The wasted years.
Inflation was rampant throughout this period, peaking at 75% in 1995. There were massive factory closures caused by declines in investment and resulting in retrenchment and increased unemployment. Social services collapsed. There was and still remains a sharp decline in consumer purchasing power, as well as the value of the naira. Prior to 1993 one naira was equal to one dollar; today one dollar fetches N90.
The years since 1994 have been the worst of any in Nigeria's 38-year history. Life is a daily struggle. Everything is in short supply: fuel, food, clothing, jobs, shelter, electricity, water. Housewives are groaning, children are hungry, 'bread winners' are screaming.
Between 1993-94, virtually every sector went on strike. The situation was characterised by uncertainty and tension and was verging on the anarchic. In July 1994, the Nigerian Labour Congress called its members to a nationwide strike in protest against the arrest and detention of Chief Abiola and the annulment of the presidential election. The strike began on 4 July, and lasted for weeks. The costs are still being counted today.
The state of the nation's oil facilities (refineries, depots and pipelines) has been anything but healthy over the last four years. Of the four refineries, only the newly-built Port Harcourt is working. An incessant fuel shortage, attributable to government mismanagement and sabotage, have contributed to the dire state of the economy.
With political instability intensifying and the oil sector in turmoil, foreign companies began pulling out of the country. Many are still not even thinking of returning.
PENGASSAN (Petroleum and Natural Gas Senior Staff Association of Nigeria) put the situation thus: 'Oil companies are forced to reduce seismic operations by over 50% and drilling by over 70%. The first casualties are our members who daily lose their jobs owing to redundancies sweeping across the industry like wild-fire.
'Thousands have lost their jobs over the past one year with no hope of securing new ones. And more job losses are expected as government shows no indication of solving the problems on hand.'
The association followed these statements up by organising nationwide industrial action. They were joined by 28 other unions including airport and bank workers. By the end of the protests the economy was crippled.
The 1994 strike by industrial unions calling for the revalidation of the election has cost Nigeria over N750m daily. The amount represents the revenue government could have generated through the production and sale of the nation's crude oil in both local and international markets.
Another effect of the political struggle on the nation's economy was the volume of funds that escaped the country. Substantial capital flight became noticeable in the second half of 1993 and later assumed an alarming dimension with most depositors transferring their money to foreign accounts. Shortly after the annulment of the 12 June 1994 presidential election, most banks across the country sent danger signals to the Central Bank of Nigeria (CBN), informing it of what they perceived as a 'high rate of withdrawal of deposits and the high demand for foreign exchange.'
For instance, at the foreign exchange market, an unusual upsurge in demand for foreign capital became evident. While dealers demanded a total of $586.231m on 10 June, 1994 two days before the annulled election, the figure rose to $648.588m in early July of the same year showing a difference of $60m or 10.6%.
Today, foreign depositors show no confidence in the political situation in the country. Many have either fully divested or 'are in the process of divesting their shares in Nigerian companies. These include blue-chips such as CPL Industries, UAC, Afribank, First Bank, Hoest and Pfizer (pharmaceutical companies). In the words of Emma Ibeabuchi, a chartered accountant, as a result of the flight capital, "half of the money in circulation is now in the hands of individuals."
In the energy sector, the at-best sporadic power supply from the national grid, the National Electric Power Authority (NEPA), become even worse in the last four years, with a possible blackout looming large. NEPA's problem is the poor performance of its Egbin Thermal Station in Lagos, and this is due mainly to the non-availability of gas, coupled with the breakdown of the other three sub-stations located at Ughelli, Sapele and Afam.
NEPA said it needs about $50m bridging finance from the Federal government in addition to a $70m loan, hopefully to be met by the Japanese Exim Bank. But the loan has been held up for months following demands by the bank that Nigeria must get a clean bill of health from The World Bank before it disbursed funds.
Needless to say, The World Bank and creditor nations have been voicing concerns particularly about the stranglehold the military has imposed over the economy. Most of the key members of the Bank and major creditors such as Britain, Canada, and the US, have vehemently opposed any economic reprieve. Instead they have slammed limited sanctions on Nigeria, aimed at forcing the military to relinquish power to elected civilians.
Under the Trinidad Terms, creditor nations are to shave off two-thirds of the debt of poor debtor nations and re-schedule the remaining one-third for 25 years. Over 22 developing countries have so far benefited from the facility. With Britain objecting, Nigeria stood no chance of benefiting from the facility. The US has vowed to veto any debt relief consideration for Nigeria from the IMF and The World Bank.
Nigeria's last chance to restore some semblance of sanity to its economy demands ensuring that genuine democratic elections are held, as scheduled, next year.
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|Title Annotation:||overview of Nigeria's economy|
|Date:||Oct 1, 1998|
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