Today, Nigeria is increasingly becoming a basket case. The 2009 budget at N3.1 trillion is already in deficit. That has unleashed an inflationary spiral with that dreaded monster rampaging at double digits.
All the revenue projections are off. Oil production was set at 2.2mbd. It is really in the region of 1.6mbd now. The exchange rate was fixed at N125 to the dollar. It hovers between N150 officially, and N180 in the parellel market. The price of oil was fixed at $45 per barrel. For most part of the new year, it did not cross $40 per barrel. The cumulative effects of this have been instant. Gross revenue accruing to the Federal and State Governments has shrunk, thereby hampering the ability of these institutions to discharge their duties to the people. We project that before long, many states will begin to default on their credit exposures and salary obligations. Already banks and other corporate organisations are in a turmoil. The banks are exposed to the economy in excess of N3 trillion. Margin facilities and credit to down stream oil and gas companies constitute over half of that figure. It is becoming increasingly obvious that a large chunk of the money may never be repaid. That has put immense pressure on the bank's liquidity and substantially affected their ability to fund businesses. There are fears that some of the banks may already be distressed. That has raised the spectre of bank failure. What is even more worrisome, from a macro-economic perspective, is the effect of all these on the economy. For over a decade, the banks have been the highest employers of qualified manpower in the country.
But in the last few months, banks have been downsizing furiously, and cutting salaries. Fresh recruitments have virtually stopped in almost all banks. In a country already plagued by unemployment, this development portends grave danger. The United Nation (UN) recently put the unemployment figure in Nigeria at about 40million. Such large scale unemployment creates immense social problems and poses real danger to the polity itself.
The unremitting crisis in the Niger Delta which has cast a pall of insecurity in the South East and the intermittent ethno religious conflicts in the North, have made Nigeria increasingly risky and even dangerous. Foreign Direct Investors, even in the area of oil and gas, no longer see Nigeria as an attractive investment destination. Even local businesses are increasingly looking offshore to obviate the high cost of doing business in Nigeria.
To compound Nigeria's woes, the political leadership appears to have learnt nothing and forgotten nothing. It carries on with characteristic recklessness, spending tons of money on its upkeep. A careful analysis of the budgets of the 36 states and Abuja will reveal that the offices of the President and State Chief Executives constitute the greatest sources of government expenditure. In other words, the leadership elite is feeding off the fat of the land, while the people survive on the crumbs.
Business Hallmark is deeply worried, not only by the economic crisis, but by the ineffectual response of Government and its obvious lack of deep appreciation of the seriousness of the problems. We are scared that if the meltdown continues, the political viability of the country will be in grave danger. President Umoru Yar'Adua must muster the political will to initiate fundamental socio-economic and political changes that would reinvent Nigeria structurally and position it for real and sustainable national development. If he does not do so willingly, we predict that the forces of history which this crisis will inevitably unleash, will do so. The consequences, for him and his country, will be calamitous. That is the lesson of history.
http://bizhallmark.com/index.php/Editorial/96/1224.html
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