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Project Topic: The Impact of the Recent Global Economic Meltdown on the Nigerian Economy




Never since the 1930’s Great Depression has the world faced such lever of financial crisis as the current credit crunch that is threatening to undermine the stability of the world’s economic system and in turn rewrite economic theories that have hitherto been regarded as sacrosanct. The credit crisis which was ignited in the US, but took its first victims in the  UK in 2007 resulting in the collapse of Northern Rock, was triggered by rising defaults by sub-prime US mortgage borrowers;  (Simon E. and Tonia O, 2008).

In the US there are three types of mortgages namely: Conventional, interest-only and sub-prime.

In conventional mortgages, part of each month’s payment goes towards paying off the principle and part goes towards interest. (Fiakpa, L. et’al: 2008)

In an interest only loan or mortgage, the borrower only pays interest each month. This makes it cheaper than a conventional mortgage.

Sub-prime mortgage is granted to borrowers whose credit history is not sufficient to get a conventional mortgage or who do not quality for market interest rates owning to various risk factors such as income level, size of the down payment made, credit history and employment status. (Fiakpa, L. et’al; 2008).

As the defaults in sub-prime US mortgage mounted, institutions had a rethink on their attitudes to risk and suddenly became scared of losing money.

Banks became unwilling to lend to each other fear of not getting their money back. The panic spread to shares and finally from financial markets to hit the wider economy.

But the damage had been done and the global economy has taken a beating, the extent of which is yet to be determined.

In Nigeria, it first came by a meltdown of the capital market, but as price depreciation continued unabated, the authorities decided to have a second look at the market. The market fundamentals were strong, what could therefore be wrong with the market? Questions were asked.

Secondly, dwindling petroleum prices which means a severe reduction in foreign exchange earnings, which in our case, derive over whelming form the petroleum sector.

Deriving from the above is the deficit in Federal Government budget narrowing down to State and Local Government allocation, there is also less of jobs and a slow down in fight against poverty.

Thus, as Komolafe Babajide (2008:6) rightly puts it, the tragedy of the US economy son became a global nightmare.

US investors in a bid to save some of their investment at home started calling home their foreign investments including those in Nigeria. This gave rise to a glut of shares in the market, which prompted the sharp depreciation of share prices. The impact of this on the Nigerian stock exchange has been quite severe as the market capitalization tumbled more than 30 percent within the period (Vanguard 2008:8).

Contrary to earlier claims that the Nigerian economy is insulted, the crisis soon infected the entire capital market. This was due to the decision of foreign investors to pull out their funds from the market leaving it saturated with stocks. The problem thus spans from the indications that a sustained investment in stocks is needed to rally investor confidence. Unfortunately, almost one month after the Nigerian stock market prices took a dive and three weeks after the US economy posted their signs that a recession was imminent; there hasn’t been a coherent effort on the part of the organized private sector especially in Nigeria to salvage what is left of the economy.

This study is therefore out to investigate this global economic meltdown or downturn as it impacts on the Nigerian Economy. The basis of the study is on the various sectors of our economy and because the Nigerian economy is mostly and hugely dependent on oil prices, the ongoing projects in Nigeria’s oil and gas industry is dependent on foreign financing. This then implies that some key sector of the economy may suffer a set back and our oil and gas sector may not be spared. Independent Daily (2009:43) captured it more vividly by saying that the crux of the project’s down turn was due to step up security concerns arising from the activities of militants operating in the Niger-Delta Region.

Economic Meltdown may also attack a nation’s bureaucratic sector. Hence, the decision making machineries have come to agree indeed that there is a huge complex theory threatening their propaganda instinct. Financial meltdown can also take a steep price of consequence on the entire population.

This is revealed in Financial Vanguard (2009:26) that because of high energy costs, consumers have reduce their gasoline consumption at the fastest rate since the oil shock of the 1970’s. As prices peaked, of consumption Nigeria dropped by 12% in July to its lowest level since the return of democracy (Oti, B. 2008). The big question then was why did a domestic problem in faraway USA become so profound as to take a toll on the Nigeria people?

I personally, felt it is just one the negative consequences of globalization: as well as the evil side of capitalism as many authors have come to discover. The researcher also finds out that though not surprisingly that a complete new approach may prove to be a more viable solution to the current economic nightmare. The reason being that, in spite of various governments’ concerted efforts in re-aligning the economy, not much has been seen of the impact of the government’s bailout packages and nationalization policies. It is therefore not surprising as it is only a repeat of the 1930’s global depression method of correction.

However, as we watch events unfold, one thing is clear; the World’s most vulnerable people have been rendered more vulnerable; there is fear of great deprivation ahead as investment losses in Nigeria may trigger factory shutdowns and generate more unemployment.


