finance article No.7759
Global Financial crisis the Nigerian Perspective
[Some words in this document Genesis American spending made weak capacity pay reselling na global world estimated current N322 trillion 000 Nigeria economic output two months Nigerian per 14 crisis CBN affected external safe immune Easy credit financial raised funds confidence international market impacted negatively feels pinch downturn capital momentum rise new performing revenues Oil hover July sales crude means infrastructure invest production immediate endure NEPA Remittances cause collapsing jobs immigrants Fear loss become source economically disadvantaged Nigerians go like initially planning remove subsidies oil now time government Go Americans belts loose theirs compete get abroad prices potatoes foreclosures order day wanted London Stocks little future take clear repayment Bankers people doubtful earnings make money institutions sneeze really ]
The Genesis Americans caused the crisis, by spending more than they save, the American government spending more than it made, American financial institutions giving house loans to people who had a very weak capacity to pay and reselling the loans to na?ve and sometimes greedy global investors while the world's financial regulators watched blindly. > The losses The sums are mind blowing. As at the close of October, estimated money lost in the current world financial turmoil is placed at US $2.8 trillion. This is equivalent to N322 trillion which is about 14,000 years of Nigeria's economic output. Simply, what the world has lost in the last two months will take the Nigerian economy, with an economic output (GDP) estimated at $200 billion per annum, about 14,000 years to produce. > >Is Nigeria immune to the crisis? The Central Bank Governor (CBN) has reassured that Nigerian banks will not be affected; that our external reserves estimated at over US $50 billion is safe despite the crumbling of financial institutions abroad. But we are not totally immune to the global crisis. It brings good and bad news home. The bad news first. > >Nigerian banks feel the pinch? Easy credit from financial institutions has dried up for Nigerian banks. This
has raised the cost of funds indirectly locally. Also the crisis of confidence that has plagued the international inter-bank market has impacted negatively on the international finance operations of Nigerian banks. > The stock market also feels the pinch The downturn in the Nigerian capital market is speculated to have been sparked off when hedge funds withdrew about N1.5 trillion from the market. With the current global downturn, this capital may not return soon, meaning the market may never regain the momentum to saw it rise to new highs. ?Nigeria's capital market is currently rated as one of the worst performing in the world. > Oil revenues also affected ? Oil prices currently hover at a low of $43-$53, about one third of its $150 high price in July 2008. This has had a crunching impact on Nigeria which earns about 90 percent of its income from sales of crude oil. > Drop in oil revenues mean less revenues for the government. That means less money to build new infrastructure, invest in new oil production and raise our reserves and fall in our external reserves which Nigeria has consistently built up in the last eight years. The immediate impact has been in the steep fall in the value of the Naira against the US dollar as Forex inflows have dried up. Nigerian cars will have to endure the bad roads a bit longer. Don't also expect any magic with NEPA (Power Supply) soon. > > > Remittances will drop Do you have relatives abroad? Then you will have cause to be really worried. Firms are collapsing and those not collapsing are cutting jobs. Obviously, the jobs at risk most are those of immigrants. Fear of job loss and actual job losses
are expected to impact negatively on remittances which has become a big source of earnings for economically disadvantaged Nigerians. > > > The good news of the global crisis > Fuel prices will not go up Fuel prices are not like to go up. The Federal Government was initially planning to remove subsidies on fuel due to the rising prices of crude oil in the international market. With crude oil prices now at all time low, the government's decision to remove subsidies will not lead to increase of the pump price of fuel immediately. Drive with ease. > > Go for shopping abroad Americans and Europeans are tightening their belts. Nigerians can now loose theirs a bit. There are sales and sales galore everywhere as retailers compete to get goods off their shelves. Perhaps this is the best time to pick up your bags to go shopping abroad. > Houses for sale House prices are dropping like hot potatoes abroad as foreclosures become the order of the day. If you ever wanted to buy a house in London, or the US, this may be your best time. Stocks are also falling. So this is perhaps the best time to own a little bit of the American dream. >
> Any lessons for the future? On the personal level, do not take a loan you do not have a clear repayment plan with workable alternatives. For Bankers, do not give credit to people with doubtful earnings stream. For Regulators..There is no substitute to close monitoring of how financial institutions make and use their money because when financial institutions sneeze, the economy can get really, really cold. >
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