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What are the reasons of economic depression in Nigeria?

What is the most obvious solution for the crisis in Nigeria? Why did it happen? All the facts and the plans of the government are here.

lots of dollars

Nearly forty years after Nigeria gained independence from Britain in 1960, its economy has dualism: modern commodity sector, working mainly for export, coexists with the traditional semi-subsistence agriculture.

In today's commodity sector, the economic development of which began in the colonial period, the state and state-controlled enterprises are the main employers. A huge number of professionally trained workers cannot find work, and the dismissal of civil servants only worsens the whole situation in the labor market.

nigerian woman

About 70% of all Nigerians are employed in agriculture. But since 1965, it does not ensure the country's food needs. Trying to solve the problem by increasing food purchases abroad led to a sharp increase in food expenditure. The failure of the Nigerian industry to provide the domestic market with essential commodities, including sugar, salt, soap, tires and oil, was another prominent feature of the economy. The lack of foreign currency for the purchase of needed raw materials has led to the fact that companies producing these and other basic commodities are not operating at full capacity. The reduction of income from the sale of crude oil on the world market has become a major reason of the economic downturn. Theft and financial fraud of the government officials also contributed to the deterioration of the economic situation.

The lack of air fuel has recently caused cancellations and delays of international flights in Nigeria. The country has the most severe economic crisis for many years. Its cause is the decline in oil prices, production of which is the basis of the Nigerian economy. In Nigeria the stock of ‘hard currency’ is about to end, which is why the country cannot afford to import even the necessary goods, like refined petroleum products, including fuel air.

‘We apologize for the cancellation of flights in recent days. It was the result of a huge lack of fuel Jet A1’, - wrote the largest Nigerian airline Dana Air.

cars in nigeria

READ ALSO: 10 most fuel efficient cars

About 75 vessels have 2.5 mln. tons of fuel on board. They are waiting for unloading on the coast of Nigeria. The country is urgently looking for dollars to pay the suppliers, but so far there is no success. No airlines have money. Sam Adurogboe, a spokesman of the Civil Aviation Authority of Nigeria, told the press that because of the crisis ‘absolutely all national airlines suffered’.

‘The planes do not fly without fuel, so yes, of course, there canceled and delayed flights - he said. - Some companies just immediately cut in half the number of flights, in order not to cancel them at the last moment’.

car petrol

The irony is that the lack of air fuel – oil, has affected country, which is on the eighth place in terms of oil production in the world. The reason is clear: Nigeria sells crude oil, but it is not engaged in the production of petroleum products. Export of crude oil provides 70% of the country's total income.

The country has four oil refineries, but even working at full capacity, they will be able to meet only a quarter of Nigeria's fuel needs. Not only have the aircrafts suffered from lack of fuel, but also all other transport: ordinary drivers have to spend hours in queues at the petrol stations.

petrol station

Once the dollar flow from abroad stopped, the government had to fix the exchange rate in order to prevent severe inflation. Last week, the Nigerian Oil Minister Emmanuel Ibe Kachikvu informed about the new decision of the authorities - to let other fuel importers to take dollars not only from the central bank, but also from other sources. For the government, it looks like an unthinkable loss of control over foreign exchange transactions.

The most obvious solution to the problem is trying to raise the price of oil. That is what the authorities are going to do to start an economic growth. The previous government's initiative contributed to the development of fuel poverty: government canceled fuel subsidies, which immediately caused a storm of indignation of the trade unions. There were planned a lot of widespread strikes, but a Nigerian court immediately banned any such activity.

producing oil

Another paradox of the situation is the fact that in recent years oil prices are slowly increasing in the world market. For example, on May 16 the price reached its highest level of the previous seven months. But this ‘jump’ is just a consequence of disruptions in oil production in Nigeria and Libya. After a series of attacks some oil companies have suspended operations in the Gulf of Guinea.

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