Nigerian businesses are feeling the crunch of the oil price decline. Not only is oil price crushing the country’s revenues, but the uncertainty exuded by the Nigerian central bank has also led to capital flight. Those with naira are left holding something whose value is uncertain and fast declining. One of my tasks in the past few weeks has been to decrease our exposure to this. It’s tough. Minku is a Nigerian company with a Nigerian soul. At the same time, though many of our raw materials are locally sourced, I also source quite a bit from outside Nigeria. The declining real value of the naira is not helping.
Many Nigerians are having to come to terms with their naira not having the purchasing power it used to have. I assume the same is happening in Russia and some other oil-dependent economies. It’s a painful process. There are many things that can improve the situation.
- From what many economists have said, the naira can’t keep being pegged at the current unrealistic official rate. It’s now almost double that on the black market, and the administration is still not budging.
- Everyone wringing their hands singing can’t can’t can’t. It’s time to get creative with gas if not oil, find avenues to sell the natural gas that we’ve been flaring for decades to reach the formerly oh-so-valuable/expensive crude oil beneath it. Action needs to be fast, it needs to be deliberate, and it needs to be communicated unequivocally to investors and citizens, to calm their fears.
- We hear that we should be more self-sufficient as a country, but it’s not that easy. Electricity generation remains an issue (imagine hand stitching instead of using electric sewing machines for instance: some magic will be required to scale output). A crucial preparatory step is being skipped, in the process to increased self-sufficiency.
- SMEs. People are ready to work, and to put people to work. But they need capital, and they need assurance that government policy won’t switch up on them just as they are getting their engines going. Actually in the States during the recession, the government’s main goal was to stimulate the economy, get people spending not hoarding, get companies hiring, and just create the illusion of wealth until reality could catch up with it. The States was easily the fastest economy to get out of the most recent recession that hit several Western countries including most of Europe, and it was because instead of belt tightening, it doubled up efforts to put money in the pockets and accounts of its populace and companies.
- Don’t scare foreign investors away, because borrowing from the IMF is not an ideal situation.
In the meantime, companies are dealing with uncertain times. Some companies are able to capitalize on the current economic crisis but for many others, the fiscal squeeze is real.