NIGERIA’s Champagne days are over for now as the country inches towards recession. Once flagged as a country of Champagne drinkers second only to France, retailers and hoteliers now report a big drop in sales of the favourite tipple of well-heeled Nigerians.
The free spending that attracted consumer companies, luxury goods salesmen and investors in glossy shopping malls had almost disappeared, many Nigerians told me during a visit to Lagos last week. People are battening down the hatches as the country rides out one of its worst economic periods in recent history.
Prices are rocketing. Some increases are up to 100% as low oil prices, foreign exchange shortages, currency problems and a lack of investor confidence really start to be felt. The fuel price doubled overnight when the president deregulated the market a few weeks ago, ending years of wasteful expenditure on fuel subsidies that benefited consumers, but encouraged corruption and diverted billions of dollars annually from productive use.
The choice by many consumers to leave their fuel-guzzling cars at home in favour of car pools and public transport is evident. In a city once characterised by serious traffic jams, the roads seem relatively quiet.
Manufacturers are battling with a lack of access to foreign exchange to buy imported components and inputs, and many are seeing custom dwindle as disposable incomes decline or are reallocated. Energy supply is more erratic than ever, forcing a greater reliance on expensive generators. Consumer demand for goods is changing. In the case of some items, sales are down, while in others, volumes are being maintained, but people are going for cheaper brands. The ports are seeing reduced traffic in the wake of a raft of import restrictions, leading to a significant decline in customs revenue. Job losses are mounting. The currency continues to tumble in the wake of the recent introduction of a flexible exchange rate, while the inflation figure for June of 16.5% was the highest in a decade.
President Muhammadu Buhari continues to come under attack for his apparent lack of focus on the Nigerian economy. His cabinet’s performance appears to be lacklustre and the delay of nearly six months in signing off the 2016 budget has not helped to build confidence in his administration.
There is limited appreciation of the fact that Buhari took over a country already hit by low oil prices and an unfortunate legacy left by the former governing party.
The president’s lauded anticorruption drive has lost its impetus, undermined by pressing short-term challenges, and it seems largely to be business as usual again in Nigeria, but with less money to go around.
Into this perfect storm came the Niger Delta Avengers — militants wreaking havoc in Nigeria’s oil fields. Stepped-up attacks on oil installations have cut production, and thus exports, by a third, and significantly reduced power supply via gas pipelines to urban areas.
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The central bank has been under fire for its policies from all quarters. It is playing a difficult balancing role between trying to attract foreign currency and taking into account the needs of the domestic economy.
Nigeria undoubtedly has a long road ahead to recovery. So, it is incumbent on the government to do everything it can now to attract investment, not with incentives, but by removing the many roadblocks and bottlenecks to investing in the country and doing business there.
The country also needs to unite in this new battle, rather than let petty politics and interests divide it.
This is a national, not a party-specific, challenge.
It would be a pity if Nigeria emerged on the other side of this crisis without significant structural change and new models of efficiency and discipline to take the country into a new era.
• Games is CEO of business advisory Africa @ Work
