Published On: Fri, Jul 10th, 2015

When the wrong people get elected; Greece debt crisis and lessons for Nigeria

 

 

I am fairly sure that not many Nigerians are aware, much less interested, in the political drama unfolding in Greece with wider implications for the European Union. But we should and for good reasons too. There is a lot of similarity between the happenings in Greece and what is going on in Nigeria in particular and most developing economies generally. We should be interested in these developments because we are already primed for a Greek encore.

What happened on Sunday July 5, when the Greeks voted against the reform programme being negotiated with its creditors, was not really unexpected; the vote was not just a Greece affair but its outcome resonated across the EU. Its origin dates back over six months when the people voted for change by electing the Syriza or the Communists party led by Alexis Tsipras, instead of the ruling party that had struggled against opposition to implement a reform regime. Like most countries cutting their coat according to their size, Greece had lived above its means, borrowing cheap assets to finance welfare and consumption to sustain a false lifestyle and status quo.

The massive endorsement of the anti reform agenda has worsened the situation for the country rather than improve the outcome. The Syriza party won the election on opposition to the reform, but the creditors, including countries that have austerity policy, insist that you either reform your economy to eliminate wastages and inefficiencies to ensure sustainable growth or pay us what you owe. The vote has further hardened the positions because while the government has obtained a landslide approval from the people to reject reform, they still have to deal with the creditors including the IMF, who are holding the purse string.

Negotiation is not a one sided expectation or threatening and blackmail from a side; negotiation involves two parties coming together to give up their individual desires for a common position and agreement. But this is not what the Greek government has done; they simply made demands and refused to shift ground – negotiating on its own terms with people they are indebted to. The Greek government preyed on the fears of the EU of a possible ‘Grexit’ – Greece’s exit from the EU and possible alliance with the eastern axis powers of China and Russia.

In all this political and ideological grand standing and shenanigans by the Greeks, the country and economy has been crippled. About 40 billion euro has left the country since the negotiations deadlocked; banks have been closed for two weeks; even with withdrawals pegged at mere 60 euro per day liquidity has dropped to less than a billion euro in the entire economy; and more importantly, the new government is ostensibly orchestrating this crisis to hide its incompetence and unrealistic ideological posturing to discharge its mandate to the people.

Without an Emergency Liquidity Assistance, ELA, from the European Central Bank, ECB, this week, Greece will be bankrupt. What will be its likely effect on the EU? Greece constitutes only 2 percent of EU economy and 0.2 percent of global economy, and as such it is tempting to dismiss its effect on regional and geopolitical scale. However, a significant portion of the original debts were banking debts acquired by government during the financial crisis of 2008 and with a default and closed access to ECB refinancing, most banks will go down with ripple or domino effect.

Unlike other countries which faced the same problem during the meltdown, such as Ireland, Spain, Portugal, and even France, Greece’s situation has persisted because of the slow pace of reforms. Those other countries swallowed the bitter bill pragmatically and today they are moving forward, while Greece pussy footed. Even France, the second EU super power is still grappling with its reforms package which includes raising taxes on the rich; reduce pension liability by increasing retirement age, which even Germany, he financier of EU, has implemented; cutting public welfare expenditure and freeze wage increase etc.

What then are the wider political and economic implications of this crisis and its specific lessons for Nigeria? First, it is a vote for tyranny and dictatorship in the country. Most democratic dictatorships rode on such popular but irrational mandate in the midst of a strangulating economic crisis. Nazi Germany is the world’s famous example of this tradition while President Putin’s Russia is a living case. By giving it a 61 percent endorsement, Greeks have ceded their right to the government to find a solution they may yet regret it.

Second, without an urgent and immediate ELA, Grexit is a possibility to the warm embrace of China and Russia – a geopolitical tragedy for NATO and EU. Thirdly, it follows a stereotype on reform or SAP, but refutes the neocolonial accusation often associated with it. Most Development economists and political sociologists – the Dependency school – had made a gospel of SAP as an IMF tool to recolonise the Third world. Spain, Ireland, Italy and France have implemented reforms. Mark Blyth in his recent book, Austerity: This History of a Dangerous Idea represents such ideological delusion.

Fourthly, people must know when not to elect the wrong people. Election is a mass decision which often does not seem to produce the best and most appropriate for the situation. The masses are fickle and tend to be influenced by their feelings and vote with their feet like what happened in 2015 election in Nigeria. The past four years of reform in Greece may have been hard on them but it is a hardship that had an end and prospect. By electing the naysayers and seeking a quick and painless resolution to the crisis, which they created themselves by their unrealistic living, they have unconscionably lost the expected benefit of their sacrifice.

