The global financial crisis began in the United States of America
and the United Kingdom when the global credit market came to a standstill in
July 2007 (Avgouleas, 2008). The crisis, brewing for a while, really started to
show its effects in the middle of 2008. Around the world stock markets have
fallen, large financial institutions have collapsed or been bought out, and
governments in even the wealthiest nations have had to come up with rescue
packages to bail out their financial systems.
The original root of the current financial mess is in the US- the
world’s largest Industrial-Military complex. With an estimated GDP of $14
trillion, the US contributes about 25% of world output. If, as is being
forecast, the US economy contracts by just 1%, this will imply a direct output
loss of approximately $140 billion- equivalent to the GDP of Pakistan, the 47th largest economy in the world! And
the crises are not restricted to the US. Financial markets have tumbled and
slumped the world over: from London to Tokyo, Seoul to Sydney, Sao Paulo to
Moscow, Bombay to Frankfurt etc. No economy-whether developed, emerging or
developing is, so far, insulated from what Greenspan refers to as ‘once-in-a-century credit tsunami’.
The initial response of the policy makers in Nigeria was meek.
Either they did not understand the crises or underestimated its magnitude. In
general, they thought of the crisis as only a ‘storm in a tea cup’, an
aberration, a ‘hiccup’. They insisted that the ‘fundamentals of the financial
system look impressively strong’ even when the capital market has been bleeding
uncontrollably. The Minister of Planning stated, rather insensitively, ‘there
is no problem in the Nation’s capital market. What we have presently is just
corrections and adjustments….shareholders are getting dividends and bonuses and
they are happy…’ this was at a time when market capitalization had dropped from
N12 trillion to less than N9 trillion. When they finally accepted there was a
crisis, they promised to take some unspecified ‘drastic and unusual action’ to
stem the global financial crises from causing havoc in the Nigerian financial
system (Abubakar, M., 2008).
That initial response was, to put it mildly, naïve. The country’s
dependence on the export sector is very significant: 99% of FX and 85% of local
revenues are directly derived from activities related to export of a single
commodity, which is at the center of the current
financial crises, oil. It is estimated that 58.4% of Nigeria’s
exports are US bound and up to 25% to the Euro zone. 67% of our non-oil exports
go to Western Europe, 20% to Asia while ECOWAS accounted for only 11% in 2007.
The stock of our FX reserves is kept in European capitals where financial
markets have tumbled and banks distressed. How can anyone think we are
financial crises which affect trade and investment flows are bound to impact on
the domestic economy.
The recent global financial crisis had a deleterious impact on the
world economy, especially on the financial system in most countries, whether
developed, emerging market or developing countries. In the wake of the
devastating effects of the crisis, governments as well as central banks all
around the world adopted several measures including some unconventional ones to
deal with the crisis. The effects of the financial crisis still lingers too
date as countries continue to struggle to bring back their financial
institutions and markets to a stage where public confidence is fully restored
and financial institutions, especially banks resume their intermediation role
through resumption of lending activities (Sanusi Lamido Sanusi, 2010).
Like most developing countries, Nigeria felt the effects of the
financial crisis largely through trade and capital flows because of the
openness of the economy and the near total reliance on crude oil exports for
government revenue and foreign exchange earnings. The impact of the crisis
through the financial system was not as direct or devastating as those of
developed and emerging market economies where there was a near obliteration of
the entire financial system because of the limited integration with the global
financial markets. However, when the impact of the crisis permeated Nigeria’s
financial system, the soundness and stability of the system was seriously
threatened prompting a decisive intervention of the Central Bank of Nigeria
(CBN) to mitigate the emerging crisis and restore public confidence (Sanusi
Lamido Sanusi, 2010).
1.2STATEMENT OF THE RESEARCH PROBLEM
The global economic recession stares everyone in the face; and no
responsible nation or leader will run from the reality of the crisis by telling
its nationals that all is well. This consideration necessitated these questions:
i.What is the impact of global economic meltdown on
the Nigerian economy?
ii.Did the crash in the price of crude oil affect
the Nigerian economy?
iii.Did the divestment of foreign investors affect
the Nigerian economy?
1.3OBJECTIVES OF THE STUDY
i.To ascertain the effect of global economic
meltdown on the Nigerian economy.
ii.To find out if the crash in the price of crude
oil affected the Nigerian economy.
iii.To examine the impact of divestment of foreign
investors on the Nigerian economy.
1.4SIGNIFICANCE OF THE STUDY
The problem of global economic meltdown which has visited every
nation is a serious one that cannot be over looked. This problem will remain
until the cause, the nature and how to mitigate the residual affect has been
completely taking care of.
This research work is based on the impact of global economic
meltdown on the Nigerian economy and attempt to shed more light in this area
will definitely constitute an important addition to already existing researches
in this area. The study as a result, will try within the contest of the
Nigerian economy to reveal the causes and the effect of the global economic
meltdown on the Nigerian economy. The results obtained from the study will
contribute to the formulation and implementation of more effective policies
that will help in salvaging the dawned Nigerian economy.
1.5STATEMENT OF RESEARCH HYPOTHESIS
i.Ho: Global economic meltdown has no significant
impact on the Nigerian economy.
economic meltdown has significant impact on the Nigerian economy.
ii.Ho: The crash in the price of crude oil has
negatively affected the Nigerian economy.
crash in the price of crude oil has not affected the Nigerian economy.
iii.Ho: Divestment of foreign investors has no effect on
the Nigerian economy.
of foreign investors has a strong effect on the Nigerian economy.
1.6SCOPE OF THE STUDY
This study is within the context of the Nigeria economy. It will
deal on the past and current effect of the global economic meltdown on the
1.7STRUCTURE OF THE STUDY
This study is made up of five chapters. Chapter one covers the
introductory part, chapter two is on literature review, chapter three deal on
methodology, while chapter four is on empirical analysis and chapter five
covers the summary, findings, recommendations and conclusion.
TERMS AND CONDITIONS APPLY
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