Nigeria given the world economic meltdown, may be able to garner some positives that could guide them going forward more especially as the nations that are mostly impacted by the meltdown are licking their wounds and fighting back to get back in cue on their presumed leadership role in the Global Economy. A lot of financial indicators point to a robust strategic change in the United States Energy Policy given President elect Barack Obama’s promise to so proceed. It will then be very unwise, if Nigerian leadership ignores all of this indicators at bar.

It could seem, on the surface, as though Nigeria is one of those countries that might be fortunate enough to avoid the global meltdown. Nigeria is not as inter-dependent on the global capital systems as other nations on the continent – and there is little that Nigeria exports (with the exception of oil) to really throw it into a crisis.

As recently as November 3, Bartholomew Ebong, managing director and CEO of Union Bank of Nigeria Plc was adamant that the world's global crisis was not Nigeria 's (Ogbonna, 2008). Ebong stated, when interviewed, that the bank is stepping back to assess the situation, but is confident that Nigeria , and its trading partners, likely won't get caught in the economic backlash (Ogbonna, 2008). What is aiding Nigeria further is that unlike other nations, it has no significant foreign ownership in the United States except its foreign reserve that is currently lodged in United States and European Banks and stands at a fluctuating rate of $59B – therefore, it's not directly connected to the U.S. economy, which was the first to spur the meltdown.

Even the World Bank agreed with Ebong, pointing out that Nigeria (with its reference budget export oil price of below $70) wouldn't be quite as damaging as it has been in the past (Appiah-Dolphyne, 2008) of Nigeria's imports (Africa News Service, 2008). Although at the moment, the Nigerian government had pegged its’ budget rate at an amount between ($40 - $45) per barrel of oil sold. But many of Nigeria 's largest trading partners are being impacted by the meltdown (Africa News Service, 2008).

Though the World Bank points out that there could be a "cut-back" in foreign capital inflows into the African region, which could impact growth, it points out that Nigeria's current Aid assistance from foreign donors stands at about one percent of its entire budget (Appiah-Dolphyne, 2008). Because it's such a small percentage, the cutback shouldn't really have a long-term impact on the capital inflow (Appiah-Dolphyne, 2008).

However, World Bank Chief Economist Shanta Devarajan points out that this doesn't mean the Nigerian government (or banking directors, for that matter) can get away with ostrich-like behavior of sticking their heads in the sand (Appiah-Dolphyne, 2008). Devarajan warns that policies should be implemented and formulated to prevent the crisis from having a huge impact on the Nigerian economy (Appiah-Dolphyne, 2008).

The economist could definitely have a point. Though experts are still uncertain as to the impact of the global economic meltdown on Nigeria, there are some concerns, despite the fact that the Governor of the Central Bank of Nigeria, Professor Soludo noted that the Nigerian economy wouldn't experience a "serious adverse impact" (Africa News Service, 2008). But a recent editorial on the Africa News Service expressed concerns that maybe – yet again – the government was painting too rosy a picture of the scenario in order to avoid a national panic (Africa News Service, 2008).

The reason is that Nigeria relies on its export of crude oil for much of its revenue – and on imports when it comes to getting the Nigeria nation to work effectively (Africa News Service, 2008). The United States is the number-one importer of Nigeria 's crude oil (Africa News Service, 2008). Drop in oil demand, following last summer's huge spike in prices means that Americans are driving less and are using less energy, while more emphasis is being placed on alternative fuels (Africa News Service, 2008). This could have a definite impact on Nigeria 's revenues. At the U.S. gas pumps, prices are already dropping – having dropped more than 50% from last summer. Furthermore, the current call for participating more on off-shore drilling and even opening the Arctic National Wildlife Refugee for drilling could mean less demand from Nigeria as more oil is dug up from the United States ground at home.

Certainly, Nigeria could start exporting crude to nations such as China and India , but these two countries are also moving away from dependency on foreign oil and working toward alternative technologies. If much of this continues, it could mean that Nigeria might end up sitting on a stockpile of a lot of crude, with no buyers to take it up. The financial Position of United States Auto makers such as General Motors, Ford and Chrysler are at the moment very precarious that one would be akin to bet that once these companies regroup, they will more likely than not initiate products that are geared towards more fuel efficiency vehicles, alternative energy powered vehicles that may rely more on electric, bio fuels etc. If and when those are the norm, Nigeria will certainly loose its edge in the Oil industry and hence the financial unpredictability will be Nigeria’s to experience, but only if, the leaders are more proactive in its approach towards infrastructural development such as its electricity, roads, rail, security etc, will that experience be averted. When all this happens, maybe, Nigeria then will be in a position to attract foreign investors that will be interested in other areas of interest other than the Oil industry.  

In conclusion, Nigeria right now is not a country in as much danger as other nations in Africa . But the government and economic leaders shouldn't assume it can't happen to them. Prudent thought toward diversification and finding other customers now could lead to better protection in the long run. Also, less interconnectedness in the banking sector with its partners in United States and Europe will also be an additional future safety pastured position to attain by Nigeria .

Cecil Ibegbu

Cibegbu@yahoo.com

Robot  # 1 | 02.12.2008 11:33

Nigeria given the world economic meltdown, may be able to garner some positives that could guide them going forward more especially as the nations that are mostly impacted by the meltdown are licking their wounds and fighting back to get back in cue on their presumed leadership role in the Global Economy. ...Read the full article.