A curious Nigerian bailout

A curious Nigerian bailout


Bob Etemiku

Following a global economic recession in 2008, then Secretary of the United States Treasury under the George W. Bush administration, Henry Paulson, proposed a plan to recapitalise the US financial system. It was a backup plan, which eventually became the Emergency Economic Stabilisation Act of 2008, called the bailout.

The plan was a call on the US government to buy about $500 billion in distressed assets from many of the banks and financial institutions that were going under. Before the winter of 2008 when the US government took over mortgage institutions like Fannie Mae and Freddie Mac, the Lehman Brothers had become insolvent.

To understand why there was a need for the US government to bail out these distressed institutions, we must first examine some of the events, which triggered the global recession. According to Wikipedia, from 1970, world capital markets were not as free as they were in 2008. The freedom that these financial institutions began to enjoy after 9/11 created a loose conglomerate in the financial system of the world economy together with a measure of recklessness.

Stock markets around the world like Britain’s FTSE 100 Index, Germany’s DAX, and France’s CAC all took a dive. The Russians suspended trading in shares after the RTS stock fell drastically. Iceland’s major banks put trading on ice, and began to cook up a plan reminiscent of the US bailout. Nonetheless, the bailout worked for the US and world economy. Even though the plan resulted in the fall of the US dollar against the major currencies, it created stability and stemmed the financial crisis of 2008.

Almost a decade after US banks and financial institutions got a bailout arising from a global economic recession, Nigeria received $61.7 billion, nearly N13 trillion in four years accruing from unexpected income from a rise in the price of oil. In spite of the payments of these amounts to the states and federal governments, power supply has not stabilised.

Roads in major cities are still relics of the 80s where a structural adjustment programme created chasms of development in Africa. Our hospitals are still consulting clinics, and even though many fancy buildings spring up in some states and are called hospitals, their builders still rush abroad for treatment if they have a headache.

In one year alone, Nigerians spend more than N120 billion in medical tourism. Universities are still underfunded, children still learn sitting on floors in primary schools, and university graduates still cannot get jobs. But by far, the most troubling

For the concluding part of this story and others, grab your copy of The Point from your nearest vendor