When Nigeria last faced an economic downturn of this magnitude, in the early 1980s, the inaction of a fledgling civilian government led directly to a military coup, followed by decades of political instability and economic malaise. Today, the price of oil, Nigeria's biggest export earner, has nosedived, the stock market has crashed and foreign investors are pulling out – but this is not the 1980s.
Though Nigeria's economy faces its biggest challenge for decades, it is in a strong position to weather the storm. The political situation, while still beset by vested interests and petty squabbling, is stable. A civilian government is handling the crisis and, while many of its decisions have been criticised, president Umaru Yar'Adua and his central bank chief have received broad support.
All eyes have turned to the country's newly reformed bank sector, which has been hit hard by losses through margin lending that could be in the region of N14,000bn ($9.5bn). Whereas 10 years ago this would have spelt disaster for the banks and the economy, today, thanks to the consolidation of the sector, average capital adequacy ratios are more than sufficient to soak up the losses.
There will, of course, be casualties, but the prospect of a systemic meltdown of the bank system is a distant one. Much more needs to be done in Nigeria before it can reach its true potential – the country's infrastructure remains weak, corruption is an ever-present shadow and militant action in the oil-rich Niger Delta has stymied production. But the country has a new-found political and economic resilience that many hope will guide it through the current crisis.
