By Omoh Gabriel
The Managing Director of the World Bank Dr. Ngozi Okonjo Iweala said in Washington on Monday that the financial crisis currently rocking the global economy will not have immediate impact on Nigeria banking system and Africa as the reforms carried out in Africa and the fact that ownership of Nigeria banks is not foreign has helped to limit its impact on the banks. She disclosed that at the board of the World bank “there is going to be an extra seat for Africa countries which means that Africa voice will be heard even more than before since it now has a third chair on the board. I think this is a major positive piece of progress by the world bank and it has received the blessing of the development committee which gives Africa countries more say and I think we should commend the work that has been done by Africa board of governors, Board of the World Bank and Mr. Robert Zoellick President of the Bank in trying to get this through”.
She said “In terms of the Present Financial crisis, the key question is how will this impact on Africa, what sort of impact is it going to have? The first thing to say is of course the effect of the crises are still working themselves out here in the US, in Europe and elsewhere and so it will take sometime before we see the full impact of that even within the countries that are the epic centre of the crisis and then to see what will happen to Africa countries. But one can look at one or two channels where African countries might be impacted.
“I think the first thing is to also remember that before this financial crisis there have been the food, fuel and fertilizer crises. The crisis is not being seen in Africa banking system and countries for now. Those countries that have high micro economic inbalances, those with high current and capital account deficient are the ones that are going to be very careful to take adequate measures because if anything happens they are the ones that will experience greater volatility.
The volume of financial aid coming to Africa may drop as she said “Another is the volume of assistance, and as you saw from the communique of the development committee and from the discussion, there have been a lot said about developed countries maintaining their commitment in Greaniggles to make sure that their pledge does not diminish. As of now they are trailing behind, I think their pledge is that by 2010 $50 billion will be going to Africa but how do they meet up with this commitment. I think we are at about $38billion there is the need for them to keep the pressure on to make sure those aid commitment are met.
“This may be a bit difficult since they themselves are experiencing a squiz due to this crisis. Certainly there is has been great effort to urge them to keep their eye on the board. Africa countries need to do their own bit. You know we also need to make our own effort to continue the reforms. You know that one of the good thing, the reason why Africa countries might not suffer much from this crisis as they could have is because they have been reforming.
“These reforms have led to growth that we have seen so there is need to continue the reform on this part not to go back and say we are not going to continue the reforms we are going to nationalise our banks, no.
“Africa has to continue because it has been delivering growth and will enable government to deliver better services to Africa people. So Africa has to continue the effort ans also see how we can use our resources better and improve tax effort and savings mobilisation”.
She said that Nigeria and other oil exporting countries face the danger of dwindling revenue as the world search for alternative source of energy and must act quickly to diversify their revenue base.
She said “Oil is a very difficult thing to forecast you see the volatility, the movement of oil prices, the trend is down and oil is about $82 a barrel if I am not mistaking this is a far cry from the $147 that we are talking about not so long ago. What does this mean, there is so much volatility in the oil market we do not know where the price is going to, if these developed countries go into recession the demand for oil will fall and that will have an impact on the price unless OPEC decides to restrict supply even more. If you are in that position it means you have to be much more prudent with your budgeting. As you know in Nigeria there is fiscal rule, where the budget is based at an oil price below the prevailing price in the market.
The oil price being used for next year is $62 per barrel, if crude oil price is coming down at $82 you can make your own deduction. Nigeria has to be very prudent because if oil price goes below the budget bench mark then Nigeria will have budget constrains.
The World Bank Managing Director said “Oil exporting countries have to be mindful that alternative sources of energy could be generated and they have to themselves diversify their economic base, that is what it means that if you focus only on one commodity and something hit that commodity you will have a lot of difficulty. They have to focus on: diversifying, that is what Nigeria and other oil exporting countries should be doing, Nigeria has good agriculture, it has to build up the good value chain, it has a strong financial services chain, Nigeria has so many other things such as other minerals, it have not even developed them there is coal I do not know what has become of that. So diversification and prudent management of the resources being generated now and in the past years of oil boom, because you are dealing with a wasting asset that could have a competitive alternative. These are things I would suggest that those countries need to do now”.
She said that at the moment Nigeria has a very healthy reserves, as a result of the fiscal rule put in place by the last administration. Nigeria was able to save so much, Nigeria reserves are at about $64billion right now, unprecedented. I think Nigeria has a healthy situation but Nigeria should not be complacent and pull out all the excess crude revenue saved and start using it not yet, I think the money Nigeria is earning now should be used in a much more broader and efficient fashion.
