Global Recession: It’s Implications On Nigeria's Economy and The Way Forward

Economists are often, occasionally unfairly, ridiculed as people who are good at theory but struggle when faced with the challenges of the real world as currently being witnessed globally. In times of economic prosperity, this isn’t a major problem, but when times are as bad as they are now, policy makers and politicians have to sit up and listen.

The economic policy in the 21st century falls down to that of old/right axis. Free marketers view capitalism in the way Florida residents in the US view storms, as a natural force – eventually you’ll have a force nine { i.e. recession}! .The way through that as argued by critics is to batten down the hatches, make savings wherever you can and come through the other side ready for recovery.

Critics points out that although this might make sense, the human cost in terms of poverty and unemployment as presently globally witnessed, both in the developed and developing countries is untenable. For example, in The UK, The conservative party policy seems to turn on tinkering with measures designed to help companies and individuals. But they’ve also abandoned Labour’s public spending commitments, looking to make big savings by working towards cutting the size of the state{ doubters are invited to view the UK Guardian’s Newspaper public sector jobs page} lauded by many on the Centre –right as an example of how the UK Government wastes money on non-existing jobs. This is very much consistent with the Centre –right approach in cutting waste, and equally open to the “ do nothing “ critique levelled at the Conservative { Tory} party by opponents.

On the other side of the argument is the left, which after the collapse of the communist command economies in the 1980’s and early 1990’s, view capitalism as a beast to be tamed and managed for the communal good of all. Here comes to mind “The Marxism Critique on capitalism”. However, Tony Blair’s Former UK Labour Prime Minister, “Third Way” led to what critics say was an unregulated ‘casino’ capitalism in which the current crisis was inevitable. Unsurprisingly, Gordon Brown, now UK Labour prime minister doesn’t really want to talk about that, instead reverting to the Keynesian leftist he probably always was { John Mainer Keynes} was a left wing economist who, in the 1920’s held that the state has a central role in managing economic growth through public spending and a reduction in interests rates}. Not surprise to see that president Barack Obama {USA} and the rest of Europe keying into this model with the rest developed countries pumping billions of US dollars, Pounds and Euros into their economies.

Creating jobs merely can just result in increasing the size of the public sector {which doesn’t actually create wealth}. And printing money would only allow the Government to buy debt, with Her Majesty Treasury effectively becoming the high street bank of UK Plc known as Qualitative Easing. Critics of this approach can adopt the Ideological stand point that the State shouldn’t be dictating to the free market { Protectionism} and /or the more practical objection that printing money brings with the risk of increased inflation.

How does this present recession affects Nigeria Economy and what are the implications if any?

Nigeria economy is not immune from global happenings and the present global economic downturns. Every Nigeria citizen now recognises that Nigeria and the whole world is faced with the collapse of oil prices since two years ago from $145.00 per barrel for bonny light a year ago to today’s price hovering just above $ 40.00 per barrel. The Nigeria economy is now in a state of crisis but not severely damaged. The cumulative results of past wrong policies are now slowly being addressed by the present Yar’Adua government but critics argued that the Government have been too slow to put in place the Infrastructural development needed for economic growth for the nation and the Nigeria people. Critics argued that the present oil price situation therefore , only makes more acute the need for urgency in trying to fashion and implement correct policies for a viable economy and for the resumption of economic growth.

What are the prevailing collapse and depression in the oil market?

Critics considered the below aspects as some of the reasons:

{1} The immediate implications for Government Budgets, and

{2} The implications for medium and long time management of the Nigeria economy


Nigeria government depend on oil for over 60% of its total revenues, and the country for over 90% of her foreign exchange earnings, while the state Governments are dependent to the extent of over 90% on the Federal government for their revenues and 10% from their internal generated revenues. The collapse of oil prices will surely have an immediate if not handle properly, disastrous impact on the budgets of all the Governments of the federation be it local, state and Federal as Nigeria economy is not insulated from the global economic crises. As a result of the economic downturn, Nigeria Naira has been depreciated against the American Dollar since 2008. The practise of publishing revenues and expenditures promptly should be encouraged by the Federal Government re-echoing the issue of transparency .

Reports shows that one-third reduction in the budget releases of funds to state Governments and Federal ministries .The president, Alhaji Musa Yar’Adua recently argued for pay cuts for all public servants including the Governors and there should be a brave attempt by the National Assembly to carry out their oversight functions in ensuring the implementation of the 2009 budget as it is not in the nation interest to continuing to encourage waste at this period of global economic downturn . Faster depreciation of Naira against the Dollar is affecting the economy and adding to the suffering of Nigeria people. Government should and is doing more to address the issues of unemployment and poverty to curb crime in the country.

Nigerian Leaders should be very humble, attentive and sympathetic like the president to the suffering of the people. A proper response to the clear implications of these developments should be :

{1} Further drastic reduction of the costs of Government Operations as reforms is necessary to curb corruption in the country.

{2}Importantly, The central Government must invest heavily by funding educational programmes and state government must be very prudent in their budgets as many state governments expend over 60% of their budget on this sector alone paying ghost government workers, teachers salaries. Add personnel payments in the non-existing medical services and deprived the local governments from carrying out their oversight functions. This writer argues that the issue of the inter-relationship between the local-state governments should be comprehensively address by the electoral reforms. This is necessary for speedy development in all the 774 local governments in the country.

{3} More efficient and effective but equitable cost recovery measures should be introduced by all the three-tie of governments.

{4} Governments at all levels should encourage private sector participation in the ownership where necessary and operation of educational , transport , Energy , Roads and Health institutions to help in curbing unemployment in the country. Government should diversify the economy and give priority to Agriculture by encouraging our unemployed youths into farming and farmers too, should be adequately compensated for their produce . If this is done, there will be mass production of food in the country for consumption and export .

What is the best way forward if any ?

The writer believes that the present economic climate begets on the Government to c

ome up with a realistic economic plan of diversification which the government is addressing For example in the area of Agriculture , reforms in the civil service , local and state levels, budgets streamlining by the National Assemblies and central government being prudent and transparent in its dealing with the states . The citizens especially the youths should not loose hope, be very flexible, patriotic, focus and determined. I shall end this discourse with a quotation from one of the greatest men of 21st century, the great Mahatma Gandhi of India . He said and I quote: “ The things that will destroy us are : politics without principle; pleasure without conscience; wealth without work; knowledge without character; business without morality; science without humanity; and worship without sacrifice”. This quotation becomes necessary when we consider the present global economic situation where greed has now become the order of the day The world economy has failed us, world leaders needs to rededicate themselves to the supreme God . The era of responsibility is now dawn on us, let us all rise up to these challenges for a better world.

Written by
Benjamin Ogbebulu
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