Must Read- RECESSION SERIES (1): Nigeria in the looming global recession

 
“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.
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.

Author-Dele Sobowale

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