In this two part series, Africa’s Premier Wealth Coach and Investment Consultant. Omilola Oshikoya, explores the recent challenges in the Nigerian economy, and proffers solutions on how best to thrive and succeed, in spite of the difficulties.
On the 11th of May, 2016 the price of petrol increased to N145 per litre. As expected, this caused a lot of fear and panic for most Nigerians however it is possible to not just survive this crisis but to also thrive.
The backdrop
Nigeria is currently going through an economic crisis and is even projected to go into a recession by the end of June 2016. This is due to a disease it has suffered from for a couple of years known as the “Dutch Disease”. According to Money Terms, the “Dutch Disease” also known as the “resource curse” or “the curse of oil” is the damaging effect on an economy as a result of the exploitation and export of natural resources. This leads to the decline in other sectors such as manufacturing, agriculture etc.
Nigeria is a mono economy. Prior to the discovery of oil, Nigeria’s non-oil sector contributed significantly to Nigeria’s revenue approximately 80% however after the discovery of oil, we neglected other sectors which made us susceptible to boom and bust cycles as a consequence of the rise or fall in oil prices.
Since June 2014, oil prices dipped from about $110 per barrel to as low as $27 per barrel in March 2016. As expected this has affected oil revenue dependent countries like Nigeria. Worse still, during periods of boom, instead of investing in sectors such as infrastructure we squandered our resources. As a result, despite the fact that we are an oil producing country, we import fuel for domestic consumption due to the fact that the four oil refineries are not in working conditions. It is also worthy to note that even if the four refineries were working at full capacity, they would not be able to meet the country’s needs.
In order to reduce the impact on consumers, the government in the past implemented a fuel subsidy which was very expensive for government during periods of oil boom. In 2016, in order to curb corruption and with the decline in oil revenues, government removed the fuel subsidy. In the long run, this would benefit Nigerians as savings from the removal of the subsidy could be diverted into investments in infrastructure such as healthcare, power, education, etc.
Due to the removal of the fuel subsidy, inability of oil marketers to source foreign exchange to import fuel and control of the price of fuel by The Government, oil marketers limited the supply of fuel resulting in long queues at petrol stations for almost a year. The government therefore increased the price of fuel to N145 per litre.
What this means for the average Nigerian
Prior to the increase in the price of fuel to N145, Nigeria’s were already suffering from the effects of the global economic downturn such as inflation, capital flight, currency crisis etc. Industries such as the telecoms, oil and gas, manufacturing and financial services laid off staff. The increase in the price of petrol of up to 70%, would definitely make things harder for Nigerians. The price increase would have a ripple effect on almost everything from transportation costs, to food costs etc.
There is no point flogging a dead horse and so for the purpose of this article we would focus on the opportunities.
Surviving an Economic Crisis
When you are in an airplane and about to pass through turbulence, the pilot would make an announcement that passengers should fasten their seat belts until the turbulence passes. Now for a first time flyer who hasn’t experienced turbulence, this would be a daunting experience and the person may think the plane is about to crash. The good thing is that it is only a temporary situation and with a good pilot, the airplane would be able to withstand and pass through the turbulence and take its passengers to the intended destination.
In the same way, we are passing through turbulent times as a country and continent. Thankfully our president and vice president are people of integrity and I am confident that they would be able to navigate our country to our destination of choice. Just like the airplane reaches its destination be rest assured that Nigeria will still reach its destination. However, while we go through turbulent times, this is a time to fasten our seat belts and do all we can to ensure we pass through this phase safely. This is a time we need to be wise and prudent, to cut costs as well as think of alternative or multiple sources of income.
Look out for the concluding part of this series tomorrow.
About Omilola Oshikoya
Omilola Oshikoya is Africa’s premier wealth coach with over 12 years’ experience in finance/investment banking. A columnist for the second most widely read newspaper in Nigeria and the creator of PocketFinance, a blog focused on providing information on personal finance & business for entrepreneurs, Omilola’s goal is to inspire this generation to live the “Richer Life” and to help eradicate poverty by teaching youths how to make money (business/entrepreneurship), how to manage it (personal finance), how to grow it (investment) and the purpose of wealth.
Omilola has a passion for coaching, inspiring, motivating, educating, informing and empowering. She has been invited to speak at companies such as Accenture, Total Nig, Plc etc. She has also been invited to speak at events such as the Heineken Lagos Fashion and Design Week 2015 etc. She has been invited as a guest to speak on the radio several times as well as talk shows, family retreat, Churches, social events etc. speaking on topics such as wealth creation, financial management. She is also an inspirational speaker.
