The current global financial crisis, which was triggered by the credit crunch within the US sub-prime mortgage market, is continuing to spread and deepen in several countries. Its impact on Nigeria is evident in the performance of the Nigeria Stock Exchange and the financial system as well as in the real sector. Some of the stylised indicators include market capitalisation, which fell by 45.8% in 2008; the crude oil price declined precipitously from US$147 per barrel in July 2008 to $47 per barrel in January 2009, leading to a decline in external reserves and hence accruable revenue. The debt profile is also increasing. Foreign portfolio investors have withdrawn over $15 billion, while remittances and official development assistance (ODA) are expected to fall greatly in 2009. Developmental goals will be unachievable with less budgetary allocation to social services, thus pushing a greater number of people further into poverty. Government responses to the crisis include reduction of the monetary policy rate (MPR) from 10.25-9.75%, of the cash reserve requirement (CRR) from 4.0-2.0% and of the liquidity ratio from 40.0-30.0%. These measures are required to shore up liquidity in the economy and thus keep it working. The crisis may offer an opportunity to look at sectors that have been yawning to allow them to act as pillars for growth and development of the economy: agriculture, tourism and infrastructure.
Olu Ajakaiye and ’Tayo Fakiyesi