GLOBAL ECONOMIC MAESTROM: How Safe is Nigeria?
GLOBAL ECONOMIC MAELSTROM: How Safe is Nigeria?
(By Peluola Adewale)
Capitalism is in deep crisis. Some have called it Armageddon. But by whatever name it is called, the global financial crisis has melt down the neo-liberal orthodoxy of capitalism. At present, the global financial maelstrom triggered by casino capitalism is raging like tsunami from one end of the earth to another. Developed, developing and under developed economies have all been hit though in different ways. The capitalist commentators themselves have agreed that the crisis will be long-drawn and widespread. Germany and Britain, the strongest economies in Europe, as well as the Eurozone and Japan are now officially in recession. So is the US, but the official proclamation has been postponed until next January when the economy will have recorded negative growth in two consecutive quarters.
The contagion has caught up with the real economy with cases of drop in profits of companies, factory closure and job losses on the rise in US, Europe and China. More and more working class people have started losing their homes because of inability to pay mortgages. The slowdown in world economy has dragged down commodity prices and thinned out revenues of developing countries. Workers, youths and poor masses around the world are in for more attacks on their living standards and basic needs.
More than any other thing the crisis has shown that capitalism is fundamentally flawed. In a complete reversal of what they have preached for the last few decades governments are now directly intervening in business. Some financial institutions have been nationalized viz; Fannie and Freddie, AIG in the US, Northern Rock in Britain and Fortis in Netherlands. This notwithstanding, the list is getting longer everyday. The US auto companies are especially pleading for state aid.
The multi-trillion dollar government interventions not known since the great depression have been tagged socialism by some capitalist commentators. But it has no semblance with genuine ideas of socialism. What we have witnessed is the nationalization of bad debts and rotten assets that litter the financial system around the world. Essentially, it is employing public funds to pay fat cats for their losses and to prop up capitalism.
Curiously, while world economic strategists are sweating and gnashing teeth over the monumental crisis, which has consumed many banks and financial institutions, and its crippling effect on the larger economy, Nigeria economic managers have assured that our financial system is largely insulated. But could any one doubt them. Take for example this year IMF/World Bank annual meeting which had global financial meltdown as the main item on the agenda; Nigerian banks executives were on the sidelines popping champagne over different awards for their “excellent performances”. But is Nigeria really safe given the rampaging global financial tsunami?
NIGERIAN BANKS: BEYOND THE RAZZMATAZZ
These days, one hardly opens newspapers without coming across advertorials posting impressive financial results of different banks. But behind this razzmatazz, there is really nothing to celebrate. Nigerian banks are good for nothing. Their phenomenal growth does not reflect in the real economy. For every new branch of bank that is opened, a factory is closed down. In addition to primitive infrastructure and high cost of fuel, real sector operators are denied access to credit facility by banks. Nigerian banks prefer to pump funds into the stock market and stimulate bubble that has burst in the face of many so-called investors. When they lend money at all, it is only to government cronies (Otedola, Dangote, etc) and in specific areas like oil and cement importation and blue chips companies while the manufacturing sector is denied access to credit due to prohibitive interest rate.
This is no fault of theirs however, in the face of pervasive infrastructure decay and attendant high cost of doing business, the risk of granting loan to the real sector is high than necessary. To banks, they are in business to make profit; therefore the real economy may “go to blazes”. Again, this proves that banks in their current profit-oriented form cannot be drivers of socio-economic development as against what we have been told by the government while justifying the banking consolidation exercise. This is why socialists demand that the banks and financial institutions have to be put under public ownership with open democratic control and management by the working people so that the resources at their disposal could be deployed for economic development and benefit of all. Meanwhile, the “all is well” tune by Nigerian banks is a moot question. Nigerian banks have obsession for exaggeration of their true worth. More so, the Cadbury scandal has taught us to always take financial and audit report with a pinch of salt.
NIGERIA: CRISIS IS NOW ONSHORE
However, while there could be some abracadabra around the financial sector, there is no hiding place for the real economy. Accordingly, the effects of the global financial meltdown are already here with us. The benchmark of 2009 budget proposal which was originally put at $62.5 per barrel has been cut down, some reports say to $45. The price of crude oil that reached all time high of $147 per barrel in July has come down below $60 due to the financial meltdown and attendant economic slowdown in Western Europe and China as of the second week of November. Even the cut in supply by OPEC could not halt the price slide. Some analysts have said the price would not stop plunging until it is $50.
Paradoxically, for so many years while Nigeria earned mouth watering profit from crude oil sales (from less than $20 a barrel in 1998 to $147 in July 2008), nothing was done to improve the infrastructure or the standard of living of ordinary Nigerians as the funds were looted by capitalist politicians. In addition to decaying infrastructure, Nigerian poor working masses have continued to pay more year-in-year out for goods and services over the same period. The cost of education has reached the roof. The fees paid in public higher institutions have been increased by as much as 5,000% in the last one decade while education quality has kept deteriorating. Most public schools are housed in dilapidated buildings and with no functional learning facilities. Throughout all these periods, medicare became expensive and inaccessible to the poor masses while the cost of domestic fuel (petrol, diesel and kerosene) was arbitrarily hiked for about 7 times in the past nine years. It is therefore not hard to see that further calamity awaits the working and poor people of Nigeria on the basis of the low price of crude oil on the world market. It is the workers, youth, artisans, farmers and poor people who will have to pay for the crisis of capitalism through retrenchment, low wages, increased school fees, unemployment etc.
