months - Fiscal position near balance - Stable unified FX market - Credit growth in line with GDP
| Indicator | Nigeria | Ghana | Kenya |
|---|---|---|---|
| Inflation (%) | 28.9 | 40.1 | 9.2 |
| Real Rate (%) | -4.0 | -10.1 | 4.3 |
| Reserves (months) | 5.2 | 2.8 | 4.5 |
| Fiscal Balance (% GDP) | -4.2 | -7.5 | -5.0 |
| Credit Growth (%) | 8.1 | 5.2 | 12.3 |
The MICE Framework for Monetary Risk Management:
| Element | Action | Tools | Output |
|---|---|---|---|
| M - Monitor | Track key monetary indicators daily/weekly | Bloomberg, CBN bulletins, IMF data | Early warning dashboard |
| I - Interpret | Assess impact on your firm's value chain | PESTLE + Stakeholder Mapping | Risk assessment memo |
| C - Calibrate | Adjust pricing, financing, and FX strategies | Scenario Planning + Real Options | Updated financial model |
| E - Engage | Build dialogue with CBN, Treasury, analysts | Non-Market Strategy + Advocacy | Policy position paper |
Guiding Question — Session 8
“How do monetary institutions shape business predictability (inflation, rates, credit, FX expectations)?”
Take a Nigerian manufacturing firm importing 60% of its raw materials and selling 80% domestically.
Discuss: 1. How did the CBN’s multiple FX window policy (2016-2023) affect this firm’s planning horizon? 2. What is the difference between exchange rate risk and monetary regime risk? 3. If you were the CFO, what would your monetary risk dashboard look like?
Background: - Nigeria’s largest conglomerate (cement, refinery, etc.) - Dollar-denominated debt; naira revenues - Heavy dependence on imported inputs
The 2023 CBN Reform Challenge: - Naira devalued 70%+ overnight - Dollar debt cost in naira terms doubled - Imported inputs became dramatically more expensive
Questions for Discussion: 1. What monetary risk hedges should Dangote have had in place? 2. How should Dangote’s strategy change given a freely floating naira? 3. What is the relationship between CBN credibility and Dangote’s cost of capital?
Group Task: Monetary Risk Assessment
| Criterion | Excellent (A) | Good (B) | Adequate (C) |
|---|---|---|---|
| Framework application | Uses MICE + impossible trinity correctly | Applies most concepts | Limited framework use |
| Evidence quality | Uses CBN data, IMF reports | Uses some primary data | Relies on secondary sources only |
| Managerial relevance | Specific, actionable recommendations | General guidance | Theoretical only |
| Critical analysis | Challenges assumptions; considers alternatives | Some critical perspective | Descriptive only |
| Presentation | Clear, structured, professional | Adequate | Needs development |
Guiding Question: > How does strategic rivalry reshape market access, technology, finance, and corporate risk?
By the end of this session, students will be able to:
Important
Core Readings: Oatley (2022) — power, interdependence, economic statecraft | Rodrik (2011) — limits of hyperglobalisation | Susskind & Vines (2024) — Global Economic Order and Governance
Defining the Landscape:
Geopolitics: The influence of geography, political power, and international relations on economic decisions and business environments.
Economic Statecraft: The use of economic instruments (trade, sanctions, investment restrictions, technology controls) to achieve political objectives.
Why is Geopolitics More Important Now?
Note
“For the first time since WWII, the US-led liberal multilateral order faces a peer competitor.” — Susskind & Vines (2024)
The Postwar International Policy Matrix (PIPM):
The US-led liberal multilateral order rested on 4 pillars (Susskind & Vines, 2024):
| Pillar | Institution | Original Goal |
|---|---|---|
| Full Employment / Keynesian Policy | National Governments | Avoid 1930s-style depression |
| Fixed but Adjustable FX Rates | IMF | Prevent competitive devaluations |
| Development Finance | World Bank | Channel capital to poorer nations |
| Trade Liberalisation | GATT → WTO | Prevent protectionist spirals |
The Hegemon: United States — provided public goods (reserve currency, security, open markets) in exchange for systemic stability
Note
African Implication: The post-war order was built without African participation. The Global South has always questioned whether “liberal” describes an order designed primarily by and for Western powers.
