How US Shutdown May Influence Nigeria

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."v