The Situation is No Laughing Matter…

…The current situation in Nigeria is no laughing matter. The economy seems to be heading towards a recession and the cost of food has escalated since Fall 2015. When I arrived in May 2014, the Naira, the local currency in Nigeria was 167 to one dollar. Later that year, it rose to 199 to one dollar. Today, the Naira is around 313 to one dollar. The currency has continued to deteriorate because of the decrease in the cost of crude oil and the militant attacks in the south of Nigeria that has decreased oil production. Nigeria was once the largest producer of crude oil on the continent but now stands at number two behind Angola (who is having its own economic issues). The situation in Nigeria is difficult.

Abuja Proper

A view of Abuja (in the distance) from one of the hills that surround the Nigerian capital.

IRI recently released a public opinion survey that stated that 54 percent of Nigerians feel that their country is headed in the right direction. However, 57 percent of Nigerians reported that their personal economic situation has gotten worse over the past year. And I am sure if you conducted that survey today, that number would be higher. The survey was conducted in April/May and since that time, the government removed the subsidy from the fuel price and the Naira has been on a free fall. The cost of rice has become so expensive that I have stopped buying rice. Rice is a staple in every house in Nigeria and if you don’t have rice on the menu then you don’t have food in your house! In addition, it has been extremely challenging getting tomatoes in Nigeria. Tomatoes are another staple in this country as everything has tomatoes in it.

Last week, we attempted to send a team to Edo State, a state in southern Nigeria. When the team arrived at the airport, they were told there was a delay and the plane would be departing very soon. A few hours later, it was announced that no flights would be departing because there was no jet fuel available. Because of the devaluation of the currency, the pump price of aviation fuel increased from N120 to N240 per liter, representing almost a 100 percent increase. Given the collapse in the value of the naira and given the scarcity of foreign currency, fuel importers have struggled to secure enough fuel to meet demand. The devaluation of the Naira has also affected the cost of international airline tickets. Foreign airlines like Lufthansa and Emirates have increased the cost of tickets by  70 percent to reflect the rising cost of doing business in Nigeria. The cause of the increase is the high cost of foreign exchange (forex) as well as the in­ability of most foreign airlines to “repatriate” their incomes out of Nigeria. Basically, Nigerians buy their airline tickets in Naira and the foreign airlines exchange those Naira for dollars. Because of the scarcity of dollars, Nigeria has been unable to convert the Naira into dollars. What has happened is that some airlines will only sell tickets in dollars, adding an addition cost to the ticket (and violating the law).

President Buhari has been laser focused in his fight to end corruption in this country. But you will find that most Nigerians are complaining because the corruption fight has turned off the free money that has littered the Nigerian economy for the past thirty years. The “Oga” or Nigerian big-man was once very free with how he spent his money. While I may pay my cook only 350,000 Naira a year, the “Oga” paid him 800,000 Naira because the money he acquired was from illegal means (corruption). The “Oga” also tipped everyone from the man who opened the gate at the shopping mall, to the door greeter at the supermarket to the street sweeper. This has created a situation where everyone now is asking for money. I once went to a meeting at an office complex. When I exited the vehicle a man spoke to me and welcomed me to the complex. Later that afternoon when I was departing, he came up to me to say, “Oga! Remember me? I welcomed you to the meeting. What do you have for me?” He was asking for me to tip him for just saying “welcome.” Can you imagine…

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2 Comments on “The Situation is No Laughing Matter…

  1. Looks like Nigeria fell into the same trap as other petro-states around the world by not sufficiently diversifying their economy to reduce the impact of oil price fluctuations. Does Nigeria have other industries they could develop to reduce the stress of ultra low oil prices?

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