Why is the Order Unravelling?
Susskind & Vines’ New Framework:
“Concerted Unilateralism”: Countries come together to agree on rules of the game, then act individually within those rules — without requiring daily enforcement.
How it works: 1. Concerted Stage: Countries collectively establish global economic institutions (GEIs) and rules 2. Unilateral Stage: Each country pursues its own interests, constrained only by agreed rules
Examples: - APEC Trade Liberalisation (1990s): Countries agreed to liberalise together → individual liberalisation became self-reinforcing - Paris Climate Agreement: Voluntary national commitments + peer pressure + 5-year review
Why the framework matters for Africa: - Africa must find its voice in the concerted stage before new rules are written - AfCFTA is Africa’s attempt at its own concerted unilateralism - The BRICS+ expansion gives Africa some new leverage
Dimensions of US-China Rivalry:
| Dimension | US Approach | China Approach |
|---|---|---|
| Trade | Tariffs on $350bn+ Chinese goods | Retaliatory tariffs; market diversification |
| Technology | Chip export controls; entity lists | Self-sufficiency drive (SMIC, Huawei) |
| Finance | Dollar weaponisation; SWIFT exclusions | RMB internationalisation; CIPS |
| Military | Indo-Pacific alliance building | Military modernisation; island building |
| Norms/Values | Democracy vs. autocracy narrative | Non-interference; sovereignty norms |
| Development Finance | DFI, G7 PGI alternative to BRI | BRI; new Development Bank (NDB) |
Economic Decoupling Trend:
Warning
Despite political rhetoric, trade flows remain large. “Decoupling” is partial, sector-specific, and strategically targeted — not comprehensive.
Why Semiconductors?
“Without them, industries worth trillions of dollars would grind to a halt.” — The Economist
The Semiconductor Value Chain & Geopolitical Control Points:
US Export Control Escalation:
| Year | Action | Business Impact |
|---|---|---|
| 2018 | Tariffs on Chinese tech products | Supply chain cost increases |
| 2019 | Huawei entity list | Telecom supply chain restructuring |
| 2020 | TSMC barred from supplying Huawei | China forces domestic chip push |
| 2022 | Advanced chip export ban to China | NVIDIA, AMD lose major customer |
| 2023 | Netherlands/Japan join chip controls | ASML restricts EUV machine sales |
| 2024 | Extended controls; “close allies” required | Global chip geography rewrites |
For African Businesses:
Important
The Data Geopolitics Landscape:
US Digital Empire: - Cloud: AWS, Azure, Google (60%+ global) - Social: Facebook, X (Twitter), LinkedIn - Search: Google (90%+ global) - Payments: Visa, Mastercard, PayPal
Regulatory approach: Free flow of data; GDPR as minimum baseline
China Digital Ecosystem: - Cloud: Alibaba, Tencent, Huawei - Social: WeChat, TikTok (ByteDance) - E-commerce: Alibaba, JD.com - Payments: Alipay, WeChat Pay
Regulatory approach: Data localisation; internet sovereignty
Africa’s Digital Choice Dilemma: - Must choose which digital ecosystem to adopt - 60%+ of African telecom infrastructure is Chinese (Huawei, ZTE) - US is pushing “Clean Network” requirements - Neither China nor US has Africa’s digital interests as priority
Tools of Economic Statecraft:
| Tool | Examples | Business Risk |
|---|---|---|
| Trade Sanctions | Russia (2022), Iran, Cuba | Market access loss; supply chain disruption |
| Financial Sanctions | SWIFT exclusions; asset freezes | Payment disruption; banking access |
| Technology Controls | Chip export bans; Entity Lists | Technology procurement risk |
| Investment Screening | CFIUS (US); FDI screening (EU) | Deal collapse; approval uncertainty |
| Currency Manipulation | Tariff threats as leverage | FX volatility; pricing instability |
| Debt Diplomacy | “Debt trap” narratives on BRI | Borrowing risk; sovereignty concerns |
| Aid Conditionality | Governance requirements; reform mandates | Policy autonomy constraints |
Oatley (2022) Framework: > Economic interdependence creates vulnerability (dependence on others) and sensitivity (cost of disruption). Nations weaponise these asymmetries.
