5.2.8 THE PETROLEUM MARKETING SECTOR
This sector is also very sensitive to the crisis. Four companies were under studied, which are Chevron, Mobil, Oando, and Total. The various models filter and observed booming in the stock market as can be seen from their models (before crisis) in chapter four. They were all enjoying police increase monthly with total oil (N8.929), Oando (N17.848), Chevron (N21.677) and Mobil (N8.526). During the crisis, they all started recording a very sharp decrease with total Oil (N-10.302), Oando (N-16.132), Chevron (N-24.454) while Mobil Oil had (N-2.139) decrease.
5.2.9 OTHER SECTORS
It was observed that the following company recorded significant difference in their stock pries, RT Briscoe and Cadbury Plc. The other companies did not record any significant difference in stock prices, before and during the crisis.
5.2.10 INFLATION RATE
Time series regression was used to analyze the inflation data collected during the studied period. The general model shows that the model is significant. The slope in chapter shows that the inflation rate in Nigeria is on the general increase in share price of N0.597 per month. When the data was spitted to Before and during the crisis, the two models have their corresponding P-value to be 0.000 and 0.045 respectively. This suggests that the inflation rate in Nigeria was increasing faster before the crisis than during the crisis.
5.2.11 CRUDE PRICES
The prices of crude oil between July 2007 and 2009 were also regressed against time. The models generated a critical look, and it was observed that because of global financial crisis, crude oil prices is declining at a monthly rate of N1.303 where as before the crisis impact in Nigeria. It was increasing at N4.027 per month. During the crisis, the crude oil prices decreases by N-10.083 per month.
Also, the graphical presentation enables us to see clearly the impact of the Global financial crisis on various sectors of the economy.
5.3 RECOMMENDATIONS
Between 2008/2009, we have witnessed a number of challenges such as falling crude oil prices, weakening of the naira and sharp drop in share prices on the Nigeria stock market, which has resulted in the slow growth of the Nigeria economy during the period with the nation facing an underlying economic crisis characterized by structural imbalances, In view of the above observations, I want to recommend as follows:
• Better fiscal coordination between the federal, state and local governments is necessary for overall macro-economic stability hence inter-governmental organs involved in the coordination of fiscal policy and public expenditure should be strengthened to ensure greater accountability, transparency and predictability.
• Nigeria, as an oil exporting country, ought to be mindful that the world was now searching for alternative sources of fuel and should therefore focus on diversification away from oil into agriculture, finance, solid minerals and tourism, among others.
“Such diversification entails the rapid and sustained development of the non-oil economy by improving the business environment and developing appropriate technological capabilities for enhanced competitiveness of private enterprise;’
“Diversification strategies should take into account the rising prospects of renewable (alternative) energies for sustainable economic development†Eboh (2009).
• In order to ameliorate the risky reliance on oil earnings as the predominant basis of public revenue and fiscal planning, governments at all levels were urged to improve domestic resource mobilization by strengthening the tax system to make it more inclusive, transparent, credible and accountable.
Credible tax reforms will entail mutual accountability and shared responsibility between the government and the people.
• Nigeria should adopt a sustained planning framework characterized by longer- term, Medium-term and short-term (perspective) plan vis-à - vis strategies as basis for annual budget.
• There is a need for new stability of the global financial system in which the voice of every nation, every continent is heard and their concerns taken into account.
• Non-bank financial sector such as Pension Funds should also be regulated. This is to protect pension funds from being invested in some of this complex instruments to enable them meet their liquidity obligation as at when due.
• There needs to be an understanding of whether and how Nigeria and other developing countries can minimise financial contagion;
5.4 CONCLUSION AND FURTHER RESEARCH
There are several conclusions that can be drawn from studying global financial crisis in Nigeria and the world at large. The timing and the pattern of the data in the episodes seen to fit a time series regression interpretation of financial crisis. Rather than starting with bank panics, most financial crisis began with a rise in interest rate, in stock market crash, fall in oil prices and the widening of interest rate spread. It was observed that the current crisis may have been caused by the political leaders who facilitated the global economic crisis and also from the graphical presentation and statistical analysis it is also observed that the global financial crisis is already causing a considerable slowdown in the Nigerian economy and steps has to be taken to come up with policies that will minimize the spread of this crisis to other sectors of our economy.
Considering each of the sectors, it has been observed and established that the financial crisis has brought financial stresses, losses, kidnapping/hostage taking, bankruptcies, inflation, De-accumulation of foreign reserves and pressure on exchange rate, Capital market downturn, weaker health systems and even more difficulties meeting the Millennium Development Goals.
Furthermore, a financial panic frequently was immediately preceded by a major failure of financial firm and the beginning of recession which increased uncertainty in the market place. The increase in uncertainty and the rise in interest rates magnified the adverse selection problem in the credit market, while the decline in the stock market increased adverse selection and moral hazard problems. The increase in adverse selection and moral hazard problems then led to a decline in investment activity and aggregate economic activity.
Only after these problems have manifested themselves in financial markets do we find that a bank panic occurs. Thus the theory helps to explain the timing of banking panics, that is, why they occurred when they did because it sees bank panics as a consequence of high interest rates, a major failure of a corporation or a nonbank financial institution, or weak business conditions stemming from a recession which make depositors nervous about the health of banks that hold their deposits. Since depositors cannot easily differentiate good banks from bad banks, when this adverse aggregate information appears, they worry about potential losses on their deposits and withdraw funds from the banking system, precipitating a panic. The facts about the crisis episodes discussed in Mishkin (1991) are thus entirely consistent with Gorton’s (1998) view that bank panics are predictable.
The economy experiences some costly adjustment to both rising and falling oil prices. When oil prices rise, slowing economic activity is further retarded by adjustment cost. When oil prices falls, stimulated economic activity is somewhat off set by adjustment cost. We then have asymmetry: rising oil prices retard economic activity while falling prices stimulate it.
