Nigeria’s Economy: Gloomy And Dangerous: A friend of mine once said, “Nigeria is so rich that nothing will ever create an economic down-turn.” This statement was made six years ago, when the rest of the civilised world was submerged in recession. A few days ago, he called to rescind his statement; he is not sure of what the future of Nigeria will be should the fall in price of oil continue. When the minister of finance, Mrs Ngozi Okonjo Iweala, announced and statistically displayed the overblown Gross Domestic Product (GDP) of Nigeria – after some magical rebasing last year – which miraculously catapulted Nigeria to the first position of the richest country in Africa using GDP index, the stage was set for expanded corruption. Political office holders in the country intensified their efforts to loot as much as possible, since in their shallow opinion, Nigeria’s wealth was inexhaustible. Today, from every rational economic point, the reverse is the case. Even countries with large shale oil deposits, like Saudi Arabia and Kuwait, have been very careful in the way accrued revenues from crude oil sales are spent. Since its recovery from financial crisis of the 1980s, Saudi Arabia, in particular, has been very prudent in its financial management; earnings from oil have been invested in other sectors of their economy with regular projection and preparation for life after oil. Graciously, the Saudis’ experience from that financial crisis prepared them to manage the current situation of falling oil prices. With a population of about 20 million, Saudi Arabia is in a much better position than Nigeria and Russia to gallantly weather the storm. According to the Economist (December 20- January 2nd, 2014), “in the world of central banking slow, steady and predictable decisions are the aim. So when bankers meet in the dead of the night and raise interest rates by a massive 6.5 percentage points, it suggests something is going very wrong. It is: the Russian currency crisis many feared is now a reality and the mood in Moscow is close to panic. Russians are right to worry: they are heading for a lethal combination of deep recession and runaway inflation. The dollar-debt problem in Russia will get worse. Credit-rating agencies, including Standard& Poor’s and Fitch were already pessimistic about Russia. With the Central Bank forecasting a 4.5% drop in GDP in 2015, a downgrade is a certainty. If debt is reclassified as junk, Russia’s investor base will shrink. The volume of debt may jump too. The blurred lines between the state and Russian firms mean Kremlin may end up on the hook for much of the $614 billion in external debt owed by banks and other firms. No wonder confidence in the prop provided by the Kremlin’s foreign-exchange reserves, officially valued at $370 billion, is draining.” The forgoing Russian story is similar to ours: Nigeria’s foreign –exchange reserves have drastically dwindled to $35.6 billion, and with external (foreign currency) debt of about $9 billion, coupled with internal debts of N10.2 trillion ($50 billion), the country is actually operating in the negative. This simple analysis of Nigeria’s financial position is blurred to the majority of those who should handle the economy with care. The massive devaluation of the Naira, may help to temporarily restructure internal debts; but for a nation notoriously known for ostentatious foreign made goods, discouraging importation will not be easy. It is so bad that as the world’s 6th highest shale oil endowed nation on planet earth, Nigeria still imports refined oil for internal consumption. No single refinery works in the country; a testimony to its high corruption level that has paralysed every revenue earning institution. Smart leadership is about investing for tomorrow; long and short-term investments in sound education/human capital development would ultimately yield positive results through good governance. There is absolutely no other way to tame a nation’s economy if there is no strong legal institution that upholds the basic rights and responsibilities of the citizens. Politics in a lawless society is as good as trying to survive on the Savannah plains in Africa, where predators and preys live according to “might is right” law. It is estimated that Nigeria’s foreign reserves will last for only six months at the current rate of consumption of imported goods. This does not sound encouraging enough, but it is the absolute reality that Nigerians must face. The problem is, how possible would it be to change Nigerians’ attitudes towards ostentatious living when those in power openly display affluence and wastage? Corruption has eaten into the fabric of the society, and like cancer, the scourge is malignant/chronic. There is no reliable institution that can fight corruption in Nigeria. All the agencies established to fight this virus have compromised their integrity; everyone is looking for his own future in a country where law and order barely exist. If state governments preferred to donate their monthly allocation to their political party as opposed to paying workers’ wages, then the looming danger of civil disobedience will surely materialize. What justification is there to challenge an uprising from an angry mob? Everywhere you go in Nigeria, the story is the same; people are visibly suffering, unemployment stands at 50% and there is no sign of abatement. In a country where the demography shows 60% of the population as unemployed, restless, and energetic youths below the age of 25 years, unless with believable immediate economic reforms – capable of creating jobs- Nigeria is sitting on a time-bomb. There are numerous stories of how parents draft their children into Boko Haram camp with the hope that the meagre remunerations will sustain the family, at least for a short while. Scores of these stories fly everywhere; the direct relationship between crime and economic factors has been analyzed by sociologists, criminologists and psychologists. And with a surging population of over 170m, mainly vibrant youths, restiveness would create civil unrest. There have been calls from various quarters for Nigeria to shift its economic base from oil to agriculture, but easy access to oil revenue is a major deterrence to any meaningful change of course. Shale oil market will dwindle further in the year 2015 and beyond; United States’ emergence as a dominant player in oil and gas production, coupled with advancement in technology are two great factors that will dwarf revenues of oil producing countries. Nigeria’s economy is 80% oil related; a sign of danger for a very gloomy economy. Original link Read More goo.gl/cYfP2S (y) ✍comment ☏share
Posted on: Sat, 03 Jan 2015 00:44:20 +0000
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