Warning
Africa’s Exposure: Russia’s war in Ukraine triggered sanctions that disrupted African food and fertiliser imports, showing how distant geopolitical conflicts create real business risks in Africa.
From “Efficiency-First” to “Security-First” Supply Chains:
What is Friendshoring?
Moving supply chains to politically aligned “friend” countries rather than optimising purely on cost/efficiency.
Key Manifestations: - US CHIPS Act ($52bn) → Incentivise chip production in USA, allies - EU Critical Raw Materials Act → Diversify away from China - “China+1” corporate strategies → Move one factory to Vietnam/India - AUKUS, QUAD → Tech/security supply chain integration
Janet Yellen (2022): > “We cannot allow countries to use their market position in key raw materials, technologies, or products to disrupt our economy or exercise unwanted geopolitical leverage.”
Africa: Opportunity or Risk?
| Friendshoring Scenario | Africa’s Role | Nigerian Opportunity |
|---|---|---|
| US “China+1” in manufacturing | Potential assembly/production hub | Free trade zones |
| EU Critical Minerals sourcing | Democratic DRC, Zambia, South Africa | Mining partnerships |
| Green tech supply chains | Cobalt, lithium, manganese | AfCFTA leverage |
| Digital economy diversification | Data centres, tech hubs | Lagos/Nairobi positioning |
| Agricultural alternatives | Food security supply chains | AgriTech, logistics |
Tip
Nigeria Strategic Question: Can Nigeria position itself as a “friend” to multiple blocs simultaneously — maintaining strategic ambiguity while accessing multiple markets?
How Friendshoring Creates Risks for African Businesses:
Africa’s Geopolitical Position (2024):
The “Africa Swing Vote” Dynamics:
Both blocs need African votes in multilateral forums. This creates leverage — if managed strategically.
Important
Rodrik (2011): “Embedded Liberalism” Crisis Just as Western embedded liberalism is under strain, African states face their own legitimacy crisis: how to deliver development results while navigating external pressures?
Key African Geopolitical Actors:
| Country | Leaning | Rationale |
|---|---|---|
| South Africa | Non-aligned/China | BRICS membership; AU leadership |
| Nigeria | Strategically ambiguous | AGOA + ECOWAS + BRI interest |
| Ethiopia | Pragmatic | IMF + China debt + AU host |
| Egypt | US/Gulf aligned | Geopolitical bridge; QUAD+ |
| Kenya | Western-leaning | Security partner; tech hub |
How Russia-Ukraine War Reshaped African Business:
| Commodity/Area | Africa's Exposure | Business Impact |
|---|---|---|
| Wheat/Grain | 65% from Russia/Ukraine for some markets | Food cost +40-60%; social instability risk |
| Fertiliser | 30%+ from Russia | Fertiliser prices +200%; agri-input crisis |
| Energy | High dependency for oil importers | Import bill surge for non-producers |
| Sanctions Compliance | Complex for firms with dual exposure | Risk of secondary sanctions |
| Development Finance | Russian banks exit; Western pressure | Project delays; financing gaps |
| Metals/Minerals | Aluminium, platinum price spikes | Mining revenue windfall but supply chain issues |
Lessons for African Managers:
The “Africa Voice” on Russia-Ukraine:
| UN Vote | Africa Position | Geopolitical Reading |
|---|---|---|
| Resolution condemning invasion (March 2022) | 28 for, 17 against, 8 abstain | Divided; regional variations |
| Humanitarian resolution | 40 for, 1 against, 12 abstain | Broader support for principles |
| Russia suspension from HR Council | 10 for, 9 against, 14 abstain | Deep division |
What this tells us: - Africa is not a monolith - Historical non-alignment movement retains influence - Economic dependency shapes political positions - Nigeria’s strategic ambiguity reflects its complex interests
BRICS+ Expansion (2024 Members):
Original BRICS: Brazil, Russia, India, China, South Africa
2024 New Members: Egypt, Ethiopia, Iran, Saudi Arabia, UAE, Argentina (declined)
What does BRICS+ mean for Africa?
