Dangers Of False Expectations As Nigeria Drifts into Austerity

Ifeanyi Izeze

It is very unfortunate that those who run things in this country seem not to care much about our collective good. To those who cared to watch the performance of the Nigerian economy, the recent gloomy picture painted by Fitch Ratings in its report released Friday, October 22, 2010, did not come as a surprise. The report which out rightly lowered its sovereign credit outlook on Nigeria from stable to negative, citing the depletion of its windfall oil savings and heightened political uncertainty ahead of elections next year could best be said to represent a matter-of-fact assessment of the way government has handled the economy and issues thereof.

All genuine and straight- minded Nigerians would agree that the agency gave the true state of our national economy as the same Fitch had on 7^th April 2009 in its release affirmed Nigeria’s long term foreign and local currency Issuer Default Ratings (IDR) at ‘BB’ and BB- respectively. The outlook then by the agency was said to be stable. At the same time, Fitch affirmed the short-term foreign currency IDR at ‘B’ and the country ceiling at ‘BB-’. Nigeria's strong sovereign balance sheet as result of savings in the excess crude account was the main support to the rating.

Instead of playing politics with the poor rating, second in a row from two different agencies, it should be a wakeup call to the government and all those currently living in denial about the true health of the nation’s economy.

It would be callous for Government to pretend that all is well when in actual fact the economy is drifting towards total collapse. This was the same defiant attitude the defunct National Party of Nigeria (NPN)- led Federal Government exhibited towards repeated wake-up calls by the then opposition leader, late Chief Obafemi Awolowo.

The NPN government ignored the warnings of the late sage and when they woke up, it was too late to save anything. That was the point at which they declared the economic emergency that gave rise to the hated ‘austerity measures’ of that era.

President Jonathan should be told and in any language he understands very well that the management of the nation’s economy, the lifeline for the sustenance of its democracy should not be sacrificed for political expediency.

Fitch in its latest rating of Nigeria’s economy said “continued withdrawals from the nation’s excess crude account, into which Nigeria saves crude oil earnings above a benchmark price, and lower foreign exchange reserves were a threat to economic stability.” In what way did this assertion sound political? For God’s sake and the sake of the already battered people of this great nation, government should wake up their ideas to do the right thing rather than looking for who to blame for all the wrongs going on in government.

Standard & Poor's (S&P) sometime last year also lowered Nigeria's ratings outlook to "negative" from "stable", citing falling oil revenues, which according to the agency, were hurting public finances. It painted a picture of an economy in severe trouble.

S&P, the world's formost provider of independent credit ratings had warned that it was watching Nigeria's rating "very closely", and was nervous over falling reserves and "unorthodox policy measures" that risked undermining foreign investors’ confidence.

The agency said “considerable uncertainty” surrounded the outlook for the country’s finances because of higher government spending and oil and gas production constraints.

No serious government can afford to ignore these danger signals from international credit rating agencies as this would amount to nonchalance.” How true he was in that declaration.

Only those who do not mean well for this country would not be concerned about the depletion of the excess crude account and continued gradual fall in our international reserves at a time of high oil prices and record high oil production following the current fragile peace in the Niger Delta.

It is alarming that savings in the account have fallen to less than $500 million from $20billion in 2007 and yet the president and his people want to accuse opposition as pushing international agencies to paint gloomy picture of the economy for quick political gains. This is an irresponsible mindset. Period!

Commendably, the National Assembly recently showed a rare courage to cry out against the dangers of the nation’s dwindling economy. The lawmakers outrightly faulted the handling of the economy and poor implementation of the current budget and this was even before the Fitch Ratings report was released.

Pathetically, nothing was done by the executive and the National Assembly too never followed up to ensure measures were taken to start reversing the downward slide of our economy. Now a foreign agency with integrity and credibility has raised the issue again so let’s see what the President and the National Assembly will do to convince Nigerians that they actually are concerned about the emerging danger.

The Federal Government should as a matter of urgency to take drastic measures to check the deteriorating state of the nation’s economy except it’s telling us that the assessments are false. Whatever they believe Nigerians should be duly informed.