Understanding Nigerias current economic situation

To survive in Nigeria, one must first understand the current economic situation of the country. Nigeria is blessed with all sorts of mineral resources; these include lime stone, gold, zinc, iron-ore, oil etc. In the past, Nigeria generated so much from these resources, until oil was discovered in commercial quantity.

We began exporting crude oil as well as refining the ones we needed for ourselves. As time went on, we became so dependent on forex from oil sales that we even abandoned our own refineries.  We did not only export crude oil, we began to import the refined oil which was converted to fuel, kerosene etc.

Corruption in government played a very crucial part in the worsened economic situation we face today. While Nigeria was making billions of dollars from crude oil export, other mineral resources were abandoned. We also spent billions of dollars as well, importing refined products and subsidizing the price at which it was sold to local consumers.

Much of the proceeds from the export were looted by various governments in power, rather than investing in the citizens and infrastructure. In life there are seasons, there is a season of abundance and a season of lack. It is the savings and investments done during the abundance that sustains one through the season of scarcity.

We have had our fare share of abundance and lack in the past, unfortunately greed and corruption denied us the opportunity to learn. Rather than invest in industries, support local manufacturing, a huge percentage of Forex gotten from crude oil export is used to import other items. Nigeria then became import dependent. Lack for electricity and infrastructure contributed to increased cost of production in Nigeria. Importation became a cheaper option and local industries died.

Today, the price of  crude oil which accounts for up to 80% of foreign exchange coming into the country has fallen .we have very little saved and almost nothing to show for the days of high oil prices . As the demand for Forex increases, the inflow of Forex also decreased. This created an increase in demand for Forex and decrease in supply. The naira became weaker in the process and inflation has risen above 16%.

Government in attempt to increase revenue, to implement the budget increased tax. These taxes include the import duties paid for imported products. The naira had to be devalued from 197 to 320 at the official central bank rate, while it goes as high as N400 to a dollar at the parallel market.

This in turn affected the cost of living in the country. Most Nigerians have become confused and frustrated at the situation. The price of everything increases while income either remains stagnant or decreased.

Delays or lack of clear economic policy direction also contributed to the current situation. Nigeria today is in recession after failing to make progress in first and second quarter.

This blog will provide ideas for various businesses that Nigerians could start to survive this harsh economic situation.