THE IMPACT OF GLOBAL FINANCIAL CRISIS ON NIGERIAN ECONOMY


 


Nowadays, the whole world is experiencing most severe financial crisis that caused many international companies for closure, and made tremendous numbers of employees jobless.  In addition, the price hike of all commodities   even made the global condition worst.  In this connection, most of the developing countries like Nigeria are in the situation that continuous to worsen. This study will focus on the influence of the global financial crisis on Nigerian economy.  It has been found out that financial crisis made the gradual fall down of commodity prices, decline in export, lower FDI input, and fall in many business investments, turning down of remittance from abroad among many others.  As a result, the Nigerian federal government is recommended to take intervention policies that will lessen the unfavorable effects in the Nigerian economy.  Many policy makers in Nigeria were not prepared for the strong impact of global financial crisis to their economy.  The nation’s capital market is having trial and error process in their market capitalization. 


(http://www.rrojasdatabank.info/crisisdb/onnigeria09.pdf)


Furthermore, the Nigerians finally realized that global financial crisis is seriously damaging their economic condition; is when various market investments had all dropped down from N12 trillion to less tN9 trillion.  The Nigerian people finally accepted the global crisis, and they set an attainable goal of taking extra measure and implementation of improving Nigerian financial system in the export sector.  It is a fact that Nigeria largely depends on their economy on the export industry. Based on the research made, 99 percent of FX and 85 of local income are directly come from country’s oil export industry.  And, it is estimated that 58.4 percent of country’s exports are US bound.  While 67 percent of Nigeria’s non-oil exports go to Western Europe, as well as 20 percent goes to Asia.  ECOWAS, as accounted for only 11 percent in 2007.  The global financial crisis even affects the local economy of people in the country.  Many Nigerian banks were being closed, recessions, stock market crashed, currency crisis and sovereign defaults.  Moreover, the effects of the global crisis include the inability of many homeowners to continuously pay their monthly amortization.  The impact of global crisis on the central bank policies and regulation greatly affect thousands of money borrowers in the country.  Plus the fact, that the poor track record of many borrowers in most financial institutions which led to the severe impact of the global financial crisis to the lives of many Nigerian people. 


(http://www.rrojasdatabank.info/crisisdb/onnigeria09.pdf)


Furthermore, assumptions of different people about what happens to Nigerian economy also contribute to the impact of global financial crisis in the country.  Conventionally, homes and residences were not considered like stocks in the market in the ancient time in Nigeria, however, this old notion of the Nigerian people has been changed already over years now.  And, now, real state   has become one of the money makers in Nigerian economy.  During 2006, 22 percent of homes, a total amount of 1.65 million


Units were just allotted for investment purposes.  Closely 40 percent of home purchases were not major residences.  This kind of speculative buying makes housing prices to go down extremely.  In this connection, the New Financial Architecture (NFA), a globally incorporated system of large groups of banks  which other known as “shadow banking system” of investment banks in Nigeria; offer hedge funds and bank-created special investment vehicles for the borrowers.  These financial programs make excessive risk to build up giant banks during the prospering period of Nigerian economy.  And, the NFA earned high leverage and systemic risk, with its channels of corruptions and red tape among higher officials down to their people that magnified the   global financial crisis on the Nigerian economy.  Aside from those issues, poor credit rating of the money borrowers due to securitization practices, credit rating agencies were added to the economic problem in the country.  What is securitization? Securitization is a structured financial system that assets, receivables or financial tools are acquired, classified into pools; and, being offered as collateral for third-party venture. Subsequently, high risk loans that are very rampant in the country have been rapidly growing in number. This is tending to be associated with the loosening lending standards. And, what worsens the Nigerian economical situation was the larger number of bad loans by high risk borrowers.  The lenders tend to allow these borrowers to avail “Ninja Loans” to those borrowers with no job or income, as well as no asset or collateral; besides, many banks give housing loans to immigrants without proper documentation.  In view thereof, the direct impact of the global financial crisis on the Nigerian economy   is more in the financial and banking industry.  Most of the commercial banks in the  country  stopped from investing   and partnering with US and other business partners in other  parts of the globe.


(http://twnafrica.org/index.php?option=com_content&view=article&id=83:nigerian-economy-may-reel-under-financial-crisis&catid=58:investment&Itemid=86a)


References:


(http://www.rrojasdatabank.info/crisisdb/onnigeria09.pdf)


(http://twnafrica.org/index.php?option=com_content&view=article&id=83:nigerian-economy-may-reel-under-financial-crisis&catid=58:investment&Itemid=86a)


 



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