Lagos, Nigeria, Aug 14 – First it was falling oil prices that plagued Nigeria, then came inflation, power shortages, and a humanitarian crisis in the north.
“Suddenly, we’re a poor country,” Nigerian President Muhammadu Buhari said on Thursday in Abuja, the nation’s capital.
“Before we came to office, petroleum sold for about $100 per barrel. Then it crashed to $37, and now oscillates between $40 and $45 per barrel.”
By the end of the month it’s likely Nigeria will officially enter a recession.
Adding insult to injury, this week the International Monetary Fund said that South Africa overtook Nigeria as Africa’s biggest economy in dollar terms — a result of the anaemic naira.
“Both countries are experiencing difficulties, but Nigeria is taking a more slower pace to recover. I don’t think Nigeria can regain its position anytime soon,” Manji Cheto, Sub-Saharan Africa analyst at London-based Teneo Holdings, told AFP.
That’s because Nigeria’s problems, a result of decades of mismanagement, have no easy fix.
Just a few months ago, Nigeria was the number one oil exporter on the continent.
Not anymore. According to figures released Friday by OPEC, Nigeria is now producing just 1.5 million barrels per day, compared with Angola which is pumping out 1.7 million.
Militant attacks on oil infrastructure in the increasingly volatile southern swamplands are to blame.
The Niger Delta Avengers, a new armed group fighting for political autonomy and a bigger cut of oil revenues, have been bombing pipelines since the beginning of 2016.
They have vowed not to stop until their demands are met.
– Not fit –
Today Nigeria is an economic heavyweight on the back foot, with its economy not fit enough to survive this round of blows exposing its structural issues.
Now the country is literally sinking into darkness.
Electricity production, which already was faltering before the crisis, barely reached 2500mW for its 170 million inhabitants, according to local reports, thanks to oil militants sabotaging the lines that fuel the gas-powered stations.
Vice President Yemi Osinbajo, tried to reassure the representatives of the Lagos Chamber of Commerce and Industry on Thursday, promising that “great” effort is being put into improving non-oil revenues.
In the streets of Lagos, posters on the street remind people that not paying taxes is a crime.
Nigeria loses too much to corruption, with Oxfam, an organisation focussed on ending global poverty, reporting that Nigeria loses the equivalent of 12 per cent of its GDP in illicit channels — the largest share of any African country.
In his speech, Osinbajo reiterated his commitment to diversifying Nigeria’s crude-addicted economy with a focus on agriculture to avoid costly imports.
Another solution is looking to private business.
Aliko Dangote, the richest man in Africa, is building a gigantic refinery project that could inject the economy with much-needed energy, according to BMI Research.
“We expect that the development of a massive refinery by the Dangote Group will lead to a sharp improvement in the current account deficit from 2018 onwards,” the consultancy said in an August note.
– Restoring credibility –
Still, Dangote has to convince wary investors to back his project.
Last week, the Transnational Corp. of Nigeria, a giant company whose interests range from agriculture to energy, said it hadn’t attracted enough funding and was consequently suspending plans to build one of the largest power plants in the country (1,000 MW).
“The priority now is to restore credibility,” Cheto said, explaining that Buhari needs to implement his economic policies with some more urgency.
“When it takes one year to implement what you said, don’t expect confidence from the investors.”
While Nigeria will still be an economic powerhouse for years to come, in the foreseeable future its once-skyrocketing growth will be subdued.
As one IMF analyst put it in July: “Nigeria is in a particularly difficult situation.”