Information service of the Pontifical Mission Societies since 1927
Lagos (Agenzia Fides) – The global financial crisis and the drop in the cost of fuel are seriously threatening the economy in Nigeria. According to economic experts, interviewed by the loval press, the depreciation of the local currency, the Naira, is just the first link in a chain of events that will lead to a crisis in the bank sector, affecting the entire economy of the nation and taking its toll on thousands of people.
According to the associations of producers and workers, the gradual depreciation of the Naira in comparison to the Dollar and the Euro will lead to a skyrocketing in prices of goods and services, unemployment, and a rise in the cost of financing the infrastructural projects that the nation is so in need of. The exchange rate of the Naira to the Dollar, has gone from 138-142 Naira per dollar in December 2008, to 150 Naira per dollar in the first several days of January 2009. According to experts, the depreciation of the Naira is linked to the fall of fuel prices in recent months. Nigeria, one of the largest producers of African fuel (along with Angola), had accumulated important financial reserves when the cost of crude oil rose above 100 dollars per barrel. Now that the price has gone back down to about 40 dollars, the money reserves are disappearing at an alarming rate. This comes as a result of the fact that Nigeria's economy is founded solely on fuel, leaving the other activities, like agriculture, fairly underdeveloped. As a result, the country must import almost everything, beginning with food products. As long as the financial reserves (fed by the high price of fuel) are active, Nigerians can purchase basic needs at a reasonable cost. However, when the fuel prices drop, the financial reserve rapidly runs dry.
It is the famous “Dutch syndrome”: an economy excessively dependent on fuel exports tends to abandon the other industries (agriculture and manufacturing production), because thanks to a strong currency, (from hydro-carbonate exports) they prefer to import goods and food for the population. The name comes from the fact that this economic phenomenon was first observed in Holland in the 70s, when the discovery of gasoline deposits led to the decision to abandon the traditional industries and use imported goods. The Nigerian Bishops have denounced the fact that the oil is misused and that other important sectors of the economy suffer the effects of exclusion, as is the case with agriculture (see Fides 13/11/2006).
The inflation phenomenon is being worsened by the great number of false banknotes being placed in circulation by local organized crime groups (another plight in the country).
Due to the crises, thousands of workers in the bank industry will be laid-off, followed by those working in other parts of the economy. The State will have to cut spending (mainly involving healthcare and education), affecting the most vulnerable part of the population. (LM) (Agenzia Fides 13/1/2009)
