Surviving the New Greek Gift

In October 1982 Mexico suddenly announced to the world it could no longer meet its debt obligations. A couple of other third world countries saw the light in the Mexican move and took a cue. Events followed; then the global debt crisis of the eighties. The rest is history.

Indeed the Mexican gift, so to speak, was the global financial epidemic of the eighties. And now, post 2010, the world may soon face a different experience with the new Greek gift that seems to resemble the legendary Trojan horse. And this is a lesson many countries particularly of the third world typified by Nigeria, must learn.

The new Greek gift comes in the form of things that Greece did and did not do within the domestic and global financial system that pushed the European nation into the present doldrums where lenders have passed a vote of no confidence on the country. Points of similarity and difference between the Greek experience and that of Nigeria must be looked at so as to avoid the areas of likeness and consolidate on the areas – positive that is – of difference.

Greece had since the turn of the new century when it joined the Eurozone, suddenly found itself hobnobbing with the strong nations of Europe. Rather than eat with the devil with a long spoon the country had gone on a bazaar, perhaps assuming the Euro itself was commonwealth which had some form of osmotic tendency that would always permeate all nations of Europe. The country was wrong.

Once it joined the European Union the country began to build the castle of comfort in the sky. Between 2001 and 2008, the Greek authorities borrowed freely from the Zone, falsely complying with basic parameters for prequalification. These included limiting budget deficits to 3% of GDP and limiting sovereign debts to not more than 60% of GDP. Particularly between 2004 and 2008, government spending rose by 87% while internally generated revenue only rose by 31% during the period creating a huge chasm of deficit. Worse still most of the spending was not channeled toward galvanizing the real sector but was used to service the unproductive public sector. Meanwhile tax evasion accounted for about half of the 2008 deficit spending and about one-third of that of 2009. At the end of the day, it has turned out that Greece has only played the Russian Roulette and has ended up shooting its economy in the foot.

Following the global 2008 financial meltdown the milk and honey abruptly ceased to flow for the country. The free lenders rolled back credits. These financial do-gooders namely the International Monetary Fund, the European Central Bank and the European Commission requested austerity measures as a prerequisite for a bail out to which the country complied. These measures resulted in heavy cuts in public spending which, like Nigeria, is the biggest driver of the economy in Greece. Unemployment levels also rose. All these in turn resulted in heavy cuts in real incomes and very low purchasing power.

While Greece may be the underdog in the Erozone, Nigeria is the biggest economy in the Afrizone. So it seems. We must remember that the recent rebasing of the Nigerian economy that shot it up to the number 1 slot only took complete account of the service sector which before now was not used and an index. As such the “big” Nigerian economy is not founded on the real sector. To this extent it is difficult to see how Nigeria can consolidate on the difference in its regional status as against that of Greece; the latter being the underdog in its region.

That said, Nigeria’s socio-economic profile is otherwise very similar to that of Greece. There are high levels of official corruption in both countries. Nigeria’s corruption perception index stands at 27. That of Greece is 43. While economic statistics were falsified by Greece during the period of jamboree borrowing, those of Nigeria have remained suspect over the years. Both countries post about the longest working hours in their regions, yet productivity is relatively low from both the private and the public sectors. In Nigeria for example actual production relative to installed industrial capacity is well below 50%. In Greece it is about 67% and still considered low for its region. Unemployment levels are sky high in both countries and the ratios of dependents to an average worker are very high in both countries.

The main lesson from the Greek experience is that global lenders and donors would be looking more closely at statistical claims of borrower nations. In addition borrowers must now expect closer monitoring and evaluation of performance by these lenders of their (borrowers’) economies and governments’ spending.

But Nigeria does not seem to be learning much. What in real terms is our spending profile? Astronomical cost of governance with political office holders earning the most in the world is still very much with us. There is still the reckless sharing between central and state governments from the Excess Crude Account without foreign reserves getting better.  We still romance with the same oil subsidy cabal that holds the nation hostage. We still allow a free fall of the naira with no programme on how to shore up domestic production. There is still no linkage between the education system and the real sector resulting in increasing levels of graduate unemployment.

To worsen things insecurity seems to have exacerbated and now nearing hopeless dimensions. Levels of hunger and anger are at unimaginable proportions. And unless the government gets really serious, sheds off a lot of hangers-on burden, faces squarely the task of governance, a time shall soon come when the poor will have nothing else to eat but the rich.

Chuba  Keshi