The overwhelming effect of the world’s credit crisis has called to question the efficacy of the global economic theories, be they capitalism or welfarism as practiced in the Western and Eastern Blocks respectively. As Governments across the globe retreat to the drawing board in search of answers, operators and stakeholders in proffering solutions have stated that the remedies lie with no economic theory, but in confidence building measures.

Although the Nigerian government has rolled out series of bad out packages to cushion the effect of the crisis on both the private sector and the public ones, it appears the economy is still sinking deep in to recession.

The issue of government intervention and its efficacy remains the crux of this research. This is borne out of the fact that economic destabilization remains the bane of national tragedy. Thus finding a better medium of recovery is often the big problem confronting the authorities. The questions now are as follows: Has the CBN done enough to really insulate the Nigerian banking sector from the crisis? Can the informal sector of the Nigerian economy to proactive enough to rescue the entire economy like the one in Europe and America? These and more are really the problems militating against the survival of the Global Economic Meltdown.


From first principles, we must not forget that financial booms and busts are not a new phenomenon. What is disquieting about the current economic meltdown is that it is in the nature of a seismic tremor of earth showing proportions. Within a few months, some of the biggest financial giants have gone belly-up while several more are in serious trouble.

Linked to this is the dwindling capacity of regulatory authorities. The reality is that the world of high finance has become so complex in our digital age, with capital traveling at the speed of light and several instruments engineered using the arcane language of quantum physics.

Thus, in the light of the problems identified in the proceeding section, the objectives of the search are as follows:

  1. To examine the factors and sequences of event resulting in thus meltdown and the impact of economic meltdown on Nigerian economy.
  2. To determine the effectiveness of government monetary policies in addressing the situation.
  3. To find out the approximate collateral damage the impact must have had on the entire Nigerian economic system.
  4. And finally, to ensure through this research that suggested way out of the crisis is not only provided but appropriately streamlined.


  • Ho: The Current Financial Crisis has greatly affected marked capitalization on the Nigerian Stock Exchange.

Hi:    The Current Financial Crisis has not greatly affected marked capitalization on the Nigerian Stock Exchange.

  • Ho: The Financial Meltdown has influenced the GDP of Nigeria.

Hi:    The Financial Meltdown has no impact on the GDP of Nigeria.


With the festering financial crisis that is fast becoming a global hitch, declining national revenue, sharp fall on the value of shares and the continuing crash of the naira against foreign currencies are some of the major indicators that the global crisis is already affecting Nigeria.

This research bears quite some significance as it will unveil the extent to which thus meltdown has no far inflicted one national economy.

The study will present in concise form the measure already taken by the relevant authorities and stakeholders to cushion the effects of the crisis and will finally present the views though varied and complex of scholars which can be of immense help in getting Nigeria off the hook.


This research will focus primarily on the financially meltdown as affecting the Nigerian Economy. The work is not conclusive in nature as the crisis is still bedeviling the national economy. Because of global implications of the menace, only secondary data were consulted while the time horizon considered is from March 2008 to February 2009.

The scope of this study is quite broad. It pictures, form a historical perspective, the economic meltdown. However, quality time was devoted to X-ray the Nigerian economy in order to ascertain the extent of damage or danger the local economy is up against.

The study therefore covers issues on monetary policies, stock market manipulations, government intervention packages as well as political economics within the country.

Again, due to the spill of this economic crisis from the developed world, attention was also paid to the perceived origin of the crisis the USA was constantly referred to because of the role the country played in spreading the economic meltdown.

Finally, some problems were encountered in the process of the research.

These are as follows:

  1. The problem of the complex nature of the study which was basically new to scholars of this century. Thus this hindered the availability of published materials.
  2. Getting the various data and appropriate materials also approved very difficult and time consuming.
  3. Finally, due to the demand of other conventional academic engagements and constructs of financial resources, the work is inclusive in nature. Above that, harnessing all the information gathered within the short time allotted to this study was not possible.


To cover the scope of this project satisfactorily, the research topic is broken down into several research questions. By the time these questions are duly answered through objectives reasoning and the use of informative facts, the researcher would have met the research objectives. Such questions include:

1)            To what extent has the meltdown affected the national economy.

2)            Has the CBN efficiently, played its role in maintaining macroeconomic and financial stability?

3)            What efforts are being put in place by the Federal Government in cushioning the effects of the crisis?

4)            How can confidence be built again in investing public?

—This article is incomplete———–This article is incomplete———— It was extracted from a well articulated quality Project, Research Work/Material

Project Topic: The Impact of the Recent Global Economic Meltdown on the Nigerian Economy

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