THE IMPACT OF HELICOPTER MONEY ON AFRICAN ECONOMY

How Helicopter money can rescue of African small business: tips that that you need to know.As the world economy prepares for an unprecedented economic crisis as a result of the COVID-19, small business in Africa are expected to be the worst hit.

?African SMEs contributions?are 50% of?GDP?and 60% of employment, their rate of failure range from 50% to 90%; this is before the COVID-19 pandemic.Many Africa economies are commodities driven; the COVID-19 has affected commodities market in the international trade.

?It has reduced the expenditures base of most of this countries, for example in Nigeria, the Government has reduced the capital expenditure by 20%,(stories), as they revised the benchmark of crude oil price from $57 to $30.The reduction of Government capital expenditures is expected to have a multiplier effect on the economy, especially the small business. Reduced Government spending is likely to reduce disposable income and consumer expenditure. It is expected to affect the bottom line of the small business.

Helicopter money has been mooted in the last few weeks in Europe and the US as a considerable alternative that will help stimulate the supply-demand chain, improve consumer expenditure and enhance the productivity of the economy as a whole.

What is helicopter money, and how can it affect a small business?Milton Friedman invented the idea throughout in 1969, where he states that "helicopter drops an additional $1,000 in bills in the skies during the period of the economic and financial crisis".?

The former Federal Reserve chairman Ben Bernanke, among others, has provided valuable assistance for helicopter drops to revive flagging economies.It is a scenario where The Government banker print more money and hand them over to beneficiaries.

?The scenario makes me remember how personality do most times when they visit an event in an area. In Europe, teeming fans surround the artiste to sign autographs while in Africa, the fans surround the personality so that he throws money to them.?

?I witnessed a scenario where a renowned figure came visiting an estate in Lagos, and after throwing plenty money to the fans, the restaurant, nail parlour and small business within the environs experience an upsurge of sales during the period.

?This is what helicopter money can do to a fragile African economy. It will increase disposable income and boost consumer expenditure.

It is regarded as an unconventional financial policy. Though many economist and financial expert have kicked against the idea. They said it could lead to the rising cost of inflation, disrespect to the national currency and may eventually lead to economic stagnation in the long run.

?Though some school of thought, want the palliative measure to be in the form of tax reductions, this policy will not have any impact on the African economy. The Informal sector employs close 60% of Africans; the tax policy reduction may not witness the desired effects,

?Particularly, they're debating variations of how it could work, but my submissions are here:

·????????The Africa Central Bank, which is expected to roll out in 2020, should initiate how to print more currencies or mandate the Central banks to print more currencies for their citizens.

·????????The Central banks should strategies how this money printed will be localized to commercial banks.

·????????The Commercial banks will be the custodian of distributing the funds to all the citizens.

·????????A special working committee in each bank should be set to implement the policv

·????????Account holders are credited directly with the money into their account.

?For me, the benefit of such financing is the fact that such spending, while contributing to an increase in the cash supply may rescue small business who are on the brink of collapse.?

?The small business is vulnerable to the shock of the COVID-19 as many are ill-prepared, mostly are impoverished, that they depend on their daily income to feed their families.

Though some Government has announced?COVID-19-relief-promises-for-Africas-small-businesses, I don't see some of the relief making the needed impact.

?"Small business owners are quite terrified by what is going on right now -- the uncertainty of how long this lockdown will continue and how long the economy will take to rebound after this," said John Dludlu, the CEO of South Africa's Small Business Institute, a national advocacy group for small business owners.

?This was echoed by the President of the Association of Small Business Owners of Nigeria, Femi Egbesola."Our members are worried, they are scared," said Egbesola on the phone from Ikeja in Lagos State.

?Surely, issuing free money which never needs to be repaid is too great to be accurate, correct??Though the political possibility of not doing anything in case we stumble into yet another recession (as appears reasonably likely) is even worse.

?Like it or perhaps not, the unconventional financial policy might well be the panacea to the imbroglio that is expected to bedevil many African small business.