Nigeria not threatened by US debt crisis

Posted by admin Africa & World Politics, Headlines Saturday, August 6th, 2011

Nigeria’s external reserve was not threatened by the liquidity crisis facing the United States (US) where the Congress reached a last-minute deal to raise America’s debt ceiling last week and saved America’s credit rating.

But the specter of global economic slowdown loomed beyond the shores of the US as Nigerians wre worried that there was no official response to the crisis in a country that warehouses its foreign reserve. The absence of the Finance Minister, Dr. Ngozi Okonjo-Iweala, who is yet to resume in her duty post, was attributed to the seeming indifference to the US debt crisis.

Informed sources said her absence was felt in the last two cabinet meetings, where she could have given an insider advice to government on what steps to take if there was a default as was feared before Tuesday last week, arising from the long drawn debate in the Capitol Hill where American lawmakers reached the deal to save America from a global odium of being declared bankrupt and shamefully downgraded from its AAA ratings status.

Nigeria, like many developing countries, use the US dollar as the international benchmark currency, and the prospect of a default would have resulted in massive devaluation of the America’s currency to the detriment of all dollar denominated accounts across the globe, with adverse consequences on the global economies.

According to a Lagos based banker and financial analyst, Dr. Francis Oshodi, “for Nigeria and many developing economies, the US sovereign debt and the looming austerity measures,that will come with the proposed cuts in social sector is a nightmare that will go beyond the shores of the United States. We must thank God that the lawmakers agreed to find a compromise to their bickering, otherwise, Nigeria’s foreign reserve would have been affected”.

He went on: “Never in the history of the United States could anybody have imagined that the world’s greatest economy was on the verge of being declared bankrupt and that would have meant a huge disaster for Nigeria which uses the dollar to denominate her foreign accounts, especially the sales from export of oil and gas”.

Sources said President Goodluck Jonathan and the nation’s economic team, which Iweala was supposed to head, felt her absence as they were unable to formulate a Nigerian response to the situation in the US which would have left the economy paralyzed. The global implication of the situation was lost on our policy makers as Iweala was not there to guide the cabinet.

Apart from her schedule as the Finance Minister, Iweala is the arrow head of the neo liberal economic disposition of Jonathan. This, according to Dr. Rasheed Akinyemi of University of Lagos, will entail strengthening of the processes of governance and institutions of government under the Jonathan administration to resume on her seat to take charge of the macro-economic direction of government.

-Vanguardwp_posts