Nigeria’s Economy Nosedives

No Comments » February 1st, 2009 posted by // Categories: Nigeriawatch


Nigeria’s Economy Nosedives

And Baba Yusuf, Abuja

February 1st, 2009


As lawmakers preoccupy themselves with whether President Umaru Musa Yar’Adua is on an illegal vacation or that Goodluck Jonathan is actually the acting president, the Nigerian economy is taking a precarious plunge down the abyss.

The value of the naira to the dollar as at yesterday was N147 at the parallel market while the official rate hovers around N145, in what is now a record depreciation of the national currency.

This has affected the chances of conducting legitimate business in the country, as the few functioning industries cannot import machinery and spare parts.

The common man who has been left to patronise mostly imported finished products is coming to terms with even harsher realities than he knew as about 90 per cent of daily consumables are now beyond his reach.

The crash of the naira is also coming at a time when the epileptic power supply in the country has worsened to the extent that a number of manufacturing firms have worked out contingency plans to relocate some of their production lines to investment-friendly Ghana where power supply is assured.

Many multinational manufacturers serving Africa have already relocated to either South Africa or Ghana.

Besides, the Nigerian capital market has witnessed what is now accepted in financial circles as a crash.

Last Friday, the market capitalisation of the Nigerian Stock Exchange dropped to a record N4.7 trillion, down from the N12.6 trillion recorded in the first quarter of last year. Experts contend that the Nigerian capital market, which Bloomberg listed as recording the second largest decline worldwide, this year, would plunge even lower into bear run as the total dearth of confidence triggers unprecedented liquidity problems.

The crash in the stock exchange has pauperised most Nigerians including the very rich. Though a global phenomenon, the Nigerian situation is worse because the federal government appears to lack the will power and the financial muscle to frontally tackle the problem as other countries have done.

The government, in spite of its denials had to finally admit, only recently, that Nigeria was affected by the global financial meltdown, as a result of which firms have started shedding staff and cutting salaries to remain afloat.

The heavy crash in the stock exchange has also adversely affected the banks and their ability to continue to grant credit to businesses. Many of the banks have billions of naira tied down in the so called margin facilities to customers who used it to trade on shares in the market during the boom years of the stock exchange and with the current situation, most of the funds are lost and cannot be recovered as the credits were tied to the stocks whose prices have now plummeted by 70 per cent in some cases.

Experts believe that only a purposeful federal government can create the stimulus that could prevent the looming and sure-fire disaster that is waiting to happen in the economy.

Currently, almost all banks have stopped granting loans and even the few that still lend now limit the credit facilities to three months, with interest rates in Nigeria still one of the highest in the world.

The total picture is worsened by the falling prices of crude oil in the international market. Pundits wonder how it would be possible to implement the 2009 budget with crude oil prices hovering around $40 a barrel when the Yar’Adua government could not implement the 2008 budget that had the advantage of price of crude at over $120 per barrel.

This lamentable situation is further compounded by the activities of militants in the Niger Delta region. Shell, which is Nigeria’s largest oil producer, now produces at about 60 per cent of its target. It used to produce more than a million barrels of crude a day but now produces about 360,000 barrels only, a drop by over two-thirds. Other oil producers are not faring any better.

Nigeria’s decayed infrastructure is also a major problem. Experts adduce this as one of the reasons Nigeria cannot compete even with fellow African countries. Alhaji Abubakar Abdulkadir, a former permanent secretary in the Federal Ministry of Finance, who spoke to LEADERSHIP said Nigeria has received more than $200 billion in the last four years from crude oil exports, but there is no evidence of the deployment of such gargantuan amount on ground. ‘It certainly did not go into improving our infrastructure’, he said.

“In spite of this amount, today, electricity is worse than what it was before 1999. Same goes for roads. We talk about people coming to invest in Nigeria, who will come?” he asked rhetorically.

Speaking further, Alhaji Abdulkadir said Ghana is thriving because they have invested extensively in infrastructure. “People who would normally come to invest in Nigeria now stop in Ghana, because Ghana has improved infrastructure. It cannot remember the last time it experienced power failure”.

He conceded that the Central Bank governor is doing his best regarding the falling value of the naira. “My only grouse with him is that he is not telling Nigerians the whole truth”, he said. He also dismissed suggestions that the problems in the Nigerian Stock Exchange are related to the global financial crisis.

Meanwhile, Senator Bala Mohammed (Bauchi South) has descended heavily on the selfish and haphazard manner in which economic reforms were implemented by former President Olusegun Obasanjo.

He told LEADERSHIP in an interview in Abuja, recently that the type of reforms carried out by the former FCT Minister, Malam Nasir el-Rufai and his likes had adversely affected the nation’s economy and led to serious dissolutions in the nation’s socio-economic pursuit.

Senator Bala further stated that the reforms were detrimental to the nation’s economy and helped to destroy the economic potentials of many entrepreneurs.

The reforms according to Senator Bala were not in the interest of the common man since those who implemented them ultimately became the beneficiaries as they ended up buying the houses, plots and companies.

He said former president Obasanjo’s economic team and even those presently advising the president are not sincere in their approach to issues as they have refused to tell Nigerians the true situation of things thereby creating distortions in our economic policies and heightening disenchantment among the populace.

He said most of the actions of the Obasanjo regime were selective and self serving which killed patriotism and nationalism among public officers who felt unappreciated. The result of the so-called reform programmes was disillusion and corruption in the society instead of the improvement of the nation’s economy.

Senator Bala explained that the consequence of the reform agenda and the World Bank policies was a distortion in economic indices and the inculcation of unrealistic policies which are unhelpful to the country.

He suggested that one of the measures to be adopted to remedy the prevailing situation is to domesticate the country’s policies and engage experienced individuals to implement them instead of relying on false technocrats who want to serve themselves.

Senator Bala also revealed that it is on record that most of the reform programmes only succeeded in negatively affecting the nation’s economy as its implementers refused to serve the interest of majority of Nigerians apart from those of some few individuals who were used as fronts by the so-called technocrats.

He suggested that there was need for a review of some of the economic policies being offered to the government to bring about the successful implementation of programmes that would help to improve the status of the ordinary people in the country and advised them to always tell Mr. President the truth.

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