Nothing can be truer than the graphic description of the present economic mess, as described by Mick Brooks on “World economy in crisis - The financial panic: where are we now?” of 23 of January, 2008, as published on www.marxist .com, he said and I quote:
“The upswing since 2001 has been one of the most lopsided in the history of capitalism. It has been powered by the American consumer, referred to by some economists as ‘the consumer of last resort,' so important are they conceived to be to the functioning of the world economy. Though comprising less than 5% of the world's people American consumers' demand has been responsible for an incredible 19% of the growth of the world economy in recent years. How is this possible? After all American workers' incomes (and most American consumers have to work for a living) have not risen in real terms for three decades. Yet they have more money in their pockets to spend, and to buoy up a world economy of six billion souls in the process. The answer to this question is because of what is called the wealth effect. House prices have been going up so Americans have felt richer. Consumers have been able to borrow against the rising value of their houses. In effect they have been using their homes as ATMs, spending like there's no tomorrow. Now tomorrow has arrived.”
The arrival of tomorrow brings in its wake, a bubble burst. Price has since been going up because people are buying things, and they were buying because the prices are going up, now it is turning to its opposite, prices are coming down because people are selling, and they are simply selling because the prices keep on going down, thereby landing the system in its present impasse.
As the US economy is melting down, one thing is too clear; it will obviously bring the whole world economy down along with it. How and when it will affect each country may vary, it will surely affect every one.
The present article takes a holistic view of how Nigeria will most likely be affected in the coming period, not for the purpose of preventing the impasse in Nigeria which is absolutely impossible on the basis of Capitalism, but for us the Marxists to get our self prepared for the political implication of impending crisis, after all, Lenin said “Politics is a concentrated economics”.
Structure of Nigerian economy in relation to World economy
Nigeria primarily supplies raw material to the world market, the main agricultural products includes; peanuts, palm oil, maize, rice, sorghum, millet, cassava (tapioca), yams, rubber; cattle, sheep, goats, pigs, timber and fish. Of all these products, Nigeria exports only cocoa and rubber. 71% of Nigerian workforce work in Agricultural sector of the economy, and yet only two products are produced large enough to be exported. Absence of mechanized farming is largely responsible for this.
The major exporting product in Nigeria remains petroleum and petroleum products since 70s and contributing 96% of exporting commodities. Nigeria exported a total of $55.34 billion worth of commodities in 2007.
Nigerian major exporting partners are United States (47.4%, Brazil 10.7% and Spain 7.1% 2004 figure).
Nigerian major Imports commodities include; Arms, machinery, chemicals, transport equipment, manufactured goods, food and live animals. Major import partners include; People's Republic of China 9.4%, United States 8.4%, United Kingdom 7.8%, Netherlands 5.9%, France 5.4%, Germany 4.8%, Italy 4% (2007).
The figures given above have a lot of implications, most significantly, with oil price hovering around $102 per barrel, Nigeria is relatively rich now.
Nigeria has an external debt of $3.3 billion with London Club and external reserve of $55 billion.
These figures also explain why Foreign Direct Investment (FDI) has been consistently increasing in Nigeria, reaching whopping 62% of GDP in 2007, 87% of this FDI goes to Oil sector of the economy mainly from U.S.
Nigeria is said to be growing at an average of 6.5% per annum (2007 figure), while at the same time the installed capacity utilization in the manufacturing industries has plummeted from 62% in the 80s to 25% in 2007. At the same time, GDP per capital has increased from $860 in 2003 to $2,660 in 2007 est.
Nigerian stock exchange is widely acknowledged as one of the fastest growing in the world, but on what real economic activities does it rely on?
There is only one life wire that connects Nigeria to the world economy, and that is Oil. Nigeria is sound, only when oil price is sound. Nigerian economy is absolutely tied to the fluctuations of oil prices.
With economic slow down in U.S, the demand for oil will be negatively affected. Oil price is presently going up largely as a result of panic and instability in the Middle East. How long this can be maintained is an important question bothering the mind of serious bourgeoisies.
Just as bubble burst in US when tomorrow comes, the oil burble will inevitably burst too when its own tomorrow comes, and in its wake, a serious catastrophe to Nigerian economy.
Despite enormous wealth that Nigeria is presently milking out of world market, rather than developing the economy and betters the life of the masses, population leaving below poverty line keeps on increasing, now at 72% of the population. Privatization means more and more loss of job and more poverty. Rather than carrying out a fair distribution of this wealth, which is absolutely impossible under Capitalism, what we see is increasing gap between the rich and the poor. The figure of on income distribution is becoming more and more difficult to get, because it is described as been extremely provocative and alarming. A rough estimate has it that, 10% of lowest house hold owns 1.6%, this was 2.6% in 1997, and 10% highest house hold owns 67%, this was 35.8% in 1997. This gap keeps on getting wider as more wealth is coming in. Under Capitalism, nothing differ rent from this is expected. When the impending world economic recession finally touches Nigerian economic life line, the time is fast approaching; it will inevitably bring along with it a huge political implication.
The confidence, the arrogance and spree of political settlement that characterizes this regime will wipe off in no time. The slightest of all concession will be impossible, already excessively pulverize masses will be incapable of absorbing more attacks on their standard of living, and Nigerian ruling class will be incapable of relaxing this attack and there emerge as a result, a tumultuous class struggle. This will end up either in total chaos and barbarism or a triumph of Socialism led and consolidated by Nigerian Working Class, no middle road to this.