Note
Rodrik & Walt (2024): Rather than seeking global primacy, the US and China should build a “meta-regime” for cooperation on shared challenges. BRICS+ complicates this but also creates pressure for reform.
BRICS+ Share of Global Economy: - ~36% of global GDP (PPP) - ~42% of global population - Controls key commodities: oil, gas, minerals
Baron’s Framework (as discussed in Oatley):
Non-market strategy: Actions taken outside of markets to manage the social, political, and legal environment of the firm — especially relevant when geopolitical forces are reshaping that environment.
Four Arenas of Non-Market Strategy:
In a Geopolitically Fragmented World: - Firms must engage in more non-market strategy, not less - The arena has expanded to include geopolitical positioning - “Whose side are you on?” is increasingly a business question
The GRIP Framework (Geopolitical Resilience Integration Protocol):
| Stage | Action | Example |
|---|---|---|
| G - Gauge | Map your geopolitical exposures | Which markets have sanctions risk? |
| R - Reduce | Diversify concentrated exposures | “China+1” manufacturing strategy |
| I - Influence | Engage policy processes | Advocate for trade access; join industry coalitions |
| P - Prepare | Develop crisis response playbooks | Sanctions compliance protocols |
Nigerian Firm Application: - Gauge: Chinese telecom partner + US cloud provider + European customer = triple exposure - Reduce: Diversify technology suppliers; build local capabilities - Influence: Engage ECOWAS trade policy processes; participate in AfCFTA negotiations - Prepare: Document beneficial ownership; establish dual-supply for critical inputs
Scenario: US Sanctions on China Escalate to Include Financial System
| Impact Area | Probability | Business Impact | Response |
|---|---|---|---|
| Chinese banks exit Africa | Medium | Trade finance gap | Activate alternative banking relationships |
| Huawei telecom contracts suspended | High | Infrastructure risk | Assess network dependencies; contingency suppliers |
| African firms with China JV face scrutiny | Medium-High | Due diligence demands | Document China exposure; legal review |
| USD clearing restricted for China transactions | Low-Medium | Payment disruption | Establish alternative clearing arrangements |
| Chinese FDI freeze | Medium | Capital market gap | Identify alternative sources (GCC, India) |
Rodrik’s (2011) Core Argument:
The world cannot simultaneously have: 1. Deep globalisation (full economic integration) 2. National sovereignty (ability to set own policies) 3. Democratic politics (responsive to citizen preferences)
— “The Globalisation Trilemma”
Contemporary Manifestation: - Citizens in rich countries voted against hyperglobalisation (Trump, Brexit) - Developing countries resist conditionality that strips policy space - Deep integration requires giving up democratic choices — increasingly unacceptable
Implications for African Firms: 1. Global standards will multiply — ESG, carbon borders, labour standards 2. Policy space will shrink — trade agreements constrain domestic industrial policy 3. But leverage exists — the Global South has more voice than before
African Continental Free Trade Area as Strategic Tool:
The Geopolitical Logic: - Intra-Africa trade currently ~15% of total (vs 60%+ in Europe) - AfCFTA targets: eliminate 90% of tariffs; create $3.4 trillion market - Strategic purpose: Reduce external dependency; build collective bargaining power
Opportunities in Fragmented World: 1. Supply chain diversification destination for Western and Chinese firms 2. Bigger single market = more leverage in geopolitical negotiations 3. Reduced commodity curse through value-added processing 4. Digital economy — African digital standards before external ones imposed 5. Green economy — African minerals are critical to global energy transition
Implementation Challenges: - Infrastructure gaps (logistics, energy) - Non-tariff barriers remain high - Regulatory harmonisation slow - Political will uneven
Tip
Managerial Implication: Firms that position for AfCFTA now — building regional capabilities, cross-border operations, and continental brand presence — will have first-mover advantages as the agreement deepens.