To be expected is further decay in the already deplorable condition of infrastructures, more power outages, insecurity and general plummeting of living standards. Already, Minister of Transportation hinting that the global financial meltdown will affect the planned rehabilitation of the deplorable road networks in the country recently lamented, “The current global meltdown will probably not assist in this particular instance because I will imagine that funds even further depleted, in terms of budgetary allocation” (Guardian October 17, 2008). Meanwhile, by official figure less than 20% of Nigerian roads are in good condition.
In past few years, many factories have closed shop or relocated out of the country with attendant job losses which add to already saturated labour market. And this is because of high cost of doing business due to poor infrastructures. Michelin has shut down its operations in Nigeria while Dunlop was forced to scale down operation. Textile industry that used to be second biggest employer of labour after government is now a shadow of its former self. Artisans and small businesses that need electricity for operation have had to close shop or continue to hope for a better tomorrow.
Unfortunately, government’s response to this debacle is to further cede responsibility of infrastructure provision to the private profit concerns under the public-private partnership initiative. Shamsudeen Usman, Minister of Finance, has continued to echo the policy thrust of the Yar’Adua government that it could not meet the financing requirements of infrastructure provision alone, more so at a period of plummeting government revenue. Besides, according to him, the private sector was a “more preferred” method of financing infrastructure provision. But where and how this “more preferred” private sector will raise fund to finance infrastructure in the face of the rampaging global credit crunch? The reality however is that even before the global financial crisis, Nigerian banks could not commit resources to long term return yielding projects like infrastructure provision.
GOVERNMENT FOR CORPORATE PROFIT
The Nigerian ruling elite are among the worst specie of the neo-liberal capitalist elements. They are perfectly content to live with the imperialist domination of the world economy and have abandoned any idea of really developing Nigeria. Thus they are not interested in committing public resources to public works and basic needs in order to reserve huge resources for looting and primitive accumulation. This is why only 1 percent Nigerians, the rapacious, parasitic ruling elite, has appropriated 80 percent of the wealth from crude oil, as once reported by the World Bank. Even the few public utilities and institutions built in the 70’s from the then crude oil windfall have been either privatized or commercialized for profit maximizing interest of a few.
Instead of injecting huge resources realized from the upswing to provision of education, health care, housing, infrastructure, Nigerian ruling is building external reserve to gratify profit interest of global financial institutions and local partners. Meanwhile, Nigerians have not been told how much in the real value of the reserves has been lost to the global financial meltdown.
The poor working masses, who have not benefited from the boom, will be worst hit as we enter the slump. The government has already hinted raising more revenues from taxes. Already, many businesses suffer multiple taxation imposed by all tiers of government. But in sharp contrast to their admonitions that average Nigerians should “tighten their belt”, the government has ‘bailed-out’ its functionaries (executives, law makers and politicians) against the telling impact of the global financial crisis with jumbo pay in addition to inestimable public loots. Again this confirms that on the basis of neo-liberal economic agenda, Yar’Adua government cannot guarantee improved living standard and infrastructure development either in the immediate or future periods. The NLC, TUC and LASCO must therefore begin mobilization of workers, youths and poor masses for mass protests against neo-liberal attacks on the living standards and working conditions.
LABOUR MUST LEAD A FIGHT BACK
Since the global meltdown came to head in September, Nigeria Labour Congress has organized two “NGO like” talk-shops. Unfortunately, there was no conscious effort at using the public events to chart concrete actions to mobilize workers and poor masses in the struggle for power as the events ended up “crying over the situation” as usual. In a press statement issued in the run up to one of the symposia, John Odah, General Secretary of NLC had lamented, “The NLC is concerned that the country seems to be adrift with no viable ideas or polity to anchor it. The Congress is particularly worried about the country’s future polity and economic well-being, given the crisis globally” (This Day November 4, 2008)
If the NLC is sincerely concerned about the prostate state of country, it cannot find solution in lamentation or sterile speechifying. First, together with TUC and LASCO, NLC should lead workers, youths and poor masses to demand a N50, 000 living minimum wage, adequate funding of education, health care, etc and provision of basic infrastructure, and oppose hike in fuel price, VAT and resist retrenchment. Labour must also lead a campaign against privatisation and all neo-liberal policies and demand nationalisation of all banks and financial institutions under workers control.
Most importantly, it is more necessary now than ever for labour to spearhead the building of a formidable working people’s political alternative, rather than lamentation that has been their pre-occupation in recent time. This means the formation of a working peoples’ political alternative that could wrest political power from the thieving ruling elite and commit public resources to basic needs of all and infrastructure development. Such party must prepare to mobilize adequate resources for socio-economic developmental programme and ensure genuine accountability and transparency while in power. This will require putting under public ownership the commanding heights of the economy including big banks, oil industry, etc with democratic management and control by the working people themselves. Such socialist nationalisation would allow a democratic plan to be drawn up to use these resources to develop the country and raise living standards.
If such a transformation took place in a country like Nigeria it is clear that, given the international character of this crisis, it would be an enormously attractive example for working people in other countries to follow, thereby opening the way to transforming the world.
Already, there is a Labour Party registered by the NLC but abandoned. The party should be built and repositioned as a fighting party of workers, youths and poor masses, which identify with their immediate demands and lead them in the struggle for political power. More importantly, the working peoples party must develop to a revolutionary socialist movement in order to defeat iniquitous capitalism that has brought the world into this abyss of mess with its vicious cycle of boom and bust. This is the task for working class people in Nigeria, Africa and worldwide.