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Sunday, June 24, 2012
Nigeria in the looming global recession pt1 by Dele Sobowale
“When your neighbour’s wall is
on fire; it becomes your
business”. Horace, 63-8BC.
In the global economy, a
country’s neighbor is not the
nation sharing its border; it is the biggest trading partner – which
might be half the planet away.
Nigeria’s neighbours, in that
sense, are not Benin Republic,
Cameroun, or Niger. They are
India, United States, Netherlands, Spain, and Brazil. Together, they
account for 70 per cent of our
external trade. According to a Bank of America
Merrill Lynch Global Research
report: “The Eurozone crisis is
infecting global oil prices as
contagion spreads from banking
woes to economic growth expectations…If Greece exits the
Euro, Greek oil demand could
drop by one third. In the event of
a disorderly broad Eurozone
break-up, demand could contract
sharply and we think that Brent oil prices could drop to as low as
$60 a barrel”. And, if you are wondering what
could trigger a “disorderly”
break-up, let me quickly provide
some answers, based on
historical precedent; specifically,
the Great Depression of the 1930s. Then, as now, several of
the world’s leading economies
went into recession at once and
then it was every country for
itself. The world is, again,
experiencing the same sort of general downturn. Let me list the
casualties at the moment. Britain is admittedly in a
recession; China and India have
reduced GDP growth
expectations by about 40%
(meaning less oil consumption);
the US economy is slowing down; Netherlands is in a mess; German
industrial production declined by
two per cent in April – that is the
country which had been keeping
the Eurozone out of recession. Finance Minister, Ngozi Okonjo- Iweala Then, last week it was announced
that “the [credit] door to markets
is not open to Spain”. The simple
meaning of that statement must
be understood by all of us. Spain,
Europe fourth largest economy, like every other modern nation,
operates by borrowing large
sums on short and long term
basis to keep its economy afloat. Again, like most countries whose
economies go into reverse, Spain
is experiencing problem
obtaining the credit and its
economy might collapse and with
it oil imports from Nigeria will slump. In fact, the only country
among our largest trading
partners not yet in distress is
Brazil. However, that situation will
be short lived. The US and Europe are Brazil’s
two largest trading partners.
Soon enough that nation will also
find its markets shrink and with it
oil exports from Nigeria to Brazil
will drop. So, it is not just one neighbor whose walls are on fire;
it is all of our neighbours which
have been set ablaze. So why is it
not yet our business to discuss
the outcome? Declining crude oil prices
increasingly reflect the imminent
recession in most of the
developed world; especially our
biggest trading partners. Greece
had just gone through an election to elect new leaders who face
tough economic choices; none of
which is guaranteed to stave off
the recession in that country and
Spain is accepting bail out
conditions which will not promote growth – at least in the
short term. To the impact of imported
recession, we must now add
domestic economic variables
threatening to turn ours into a
deep depression. Boko haram-
induced violence in several parts of the north presents a grave
challenge to agricultural output
which contributes the second
largest percentage to our Gross
Domestic Product, GDP, and which
is more significant than manufacturing and services as a
contributor to our collective
prosperity. In several parts of the north,
especially, Borno, Adamawa,
Gombe, Bauchi, Plateau, Kano,
Yobe and now Kaduna, farmers
are fleeing for their lives instead
of planting the crops which will enrich us next year and beyond. FEDERAL GOVERNMENT’S TRUTH
BENDERS
The Minister of Finance, and
Coordinating Minister for the
Economy was recently reported
to have made a statement, obviously meant to re-assure
Nigerians that, despite
widespread threat of global
recession, the Nigerian
government is in control. She also claimed that measures
have been “put in place” to
address the situation. With all due
respects to Madam, that is a lot of
balderdash. Just a few weeks
earlier, the same Minister was issuing dire warnings that the
economy will soon collapse
without diversification. Diversification, meanwhile had
not even started; and it is not a
short term or even a medium term
programme. Meanwhile the race
to the abyss is accelerating
globally. Many more nations are in distress; Ukraine is one and
others in the former Soviet Union
are about to follow. For a start, it is not the first time
Nigerians would receive
assurances from top government
officials about our insulation from
global trends. In 2007 to 2008,
the former Governor of the Central Bank of Nigeria was
assuring us that our banks were
immune from the global financial
melt-down. As it turned out, our
meltdown was only delayed and
much worse. There is no Nigerian bank which
is not in worse shape today than
in 2009 – when the current CBN
governor blew the lid off the
scams in the sector. Big brand
names like OCEANIC and INTERCONTINENTAL have
vanished. Then, in 2008, it was the turn of
the Director General of the
Nigerian Stock Exchange, NSE to
ask Nigerians to ignore “prophets
of doom”, like this writer who
pointed to an inevitable capital market crash. The total market
capitalization, which at the time
stood at N16 trillion, is now well
under N8 trillion. Just two weeks ago, the Minister
of Trade and Investment, Mr
Segun Aganga, had published a
report which claimed that
government had created 1.4
million jobs since last year; 1.3 million of the jobs were attributed
to the efforts of the Bank of
Industry, BOI. Sensing an attempt
to foist deliberate falsehood on
Nigerians, I wrote an OPEN LETTER
TO THE BOI MD in the SUNDAY VANGUARD OF June 17, 2012;
asking BOi to confirm if indeed
1.3 million jobs were created by
the bank in one year. It was also
made clear that my management
consulting group was prepared to verify all the 1.3 million jobs
wherever they might be. The BOI, one of the most
responsible of our public
enterprises, was prompt in its
reply. Two days after, on
Tuesday, June 19, 2012, the
following clarification was received from BOI.”The attached
summarises the highlights of
BOI’s operations and their
developmental impact over a ten
year period 2001-2011. As
indicated during our brief conversation, the number of
direct and indirect jobs created
under reference are cumulative
and not for one year. [underlying
mine]. Obviously, the Ministry of Trade
and investment is following the
time-worn path of deception in
order to deceive the President
and the public. The fact is, more
jobs were lost than created last year – even without adding those
who abandoned jobs in violence-
torn parts of the north. Clearly, if anybody should be
ignored, it is the Minister, who,
like most other public officials tell
the President and the Nigerian
public, what they want to hear,
not what they must know. With crude prices plummeting daily
and agriculture under siege
locally, it is difficult to imagine
what measures put in place will
avert a recession. CONDOLENCES
The wounds of the heart are the
most sensitive of all..Nothing but
time can heal them”. Frederick the
Great, 1740-1786. (VANGUARD
BOOK OF QUOTATIONS p88). To all the families of the victims of the
DANA air crash without
exception, please accept my
condolence. To those known to
me, Doherty, Odujirin, Somolu,
Otegbeye, and, of course, Shobowale, I pray to God to
console all of us in His inimitable
way.
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