I’ve been getting a lot of emails, texts, tweets from my friends asking me to explain what’s going on in Nigeria. I don’t really have all the answers but I think I have an okay understanding. Here’s my response to one of my friends about the recent growth adjustment discussed here.
A couple of things…..
It’s bad but it isn’t as bad as this guy makes it sound… A lot of things aren’t happening right now because of the currency restrictions the Nigerian government has put on commerce and consumers. The policy is in place as ant-corruption + protection driven strategy to prevent rapid inflation. I need to find some articles to better explain it but that’s one major part of whats going on. There are things still happening but the industries that aren’t driven by import and currency arbitrage seem to be doing okay. Totally forgot to mention the fuel scarcity… maybe its pretty bad, but Nigerians always make the pretty bad seem bearable for some reason.
It’s a mix of history and current situations biting Nigeria in the butt. The major challenge with the Nigerian economy was that it was so dependent on oil revenues as a government. As supply increased, the Nigerian government was over exposed to the decreased prices and it ruined the 2015 and 2016 budget. Now everyone internally is screaming diversification but its a tad late. If you look at Angola, Saudi Arabia, Libya….They all have ridiculous sovereign wealth funds that have been at work to invest oil profit in other industries and other areas of the world. Nigeria has been squandering its oil profits through corruption and living the high life.
This is probably the best situation Nigeria can be in.. I think this is forcing a lot of difficult conversations that should have been had 20 or 30 years ago. It could be severely worst…. Imagine a currency diving into a tail spin. That would suck. Nigeria still has a things going for it… a ton of natural resources, low labor costs, improving infrastructure…. There’s still a lot of work to do but I think Nigeria is still in a decent position…