Managing the Global Economic Meltdown in a Consolidated Banking Sector of Nigeria

Current Research Journal of Economic Theory 2(1): 16-21, 2010 ISSN: 2042-485X © M axwell Scientific Organization, 2009 Submitted Date: December 09, 2009 Accepted Date: December 28, 2009

Published Date: January 30, 2010

Managing the Global Economic Meltdown in a Consolidated Banking Sector of Nigeria: Rhetorics or Realities
J. David Agaba and M.S. Tenuche Department of Political Science Kogi State University, Anyigba
Abstract: This paper interrogates the implications of the global economic meltdown on the Nigeria Economy within the framework of a consolidated Banking sector. It investigates the ability of the Nigerian financial sector to withstand the challenges of the global economic meltdown in the face of the current crisis facing the banking sector. W e argu ed in this paper that the financial melt down though a reality in the country 's financial sector, has limited impact on the economy because Nigeria’s economy had been heavily weighed down by internal crisis. W e how ever, argued nonethe less that because the glob al econom ic meltdow n coin cided with the age of globa lization that emphasis interconnectedness and b reakin g down of all ma rket barriers, Nigeria cannot be an exception to its deva stating effects since globalization in the first instanc e is not a friend to developing economies like ours. Key w ords: Banking sector conso lidation, central bank of Nigeria, ec onomic development, economic meltdown and globalization INTRODUCTION Broadly defined, a recession is a downturn in a nation 's economic activity. The consequence s typica lly include increased unem ployment, decreased consumer and business spending, and declining stock prices. According to Og unley e (200 9), recessions are typ ically shorter than the periods of economic expansion that they follow, but they can be quite severe eve n if brief. Reco very is slower for some recessions than from others. The global financial crisis, brewing for a while, really started to show its effects in

References: Abu-Maji, and Abu-Ameh, 2009. Analysis of the causes of the recent global financial crisis and how it may affect Nigerian economy . Kogi.J. M anag e. Sci., Elvic Printing and Publishing, Lokoja, Nigeria, 2(3): 76-83. Appiah-Dolphyne, 2009. Nigeria’s Banks, Stock s in Crisis. Daily Triumph, 12 March 2009. Fiaka, L., A. A dekoya, et al., 2008. Nigeria: Global Financial Meltdow n. Co untry Panics. Vanguard, 13 October, 2008. Obi, C.K ., 2009 . Global financial meltdown and millennium development goals. Being a paper presented the 2nd international conference on the theme: Millennium development goals the challenges in Africa organized by the Faculty of the Social Sciences, Delta State University Abraka. Nigeria. 20 All agreements on major projects in the oil sector which the Nigerian National Petroleum Corporation, NNPC, entered into with its key partners are to be reviewed. NNPC has disclosed that the action is informed by difficulties in funding the prime projects as a result of the present global economic crunch. The Corporation said that in order to keep the projects on course, it has adopted austerity measures in its capital expenditure and reviewed the cost of the affected projects. It plans to further review the Memorandum of Understanding (MoU) it signed with some companies on new oil and gas projects in the country. As earlier noted, the increased high rating of the Nigerian Bank s in the world econom y sugge sts that where properly managed the Banks can play key role in the reversal of the economic recession in Nigeria. On of the major hand icaps to the ind ustrialization process in Nig eria is the lack of capital for inve stment. Arising from this developm ent, Nigeria had been highly dependent of foreign capital for industrial growth and development of the various sectors of the economy. Foreign direct investments often had string attached which has been unfavourable for economic development. Abu-Maji and Abu-Ameh (2009) dealt extensively with the negative implications of international capital on Nigeria’s agricultural sector. Tenuche (2001) also documented the negative role of the foreign capital on the industrial sector. These sec tors are keys to econom ic developm ent. This trend can be reverse with a focus of the Banking sector of critical sector of the economy through investment of capital. CONCLUSION AND RECOMMENDATION W e have been able to give a historical and analytical account of the causes, dimension and impacts of the current globa l financial crisis in the world on the economy and most especially on the finance services sector and how the Soludo’s led financial sectors recapitalization and consolidation have been able to bail the Nigeria banking sector from the total devastating impact of the meltdown. In spite of the current crisis rocking the sector under the new dispensation of Sanusi Lamido, our analysis shows firm and decisive financial and econom ic policy of a nation is a function of a positive and productive leadership which can see beyond today whatever policies and decision it takes. Similarly, it shows clearly that the stronger the financial sector of a country is, the more stable the econom y will be. It is therefore safe to conclude that beyond the rhetoric, it is today a reality that the consolidated banking sector of Nigeria under Soludo (2009) has positively affected the Nigeria’s banking and financial service sector and helped to cushion the effects C C C C Curr. Res. J. Econ. Theory, 2(1): 16-21, 2010 Ogbonna, 2008. Nigeria banks: withering through the storm of the global economic meltdown. Thisday Newspaper, November 3, 2008. Ogunleye, 2009. H ow global financial meltdown has affected Nigerian banks. The Sun News online 5 March, 2009. Ogundipe, Y., 2009. Global economic meltdown and survival of microfinance banks. Being a paper presented at the 3 rd Bi-Annual International Conferen ce of M anag eme nt and Social. Soludo, C.C ., 2009. Banking in Nigeria at a time of global financial crisis. Being a speech read at the special interactive session on the banking system, Lagos. Soludo, C.C., 2008. Nigerian Banks; Strong, Stable and Reliable Africa News Service, 4 November, 2008. Tenuche, M., 2001. The political economy of industrialization in Nig eria: A case study of The Ajaokuta steel pro ject. Unpublished PhD. Dissertation Submitted to The Department of Political Science, Ahmadu Bello University Zaria. 21