And the World Recovers

Some relief at last! The recovery is not total, but with many countries swimming out of recession, at least a road to recovery has been found. Unlike last year when the world, with all its experts, was groping in hopelessness, now there is hope. So much hope that Nigerian legislators even want to increase the benchmark $50 dollars per barrel crude oil price for the country's 2010 budget.

For over a year, the world had lived in fear of the worst economic crisis since the 1930s. The signs were visible from the second quarter of 2008, but it was not until the US government let 160-year old Lehman Brothers die did they appreciate the severity of the crisis.

The collapse of the investment bank, a flagship of enterprise, is widely considered to have marked the beginning of the global recession. The global economy ceased to expand for the first time in 60 years, heading many strong economies into recession, and poorer countries severely hit by the fall in commodity prices and remittances. With a crashed oil market, Nigeria was badly hit.

All over the world, banks were popping like bubbles, gates of manufacturers were cranking shut in response to heavily depressed global consumer demand for goods and services, credits dried up, and stock markets crashed. Job losses were in millions. On January 26, 2009 alone, more than 70,000 people were estimated to have lost their jobs in the US, Europe and Asia.

So deep was the crisis that world leaders had to convene a desperate meeting in search of global solutions. It was similar to the Breton Woods meeting in 1944, when the World Bank and the International Monetary Fund (IMF) were born. Two follow-up meetings have been held since then.

Then in 1944, they knew the only country that had an industrial base capable of pulling the world back from the precipice was the United States. The rest of the world was in ruins. Ironically, it was the US that caused last year's tsunami.

In spite of the desperation there was a global uncertainty about the duration of the crisis and forecasts were unreliable. In the pitch darkness the world panicked.

However, in celebration of the power of the human spirit, the story has changed. The dark clouds are lifting and hope is being restored. US President Barack Obama, who last year described the crisis as a “disaster”, sang a new song last week, when his country swam out of recession.

With the contraction of the US economy reversed, Obama thumbed his chest, saying, “This is affirmation that this recession is abating and the steps we've taken have made a difference.”

The US economy grew at an annual pace of 3.5 per cent between July and September, its first expansion in more than a year and an official indication that the recession has ended. Japan, Germany and France have recently climbed out of recession. China and India are headed for full recovery.

Of course, as Obama noted, this is not synonymous with total recovery from business and economic losses and from unemployment. These would take a while longer, but now there is hope. What I am celebrating is the power of the human spirit and responsible leadership.

The road to recovery has not been easy. A total of about $11 trillion was spent by governments to bail out ailing firms and on loan guarantees. Out of this the world's rich countries spent some $9.2 trillion, translating to about $10,000 per person for each of the one billion people in those countries. China and other emerging countries spent $1.6 trillion on bailout.

Equally inspiring are some other desperate measures taken by these countries. Included in the hefty $3.6 trillion spent on bailout in the US is the ingenious “cash for clunkers” scheme to boost car sales and tax credit for first-time house buyers and strong exports.

In China where the economy grew by 7.7 per cent in the nine months to September, with its car market becoming the world's largest, the government announced at the end of 2008, a four trillion Yuan ($586bn) stimulus plan involving increased spending on infrastructure, such as rail and roads, to boost the domestic economy as exports slumped.

France and Germany are said to have their strong social security systems called “automatic stabilizers”, but they also used stimulus packages.

Japan officially fell into recession last year but government stimulus measures totalling some $260 billion helped to boost the economy, including cash handouts and subsidies to buy energy-efficient cars and home appliances.

The good news for Nigeria is that all these countries on the march to full recovery are oil guzzlers.

Indeed, all the G-20 countries, including South Africa, are on the path to recovery. But for a few countries, not much has been heard from Africa. On a continent where leaders are not accountable to the people, and executive begging has become a culture, efforts to reverse the effects of the global economic downturn have not been visible. Many African countries have been looking for handouts like the $20 billion in agricultural aid pledged them by the G8, and the G-20's pledge to provide $250 billion in trade financing to developing countries.

However, of early denials of the harsh effects of the crisis by some government officials, Nigeria did show concern. Addressing the newly constituted Federal Executive Council, President Umaru Yar' Adua said the mid-point of this administration has coincided with the time of profound economic worries in the world.

He demonstrated this concern in the establishment of a Presidential Steering Committee on the economic crisis, salary cuts for political office holders and the announcement of palliative measures.

But what we are talking about here is results, so I put in a question at the Ministry of Finance. I asked, “Economies around the world are recovering from the global economic meltdown. The latest is the US economy. In summary, how successful has Nigeria's recovery efforts been?”

This is the response from the Ministry. “ Thanks for the question. You would remember that President Umaru Musa Yar'Adua has been consistent about our exposure to the crisis, particularly with respect to crude oil prices and the associated impact on the Current Account Balance as well as the budget.

“You remember also that the country responded to the global economic downturn by placing emphasis on widening the base for non-oil taxes through tax-administration measures as well as focus on expenditures that are growth enhancing. Expenditure has also been rationalised by curbing areas of inefficiency and reprioritising spending to deliver on the promises of the Seven-Point Agenda.

“Also, we have had to focus on key infrastructures with a view to diversifying the base of our economy. The administration's interventions in the power sector are yielding results. The government has also restarted the process of revitalizing the railway lines and services. The government has also made massive investments in agriculture to help jumpstart the development of mechanized farming and guarantee food security in the country, and is already yielding results. The government recently commenced the dredging of the lower Niger. The government continues to invest in Human Capital, and has a Presidency level Millennium Development Goals Office, and remains committed to long term economic development through its Vision 2020 programme.

“Also we had to restore peace in the Niger Delta to speed up development there and to allow for optimal production of oil and gas. The calm restored by Government's amnesty programme and the increasing global demand for oil have justified our decision.

“There are also many positive measures. Although they were not announced as responses to the economic downturn, they invariably have the same objectives. Among these measures are the Commercial Agricultural Credit Scheme and the ongoing banking reforms to ensure discipline and good corporate governance in the banking industry.

“I believe that with all these measures, we will come out of the crisis as a much stronger economy. The real GDP growth rate of about 5% during the first half of 2009 combined with improvement in key macroeconomic indicators support this assertion.”

Co-incindentally, the IMF last week rated Nigeria's efforts. It said “the substantial cushion of oil savings and foreign reserves built up when oil prices were surging, together with bank consolidation and recapitalisation has enabled policy makers to manage the crisis fallout from a position of strength.”

Overall, but for stubborn cases like the UK still in recession despite the country's spirited efforts, including over $2 trillion in bailouts, there are reasons to believe that the worst is over.

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