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Michael NnebeSunday, January 25, 2015
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THE PENDING ECONOMIC GLOOM IN NIGERIA
…WHAT THE PDP AND APC WILL NOT TELL YOU

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ell, the political season is upon us again, and the gladiators are up and about, crisscrossing Nigeria from East to West, and from North to South. They have listed what they did and claimed what they did not do, they have promised heaven and earth to come if elected or re-elected. I have watched from afar, but intently, to see if any of the two major political parties will address how they intend to manage the potential doom that will likely befall Nigeria in the next few months. Sadly, none of them cared to do so. In a way, I really don't blame them, for campaign stops are not the best platforms to inform the people of potential financial disasters. I had at least expected the APC to crunch the numbers and if nothing else, use them to scare people from voting for the PDP, but unfortunately they must have been very busy trying to manufacture Buhari's WASC results to ward of the immediate challenge of disqualification. Such is the theater of politics that a man who has attained advanced education at Nigeria military academy and in the United States at levels that equals or surpasses a master's degree is now reduced to the caricature of producing a secondary school certificate from nearly 54 years ago. Nsogbu di! And all these in a country where "My fellow widows" supposedly acquired a master's degree from a Nigerian University, and those with PhD could hardly read speeches prepared for them. There's God o! Before you get carried away, I am not a Buhari's fan, I'm just keeping it real.

Back to serious business, I have examined what lies ahead for Nigeria in the next few months and beyond, and anyway you hold the candle the picture isn't pretty. Back in August 2014, I warned in a related article (What happened to Ghana…and lessons for Nigeria) that our overdependence on oil revenues puts Nigeria at a huge risk of free fall, much like Ghana, should there be any sudden drop in oil prices. I followed up a couple of months later with another article that explained the devastating effects of US Shale oil to countries like Nigeria when oil was still at $92 per barrel, and how Shale oil boom will continue to drive down crude oil prices. In those articles, I warned our government to begin making alternative plans to avoid the sinking of Nigeria under such developments. Apparently, they did not listen. As things stand today, it may well be too late to avoid this economic cataclysm. Surely they will do anything and everything to hold things together until after next month's election, but the bottom is likely to fall off two or three months after that presidential election. Here are the current numbers; Brent crude oil remains solidly below $50 per barrel, the naira is now exchanging at well over 200 against the dollar and likely to get to 250 before summer. Given the dwindling oil revenues, the recurrent expenditures in our budget is likely to top 90% in 2015 budget and possibly higher. The cost of servicing our debt will most likely reach 25% of the budget or higher. All these means massive borrowing by the Nigerian government to finance the huge budget deficit which could be anywhere from 1.5 trillion to 2 trillion naira. And this is just the beginning.

Given the few numbers I listed above, I expect that thirty or so billion dollars left in foreign reserve to be wiped out before the end of this year. It is really sad that it has gotten to this, especially since our national budget represents less than 5% of our GDP. In theory the rest of the economy should be ok and insulated from cuts that may come from the government sector, but it is not that simple in Nigeria where most economic activities are somehow tied to the government at various levels. The government sector is just so huge in Nigeria that it permeates everything. For example in Enugu state where I live, some local government chairmen have between 500 and 700 party cronies on their payroll as advisers, and they each get monthly salary from the government. These were the first line of casualties as the cuts began to come in from Abuja. Many states have not paid salaries for the past two or three months. And in fact, several federal ministries did not pay salaries in December. All these are just the beginning. I reckon that by March or April, if these salaries continue to remain unpaid, we may see massive street protests across the federation of Nigeria regardless of who wins this forthcoming presidential election. Yes, none of the presidential candidates will tell you this, but it is true that things look terribly bleak moving forward, and none of them have answers on how to prevent this great titanic from sinking.

In spite of this incredible squeeze, Nigerians are expected to start paying more for just about everything since we remain basically a consumer nation. Most of the things we use in this country are imported, and even when they are made here, some components still come from abroad. Despite all the tory by our Agriculture Minister, Nigeria still spends upwards of 350 billion naira monthly on food importation, and as the dollar exchanges higher, impoverished Nigerians should expect to pay even higher for their foodstuffs. Surely there cannot be a better opportunity for Nigerians to start manufacturing everything, but the lingering question of epileptic power supply has not gone away. As the pastor turned politician Fr. Mbaka rightly put it, "Are they going to fuel their generators with their urine?" Therefore the cycle remains, but I seriously suspect that it will all come to a climax sometime between April and June, after the election results have settled in, and the perfect storm of absent salaries, higher costs, and general hardships sink in. I dare not forecast how widespread and devastating the mass disruptions would be, but it is likely to be unprecedented in the history of Nigeria.

Before I depress you any further with potential gloom, perhaps I should end by telling you that Nigeria have not always been in a sorry state. Recently I watched a 27-minute-clip on youtube about Nigeria that left me somewhat tearing up a bit with overwhelming happiness. It was a summary of Alhaji Abubakar Tafawa Balewa (Nigeria's first Prime Minister) state visit to the United States in 1961. It was at the invitation of President J.F. Kennedy who sent the Airforce 1 to pick him up. Upon Balewa's arrival at Andrews Airforce base in Maryland, he was met and welcomed by an enthusiastic Vice President Lyndon Johnson. Along the way to Blair House and later the White House, thousands of white Americans lined the street to catch a glimpse and wave to our own Prime Minister. To put things in perspective, this was happening when black Americans were still under segregation and didn't have the right to vote in most American states. But Nigeria was already held in such high esteem, and even President Kennedy could not hide his enthusiasm when Balewa arrived to meet him in front of the White House amid all the pump and circumstance of that state visit. Then we saw his visit to address the US Congress, where Balewa spoke so eloquently, no doubt my proudest moment watching a Nigerian leader speak, and followed by a thunderous standing ovation. Everywhere he visited, from Lincoln Memorial, to the Islamic Center, people lined up to see him. I encourage you to seek and watch this video if you ever wish to lift your spirit about Nigeria.

Such Balewa video can only give me hope that a country that produced that era of politicians that included but not limited to Balewa, Azikiwe, and Awolowo, can certainly give us much more in the future. We just have to weather the present storm of mediocre, and pray that the glory days may once again return in our lifetime. For now though, and for the foreseeable future, it is mostly gloom and doom that await the nation of Nigeria, but I'm sure the political aspirants from both major parties won't mention it in their campaign.

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