Only a few years ago Brazil was taunted as a rapidly emerging Nation. Growing at over 4% annually, the GDP grew decently and put Brazil on the BRICS categorization. President Luiz Inacio Lula Da Silva and his Workers Party( Partido des Trabalhadores-PT) led the Nation through what was regarded as an impressive growth trajectory to become the toast of Nations, lining it along Russia, India ,China and South Africa as the World's next economic growth frontier. I remember that in Nigeria, we were unhappy that we were not included in this class, prompting us and some of our friends in the West to push for our inclusion and the adjustment of the acronym to read BRINCS- Brazil, Russia, India, Nigeria, China and South Africa. After all, Nigeria was growing at a decent 6-7% annually for about a decade.

But in the last two years, things have fallen apart and the centre seems not to be holding. Brazil's hitherto impressive growth stalled in 2014 and contracted by 3.8% in 2015, which is its worst year in over a decade and it is estimated to shrink further by nearly 3% in 2016. It is firmly in recession and Goldman Sachs predicts, Brazil is heading into a depression. Unemployment rose to 9.5% in 2015, wages fell by 2.4% and 1 out of every young Brazilian is currently unemployed. Inflation ended 2015 at nearly 11%. Debt is accumulating, tripling to nearly 1trillion US Dollars in the last couple of years. Today debt is said to represent 67% of Brazil's GDP and is projected to reach 80% by 2017. Budget deficit has reached 10% of GDP. The rising debt and the slowing growth has prompted Credit- rating agencies to cut Brazil's bond status to Junk.

This economic descent has been accentuated by a political crisis which started about two years ago and which is being currently fueled by new revelations in the Operations Carwash ( lava Jato) which uncovered a bribes- for- contracts scheme that funneled some $800 million out of Brazil's former economic crown Jewel, the state-run energy conglomerate- Petrobas(Petroleo Brasileiro S.A). Mrs Dilma Rouseff who is the current Brazilian President who formerly chaired the company managed to win re-election in 2014 but has faced staunch right-wing opposition with attempts to stop her taking office,vote-rigging accusations, massive street demonstrations and finally, the opening of an impeachment procedure, still underway,based on alleged budget manipulation, designed to mask the government's fiscal crisis in the run-up to the elections. In an apparent miscalculated bid to shore up her government, Mrs Rousseff appointed her predecessor and political mentor- Lula Da Silva to be chief of Staff, a move that largely shields him for now,for prosecution in the corruption scandal involving his ties to giant construction companies associated to Petroba

This move has worsened her unpopularity and increased the right wing opposition against President Rousseff. Recently 3 million people including labour unions took to the street in 200 cities across Brazil, mostly in Rio de Janeiro and São Paulo supporting her impeachment for corruption and incompetence. There is loss of confidence in her ability to govern and this is followed by massive loss of investor confidence in the once emerging market star, following years of erratic economic policies. The interaction between political crisis and the economic outcomes have become self-reinforcing leading many Brazilians to conclude that "in the last decade, they thought that Brazil was climbing to the top of the hill of Progress and National greatness. They had believed that Brazil could be one of the big powers of the World. But they have only recently realized that they were climbing to the top of the corruption hill"

The first parallel is that the major cause of Brazil's economic woes is the sharp drop in commodity prices. Brazil and Nigeria depend on commodities, especially crude oil for its National revenue. The fall in oil prices and other agricultural commodities has hurt both countries terribly resulting in the contraction of both economies. Nigeria's GDP descended from 6.5% growth in 2014 to 2.85% in 2015, just as Brazil went from stagnation in 2014 to a 3.85% contraction in 2015. Though Brazil has a bigger industrial base and better diversified economy, both countries remain vulnerable to global commodity price fluctuations.

The second parallel is that corruption is a big issue in Brazil and Nigeria and that the economic crisis is accentuated by official corruption. Both the past and present Presidents of Brazil are accused of corruption and are being investigated. Thirdly is that the government run energy companies in both countries- Petrobas and NNPC are strongholds of corruption. The issue of corruption in NNPC seems to have been with us since the Military till date. Therefore if corruption will be wiped out in both countries, it must start with the Petrobas in Brazil and NNPC in Nigeria. Fourth is that both countries famed rise as emerging economies either in BRINCS or among the top twenty largest economies in the World is still ephemeral, standing only on the performance of commodities. Slight challenge exposed the shallowness of the economic rise or miracle of both Countries. There is a need to build greater growth stability through consistent pro-business policies, transparent and enlightened governance .


Current Brazil's  lowered attractiveness to investors has been caused by the huge deficits which currently exceed 10% of GDP. This is worsened by the growing huge National Debt which is nearly 1trillion Dollars and equivalent to 67% of GDP. Most of the Debt has happened by Government borrowing to stimulate the economy in the past and in the present. It is known that Budget stimulus has left Brazil's public finances over stretched as Brazil seemed to adopt the Asian Model. Nigeria is currently running a 6.06 Trillion Naira Bugdet with a stimulus focus, and an inherent deficit of 2.22 Trillion Naira which is nearly 40% of the budget. We must therefore watch our borrowing and deficit. In the 2016 Budget, Debt servicing is 1.48 Trillion Naira which is nearly 25% of the budget( a quarter of the budget) and compares un favorably with our Capital Budget of 1.59 Trillion Naira( 30% of Budget). In the long run, this can be counter productive as we have seen in Brazil.

Secondly, Corporate Borrowing has risen three fold to around $290 Billion between 2002-2015 in Brazil and many large companies are already in financial distress. Grupo OAS-an engineering firm involved in the corruption scandal has declared Bankruptcy. Steel Maker Usiminas has suspended loan repayments to Banks and as the end of 2015, 54.1 million Brazilians were behind on loans obligations totaling $60 billion . Nigerian lenders and borrowers must be careful because sustained economic crisis in Nigeria may precipitate significant loan defaults at both corporate and consumer levels as we have seen in Brazil.

Thirdly, mass demonstrations against the government because of the worsening economy and accusations of corruption has created additional political problem for the Country. In Brazil, the people are accusing all politicians as being corrupt because politicians from the opposition parties have been implicated in the corruption scandal. In Nigeria, luckily, President Muhammadu Buhari is stoutly fighting corruption but when the chips are down, Nigerians know that corruption is not the preserve of any political party, even if the current investigations seem to give that indication. The lesson for Nigeria now is to take every measure possible to revive the economy fast and reduce the current and growing silently audible grumblings of Nigerians who can not get electricity, have extreme difficulties buying expensive Petrol or diesel to fire their generators, who are losing their jobs and whose savings( if any) and meager earnings are being wiped out by inflation. There is a call for urgency of response if we have learnt any lessons from Brazil.

 Mazi Sam Ohuabunwa OFR


  1. This is an excellent piece. I hope government would listen and take note.


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