Now, did SAP fail as the agitators and antagonists used to argue? Of course, not! It is the new leaders that created the present situation, but it will be blamed on reform. What people usually ignore in the debate on reform is that problems, especially economic, are easy to create but very difficult and sensitive to tackle because they assume political dimension, and leaders are extremely lethargic toward such decisions due to their implications for electoral fortunes.

For Nigeria in particular, they Greeks are paying the price of people who live above their means. We have lived such lifestyle when money is not the problem but how to spend it, that it is becoming a real challenge to adjust to reality even in the face of dwindling earnings from our main revenue source – oil. If we don’t tighten our belt and cut off the excess baggage of conspicuous consumption and ostentatious living, we will sooner than later go the Greece way. We seem to have forgotten so soon that by 2003 when the debt relief came, Nigeria was already tethering on debt default.

For those who can see, the economic prognosis for our country is dire. Oil price is not like to rise above $70 per barrel for a while and with governments unable to meet their basic obligations of payment of salaries and contractors, we are already defaulting although to local creditors. With a nuclear deal in sight with the six world powers, Iran, the second largest producer in OPEC with about four million bpd, will soon rejoin export. This means oil price will come under more pressure.

Beside Iran, global economic outlook is gloomy. China, the growth driver in the past decades, has slowed down. Experts are already predicting another recession with interest rates in western economies at rock bottom level. This is further compounded by the abject infrastructure deficit in the country making the economy incapable of any productive activity.

Unfortunately, we have elected a government that is clueless and yet to find its bearing in the ocean of problems. Like the Greek, and understandably so, this government will concern itself with political survival rather confront squarely the economic problems facing the country.  The challenge of economic development in most nations is the tendency to mix economics and politics. May be it is difficult to separate them but not trying at all is the tragedy.

Now the Greeks’ vote was a political decision when the problem is economic. So, how do you use politics to settle economic problem. That is the challenge and lesson for the government of President Buhari as he faces the task of changing Nigeria.

 

 

 

 

 

 

 

 

 

© 2015, Hallmarknews. All rights reserved. Reference and link to this site is required if you wish to reuse any article.

Reactions from Facebook

comments and opinions

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Most Shared

Recent posts

  • My Mandate Is To Deliver The Ecobank Brand Promise As Platform Of Choice In Nigeria – Akinwuntan

    The Managing Director, Ecobank Nigeria, Mr Patrick Akinwuntan has reaffirmed that his mandate in Nigeria is to grow the Ecobank brand by delivering it as a brand of choice. The bank Managing Director stated that Ecobank service will be available and within the reach of every Nigerian either in their homes or locality through any […]

  • Experts blame shareholders as CBN revokes Skye Bank’s license

    FELIX OLOYEDE The failure of Skye Bank shareholders to recapitalize the bank, which has been battling with acute liquidity challenges is responsible for the revocation of its operating license of Skye Bank by the Central Bank of Nigeria (CBN), experts have declared. Prof. Joseph Ajibola, former President, Chartered Institute of Banking of Nigeria (CIBN) opined […]

  • Bulls return to stock market, appreciates 0.33%

    By FELIX OLOYEDE The Nigerian equity market on Thursday trended upward, reversing the previous day’s negative sentiment. The bourse gained 0.33 per cent, propelled gains recorded in medium and large capitalized stocks with WAPCO setting the pace. The All Share Index (ASI) appreciated by 105.77 absolute points, representing a growth of 0.33 per cent to […]

  •  Elumelu Foundation to launch world’s largest digital platform for African entrepreneurs

    The Tony Elumelu Foundation has concluded all plans to launch the world’s largest digital platform for African entrepreneurs and the African entrepreneurship ecosystem –  TEFConnect. TEFConnect will officially be unveiled at this year’s TEF Forum, taking place on October 25, 2018, at Federal Palace Hotel, Lagos, Nigeria. Harnessing and building on the success of Africa’s […]

  • NNPC declares 46% trade surplus

    Nigerian National Petroleum Corporation (NNPC) has stated on Thursday  that it had trade surplus of about 46 per cent in oil sales in the month of April, 2018. NNPC Group General Manager, Group Public Affairs Division, Mr. Ndu Ughamadu, in a statement noted that the trade surplus which amount to N17.16 billion was part of the highlight […]