| Quadrant | Strategy | Description | Example |
|---|---|---|---|
| High Exposure/High Intensity | Geopolitical Arbitrage | Use multiple jurisdiction presence; actively profit from regime differences | Firms with China + US + Africa operations; can route transactions |
| Low Exposure/High Intensity | Monitor & Prepare | Build scenario plans; maintain optionality; avoid lock-in | Domestic firm expanding to DRC or Ethiopia — geopolitical risk rising |
| High Exposure/Low Intensity | Active Hedging | Diversify supply chains; build financial hedges; reduce single-bloc dependency | Nigerian importer of Chinese equipment with US banking relationships |
| Low Exposure/Low Intensity | Opportunistic Growth | Focus on operational excellence; selective expansion to aligned markets | South African retailer expanding within SADC under stable conditions |
Guiding Question — Session 9
“How does strategic rivalry reshape market access, technology, finance, and corporate risk?”
Case Exercise: A Nigerian telecommunications company (like MTN Nigeria) sources Huawei equipment for 5G rollout. Its shares are listed in South Africa. Its largest institutional investors are US pension funds. It sells services to millions of Nigerian consumers.
Discuss: 1. Map this firm’s geopolitical exposure across all four stakeholder categories 2. What happens if the US Treasury designates Huawei as a “national security threat” and pressures allies to divest? 3. Design a 3-year geopolitical resilience strategy for this firm
Structured Debate: “Africa Should Align with China, Not the West”
FOR (Affirmative Team): - China offers aid without conditionality - Historical colonial experience with the West - China is Africa’s largest trading partner - Belt and Road provides genuine infrastructure - Cultural non-interference principle
AGAINST (Negative Team): - Democratic governance matters for long-term development - Western rule of law protects property rights - US dollar remains dominant; financial system access matters - Debt sustainability concerns with BRI - Technology and innovation still Western-dominated
Moderator’s meta-question: Is the binary framing itself the problem? What would Rodrik’s “embedded liberalism” solution look like for Africa?
Individual Memo (800-1200 words):
“You are the Group Head of Strategy at a Nigerian conglomerate with interests in manufacturing, banking, and energy. The Group CEO has asked you to prepare a briefing on geopolitical risks to the business for the next Board meeting.”
Your memo should: 1. Identify the top 3 geopolitical risks to your business 2. Apply the impossible trinity AND Rodrik’s trilemma to the Nigerian macro context 3. Recommend one non-market strategy action for each risk 4. Include a simple early-warning indicator dashboard
Reference Oatley (2022), Eichengreen (2019), and Susskind & Vines (2024)
The Connection:
Monetary policy and geopolitics are increasingly inseparable:
Oatley (2022) bridges both: > “International monetary relations are inherently political. Who issues the reserve currency, who controls credit standards, who sits on the IMF board — these are questions of power, not just economics.”
| Concept | Definition | Managerial Application |
|---|---|---|
| Monetary Transmission | How CB decisions affect real economy | Anticipate credit cost changes |
| Credibility | Belief that CB will follow through | Determines long-term borrowing costs |
| Impossible Trinity | Can’t have all 3: fixed FX + open capital + independent MP | Framework for understanding policy tradeoffs |
| Inflation Targeting | Explicit CB commitment to inflation range | Benchmark for contract indexation |
| Fiscal Dominance | Government forces CB to monetise deficit | Early warning for inflation risk |
| FX Risk | Transaction, translation, economic, competitive | Comprehensive hedging framework |
| Concept | Definition | Managerial Application |
|---|---|---|
| Economic Statecraft | Using economic tools for political ends | Sanctions compliance; market access risk |
| Concerted Unilateralism | Agreed rules + individual action (Susskind & Vines) | How multilateral norms change |
| Friendshoring | Supply chains to politically aligned countries | Opportunity for Africa in new order |
