The
political logjam in the United States which has forced partial
government shutdown over refusal of the legislature to review the debt
ceiling of the Barack Obama government will directly affect Nigeria’s
economy, unless the crisis is resolved immediately.
Co-ordinating
Minister for the Economy and Minister of Finance, Dr. Ngozi
Okonjo-Iweala, as well as the Managing Director of the International
Monetary Fund, Ms Christine Lagarde, gave the warning at separate
briefings at the on-going annual meetings of the World Bank and the IMF,
in Washington, D.C., the United States.
A
protester covers his mouth with a dollar bill as he joins others in a
demonstration in front of the US Capitol in Washington, DC, on October
1, 2013 urging congress to pass the budget bill. US President Obama
slammed Republicans for shutting down the government as part of an
"ideological crusade" designed to kill his signature health care law.
The US government shut down on October 1, 2013 for the first time in 17
years after a gridlocked Congress failed to reach a federal budget deal
amid bitter brinkmanship. Some
800,000 federal workers have been
furloughed in a move reminiscent of two previous shutdowns -- for six
days in November 1995 and 21 days from December that year into early
1996. AFP Photo
A
protester covers his mouth with a dollar bill as he joins others in a
demonstration in front of the US Capitol in Washington, DC, on October
1, 2013 urging congress to pass the budget bill. AFP Photo
“The
present situation in the US creates uncertainties for people in the
developing and emerging markets; that is why we look forward to a swift
resolution of the issue of the debt ceiling.
“If
not resolved it could upset the market, we could see higher interest
rates, it could directly affect Nigerian bonds — as you know we do not
have only the 500 million Euro bond we floated two years ago but also
the highly successful Euro Bond we floated recently about three, four
months ago”.
The
minister said that the present administration was working hard to
ensure that the growth which the nation’s economy has recorded was
converted into better living standards for ordinary people.
According
to her, the Federal Government is massively investing in infrastructure
facilities, especially electricity which she identified as Nigerian’s
most critical development impediment, among both the rich and the poor.
She
said: “We are utilizing the funds freed from petroleum subsidy to
create social safety nets in the area of maternal and infant health,
which has won a commonwealth award for its initiative.”
Also
speaking on implications of the US shutdown for the Nigerian economy,
Ms. Lagarde said, “there will be negative consequences for the US
economy and there will be very negative consequences outside of the US
economy. And the IMF does not take a stand and does not make a
recommendation as to how politically this matter can be resolved.
“This
is not for the IMF to say. We don’t take political views, we only look
at the economic consequences of measures decided anywhere in the world.
When it affects the largest economy in the world, we are bound to not
only look at the immediate domestic consequnecs but we also have to look
at what happens elsewhere, and we have to engage in a dialogue with
members to see how they can best prepare for that.
“What
I can tell you is that the transmission channels elsewhere including in
Nigeria would include the trade channel, because the US economy would
have to balance its budget and would cetrainly reduce its economic
activities starting from the third quarter onwards.
“I
can tell you that the second channel which is probably going to be much
more active is the financial channel. If that matter is not resolved,
we are likely to see volatility, uncertainty and consequences on the
rest of the world.
“As
far as Nigeria is concerned, clearly we would have to look into how it
would affect the price of oil, for instance, because Nigeria is an oil
consuming and exporting country.”
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