  • 2018 GTBank Fashion Weekend to hold in November

    Fashion enthusiasts all over the world will be treated to an unparalleled exposé of Africa’s finest in fashion at the 3rd edition of the GTBank Fashion Weekend, which is bid to hold between  November 10-11, 2018, The two-day event will bring together renowned fashion personalities from around the world and budding small businesses in the […]

  • NDIC hosts IADI Africa Regional Committee AGM

    The Nigeria Deposit Insurance Corporation (NDIC) will host the next edition of the International Association of Deposit Insurers (IADI) Africa Regional Committee (ARC) Annual General Meeting and Technical Assistance Workshop. The event which has been scheduled to hold at the Four Points by Sheraton Hotel, Lagos from September, 25th – 27th 2018, would be focusing on Financial […]

  • Ambode 2019: The godfather’s revolt

    By OBINNA EZUGWU As uncertainty continues to hover around the second term bid of Lagos State governor, Akinwunmi Ambode, following an alleged plot by the state’s political godfather, Senator Bola Ahmed Tinubu to hand the ruling All Progressives Congress (APC) ticket to the Managing Director of Lagos State Property Development Corporation (LSPDC), Mr. Babajide Sanwo-olu, […]

  • FG to generate N6bn from concession of 20 Silos

    The Federal Executive Council (FEC) on Wednesday approved the Concessioning of 20 out of its 33 Silos to private sector operators at the cost of N6 billion. The Minister of Agriculture and Rural Development, Chief Audu Ogbeh, revealed this when he briefed State House correspondents on the outcome of the meeting of the Federal Executive […]

  • Insurance sector sell-off drags capital market down, loses 0.02%

    The Equity Market on Wednesday shed 0.02 per cent, reversing yesterday’s positive sentiment. The downturn was on the back of the massive sell-off in Insurance stocks among others, which dragged the All Share Index (ASI) down by 5.88 absolute points, representing a dip of 0.02%, closing at 32,375.12 points. The Market Capitalization also dipped by […]

  • Number of extremely poor continues to soar in Sub-Sahara Africa

    Although globally, extreme poverty has rapidly declined, the number of people living in extreme poverty is, however, on the rise in Sub-Saharan Africa, comprising more than half of the extreme poor in 2015, a new poverty estimates by the World Bank has shown. Forecasts also indicate that by 2030, nearly 9 in 10 extremely poor […]

  • MAN sets for 46th AGM as Jacobs bows out 

    The Manufacturer Association of Nigeria (MAN) has unveiled plans for its 46th Annual General Meeting and Manufacturers Annual lecture/Presidential Luncheon, which is scheduled for  September 26 and 27, 2018 in Lagos. The occasion will also see the outgoing President of MAN, Dr. Frank Udemba Jacobs end his 4-year tenure. The event will play host to […]

  • Naira firms up marginally at I&E forex market

    The Naira appreciated slightly against the dollar at the Investors and Exporters (I&E) Foreign Exchange window on Wednesday, assisted by new interventions by the Central Bank.  The local currency was up 0.09 per cent after opening at $/N363.03, traded high at $/N364.75 and eventually closed at $/N362.97. A total of $112.66 million was transacted at […]

  • Heritage Bank partners NPA to support improved ports infrastructure in maritime sector 

    The maritime sector through Nigerian Port Authority (NPA) is set to get improved infrastructural boost as Heritage Bank Plc revealed plans to provide financing for building critical maritime infrastructures and other aspects of transport sector projects once policies driving the projects are well structured. The MD/CEO of Heritage Bank, Ifie Sekibo disclosed this as one […]

  • Rivers, Delta, Bayelsa lead BudgIT’s 2018 fiscal sustainability index

    BudgIT, recently analysed the fiscal condition of states and noticed that states fiscal account generally improved on the back of increasing oil revenue. It was critical that State governments embrace a high level of transparency and accountability, develop workable economic plans, take haircuts — especially on overheads — expand their internally generated revenue (IGR) base, […]

  • CBN intervenes with $210m in forex market

    The Central Bank of Nigeria has sustained its intervention in the Inter-Bank Foreign Exchange Market by injecting 210 million dollars into the various segments of the market. The Director, Corporate Communications, CBN, Mr Isaac Okorafor, on Tuesday in Abuja, said the apex bank offered 100 million dollars as wholesale interventions and allocated 55 million dollars […]