ABUJA, Nigeria — 

The citizens of Nigeria are currently experiencing a severe economic crisis, one of the worst in the West African region. This crisis has been caused by a sharp increase in inflation, which is a direct result of the government’s monetary policies that have caused the country’s currency to significantly decrease in value against the US dollar. As a result, there have been widespread protests and expressions of anger throughout the country.

On Thursday, the most recent government data indicated that the inflation rate for January climbed to 29.9%, marking its highest level since 1996. This increase was primarily influenced by the rising costs of food and non-alcoholic drinks. Additionally, Nigeria’s currency, the naira, continued to decline, reaching a low of 1,524 naira per $1 on Friday. This represents a significant loss of value, with a decrease of 230% in the past year.

“My family is currently taking things one day at a time and relying on God,” stated Idris Ahmed, a merchant who has seen a decrease in daily sales from an average of $46 to $16 at his clothing shop in Abuja, Nigeria’s capital city.

The declining currency exacerbates an already dire circumstance, further diminishing earnings and reserves. It puts pressure on millions of Nigerians who are already facing difficulties due to government changes, such as the elimination of gas subsidies that led to a threefold increase in gas prices.

An overview of the economic status of Nigeria.

Nigeria, with over 210 million inhabitants, is not only the most populous nation in Africa, but also boasts the largest economy on the continent. The country’s gross domestic product is primarily bolstered by industries such as information technology and banking, followed by manufacturing and processing companies, and lastly, agriculture.

The issue is that Nigeria’s growing population has outpaced its economy, resulting in a heavy dependence on imported goods, including cars and cutlery, to meet daily needs. This makes the economy vulnerable to external factors, such as the parallel foreign exchange market, which impacts the prices of goods and services.

Nigeria relies heavily on crude oil for its economy, as it is the main source of foreign currency. In 2014, when the price of crude oil dropped, the government used its limited foreign reserves to help stabilize the naira. They also closed the land borders in an effort to boost domestic production and restricted access to the US dollar for importers of specific goods.

The actions caused the naira to become more unstable by creating a thriving black market for the dollar. Additionally, the sale of crude oil, which contributes to foreign currency gains, has decreased due to ongoing theft and damage to pipelines.

The implementation of monetary reforms was inadequate.

Shortly after assuming office in May of last year, President Bola Tinubu took decisive action to address the struggling economy and draw in investors. This included discontinuing long-standing gas subsidies, which the government deemed unfeasible, and unifying the country’s various exchange rates to give market forces control over the value of the local currency in relation to the dollar.

Experts state that there were insufficient measures in place to mitigate the inevitable repercussions from recent changes such as implementing a subsidized transportation system and an immediate wage hike.

The termination of the gas subsidy resulted in a significant 200% surge in gas prices, which had a ripple effect on all other goods and services. This was particularly impactful as the community heavily depends on gas generators for household lighting and business operations.

What is causing the devaluation of the naira?

During the previous administration of the Central Bank of Nigeria, the naira was tightly regulated against the dollar, resulting in individuals and businesses resorting to the black market to obtain dollars at a significantly reduced rate.

Additionally, there was a significant buildup of outstanding requests for foreign currency on the official market, which was believed to be around $7 billion. This was partly due to the decrease in dollar inflows from foreign investments and the country’s reduced sales of crude oil.

Officials stated that implementing a single exchange rate would result in increased accessibility to the dollar, ultimately attracting more foreign investors and bringing stability to the naira. However, this has not yet occurred due to insufficient inflows. As a result, the naira has continued to decline in value against the dollar.

What actions are the authorities taking?

The Governor of the Central Bank of Nigeria, Olayemi Cardoso, announced that the bank has successfully resolved $2.5 billion of the previously pending foreign exchange backlog, out of the total amount of $7 billion. However, after investigations, it was discovered that $2.4 billion of the backlog were fraudulent claims that will not be cleared. As a result, there is still a remaining balance of approximately $2.2 billion, which is expected to be resolved in the near future.

Tinubu has instructed the distribution of food supplies, including cereals from government reserves, as part of relief efforts to alleviate the impact of the difficult circumstances. The government has also announced its intention to establish a commodity board to oversee and control the rising costs of goods and services.

The Nigerian president held a meeting with state governors on Thursday to discuss the economic crisis. He attributed some of the crisis to the significant hoarding of food in certain warehouses.

Tinubu stated that it is crucial to prevent speculators, hoarders, and rent seekers from hindering our goal of making food widely accessible to all Nigerians.

On Friday morning, news outlets were stating that businesses were being closed for stockpiling and overcharging customers.

What are Nigerians doing to handle difficult circumstances?

In northern Nigeria, areas affected by conflict have reached a critical point where farming communities are unable to grow their own food due to being displaced by violence. There have been small instances of demonstrations in recent weeks, however, law enforcement has swiftly hindered them and even detained individuals in certain instances.

In bustling cities like Lagos, there has been a decrease in the number of cars on the roads due to increasing prices, causing commuters to rely on walking to get to work. Everyday, the cost of goods such as food and household items continues to rise.

Ahmed in Abuja expressed that even eating currently poses a challenge. He questioned, “What options do we have?”

Source: voanews.com