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Rhythm of Thought

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All is not well with the Nigerian economy. It is going through recession. During periods like this, purposeful countries take inspiration from those that have gone through periodic economic hardships that threw them up as emerging economic power houses. South Korea, Brazil and Malaysia are examples. Iran is also one of such countries. 
Having gone through severe economic sanctions imposed on it by the big powers, the country looked inward to mobilize its resources for sustainable development. Though Iran is yet to be an economic power house, it is a success story, and a lesson on how to use scarce resources for scientific and technological innovations. The country continues to make giant strides in the face of the instability in the Middle East.

In July this year, a delegation of Iranian business community led by that country’s Minister of Foreign Affairs visited Nigeria. They were the guests of President Muhammadu Buhari at the Villa. Their mission was to explore areas of collaboration and invest in sectors like banking, education, agriculture, energy and technology development.
President Buhari and the Iranian delegation
During the visit, president Buhari praised the achievement Iran has made in security, manufacturing, agriculture, technology and nuclear research. Taking inspiration from the Iranian success story, the president said Nigeria is learning in a hard way how to maximize the advantages the gas, solid minerals and agriculture sectors hold for growth.

However, critical observers feel that Nigeria has not learnt any lesson from its economic mis-adventures as it continues to repeat the mistakes of the past as clearly shown by the present recession-an accumulation of policy and governance ills over the years.

One thing that is conversant with the world capitalist system is recession. The development trajectories of developed and developing economics show that they periodically go in and out of recession, with some coming out stronger.
By reason of the volatility caused by competing forces in the global economy, recessions do occur. All that is left for countries is the application of the right measures to put their economies back on track. Countries like the United States of America (USA), Germany, Japan and the likes might no longer be talking of double digit growth owing to the giant strides they have already achieved, but budding economies like that of Nigeria if well planned and policies purposefully executed can achieve tremendous growth and development. This entails learning from history.

Let’s look at the global recession of the 1970s and how countries of the West, got out of it. The recession that began in 1974 was severe. The annual rate of inflation in some European countries at the time reached 20%. In Britain in 1975 it was 27%. The economic situation in Britain during this period caused the Labour Party to lose the 1979 election to the Conservatives led by Margaret Thatcher.

The recession of the 1970s shook several countries.  Production fell, economic growth slowed or halted. By 1982, unemployment in the United States rose to 10.8% from a 1969 figure of 3.4%.
The recession worsened the problem of structural employment due to new methods of production that came with the improvement in technology. To boost production, automation and high technology were employed displacing old and unskilled working population, leading to stagnation and inflation at the same time. The combination of inflation and stagnation during this period was dubbed stagflation by the media. This created unprecedented problems for governments.

One critical factor that compounded the recession, was the oil embargo which was a fall out of the Arab-Israeli war of 1973. This was a time oil had replaced coal as the main source of energy to fire industrial complexes of advanced nations. In solidarity with their Arab brothers and sisters in Palestine and neighboring Arab countries suffering from Israel’s military bombardment, the oil producing countries of the Middle East, the strongest bloc in  the Organization of Petroleum Exporting Countries (OPEC)  bonded and cut  oil supply to the world market. They did not only cut supply, they also embargoed the shipment of oil to states accused of supporting Israel. With this action, the price of oil in the international market rose astronomically.

This action of OPEC members coincided with the period the International Monetary Fund had difficulties that caused it to devalue the dollar.
The oil war, caused the big powers severe problems. It undermined their currencies and accelerated inflation. It increased balance of payment deficit and interrupted their spectacular growth. You would recollect that after World War 2, following the US launch of the Marshall plan, the economics of countries of Western Europe, entered a period of boom, leading to the expansion of the global economy. By 1974, after more than two decades of spectacular growth, the boom came to a sudden end.

Before the embargo, there were indications that recession would set in, but the action of OPEC members accelerated it. While the advanced countries suffered from the scarcity and high prices of oil in the international market, Nigeria a member of OPEC enjoyed a period of boom from the high prices of oil.
What did Nigeria do with the gains of the embargo?
It frittered them away. Nigeria would soon find itself in economic mess as the US and countries of Europe found their ways out of the conspiracy of OPEC countries.

Ayatollah Khomeini the founder of the Islamic Republic of Iran 
While, the big powers tried to wriggle their way out of the embargo of 1973, another surge in price occurred in 1979 following the revolution in Iran. Iran had to halt oil exports. In the 1980s, the Iran- Iraq war further worsened oil supply, leading to higher prices of the product. When the big powers could not take the resultant threat to the free movement of tankers on the Persian Gulf as a result of the war, they took naval action.
The US and the West supported Iraq in the war against Iran to weaken the power of OPEC and have easy access to the oil of the gulf. Aside this, oil was also discovered in the North Sea making Britain and Norway exporters of the product. The Netherlands and other countries turned to gas, France turned to nuclear energy. Many countries initiated energy conservation measures, and the prices of oil crashed.

Iran, and oil producing countries like Nigeria ran into trouble resulting from the crash in the prices of oil. The Nigerian economy ran into recession, giving the military an alibi to overthrow the civilian government of Shehu Shagari in 1983.  Gen Muhammadu Buhari became the military head of state. Did he learn any lesson from the situation he met and struggled with from 1984 -1985?
It is the same situation he met in 2015.
He could not fix it then, can he fix now? 
The clock is ticking.

1 comment:

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