| Globalisation Trilemma | Can’t have: deep globalisation + sovereignty + democracy (Rodrik) | Policy space analysis |
| Non-market Strategy | Actions outside markets to manage political environment | Geopolitical advocacy |
| Strategic Rivalry | Systematic competition between great powers | Technology and market access risk |
Required: - Oatley, T. (2022) International Political Economy, 7th edn. Routledge. [Ch. on Money, Power, Interdependence] - Eichengreen, B. (2019) Globalizing Capital, 3rd edn. Princeton UP. [Ch. 1-3, 7] - Susskind, D. & Vines, D. (2024) “Global Economic Order and Global Economic Governance” Oxford Review of Economic Policy, 40(2): 189-219. - Rodrik, D. (2011) The Globalization Paradox. W.W. Norton. [Ch. 9-11]
Supplementary: - Kaminsky, G. & Reinhart, C. (1999) “The Twin Crises” American Economic Review 89(3): 473-500. - Busse, M. & Hefeker, C. (2005) “Political Risk, Institutions and FDI” HWWA Discussion Paper 315. - IMF World Economic Outlook (latest edition) - CBN Annual Reports (2020-2024)
Tip
LO5 Tool Application: Extended PESTLE for the New Environment
| Factor | Session 8: Monetary Implications | Session 9: Geopolitical Implications |
|---|---|---|
| Political | Government pressure on CBN; fiscal dominance risk | US-China rivalry; sanctions risk; AfCFTA governance |
| Economic | Interest rate trajectory; inflation outlook; credit availability | Friendshoring cost impacts; commodity price geopolitics |
| Social | Public trust in currency; inflationary expectations among workers | Anti-Western/Anti-Chinese sentiment; local content demands |
| Technological | CBN digital currency (eNaira); payment innovation | Chip export controls; digital sovereignty; Huawei restrictions |
| Legal | Capital controls legislation; foreign exchange regulations | Secondary sanctions exposure; BIT enforcement changes |
| Environmental | Climate finance regulations affecting monetary flows | Carbon border adjustments; green finance conditionality |
| Session | Topic | Connecting Thread |
|---|---|---|
| Session 8 (Today) | |Monetary Policy & Inflation | |How money affects all international economic relationships |
| Session 9 (Today) | |Geopolitics & Business | |How power shapes rules of the global economic game |
| Session 10 | International Trade Negotiation | |How negotiating power and monetary conditions determine trade outcomes |
| Session 11 | Regional Integration | |How Africa's integration builds geopolitical and monetary resilience |
| Session 12 | Global Financial Governance | |IMF, World Bank, WTO as arenas for monetary and geopolitical contestati |
Session 8 — Monetary Policy:
Five Core Insights
Session 9 — Geopolitics:
Five Core Insights
Core Texts:
Journal Articles:
Data Sources:
Further Reading:
Note
Note: Interactive Shiny simulator available in the course LMS. Run shiny::runApp() to launch the full interactive version with real-time scenario exploration.
Tip
Group Assignment Tool: 2x2 Scenario Matrix
| Scenario | Monetary Conditions | Geopolitical Environment | Strategic Response |
|---|---|---|---|
| 🔵 Blue Horizon (Best Case) | CBN credibility restored; inflation < 10%; stable naira | US-China managed rivalry; AfCFTA progressing; stable oil | Invest and expand; build regional presence; lock in long-term finance |
| 🟡 Yellow Caution (Moderate) | Inflation 15-20%; naira volatile but managed | Some decoupling; commodity price volatility; moderate sanctions | Cautious expansion; maintain optionality; dual-supplier strategy |
| 🔴 Red Storm (Worst Case) | Inflation > 30%; naira in freefall; credit crunch | Full decoupling; African caught in crossfire; sanctions cascades | Defensive mode; cut dollar exposure; prioritise cash flow |
| ⚪ Grey Fog (Uncertain) | High uncertainty; policy oscillating; markets confused | Multipolar chaos; no clear rules; bilateral deals dominate | Scenario planning; maintain flexibility; small bets on multiple outcomes |
End of Sessions 8 & 9 Slide Deck
Next Session: Session 10 — International Trade: Socio-Political Issues and Negotiation
“Why do trade agreements redistribute gains, and how does that shape negotiation positions and domestic politics?”
GPEB | Module 2 | MiM Programme