NLC protests: Why Nigeria’s economy is in such a mess

Nigeria is currently facing its worst economic crisis in a generation, leading to widespread hardship and anger.

The umbrella body of trade unions, the Nigeria Labor Congress (NLC), organized a nationwide protest on Tuesday, calling for further action from the government.

The price of a liter of gasoline is more than triple what it was nine months ago, and the price of rice, the staple food, has more than doubled in the past year.

These two figures highlight the difficulties many Nigerians face as wages have not kept pace with rising costs of living.

Like many countries, Nigeria has experienced economic shocks from within and outside the country in recent years, but the country’s unique problems have been caused in part by reforms introduced by President Bola Tinubu, who took office last May. There is also.

Overall, annual inflation, the average rate of increase in prices, is currently near 30%, the highest rate in nearly 30 years. Food costs have increased by an additional 35%.

However, the monthly minimum wage set by the government and to which all employers are supposed to comply has remained unchanged since it was set at N30,000 in 2019. This is worth just $19 (£15) at current exchange rates.

Many people are going hungry, rationing what food they have or looking for cheaper alternatives.

A widely shared social media video shows how some people are cutting back on their portion sizes.

One clip shows a woman cutting a fish into nine pieces instead of the usual four or five pieces. Her goal is for her family to eat fish at least twice a week, she said.

Inflation is soaring in many countries as fuel and other costs soar as a result of the Ukraine war.

But President Tinubu’s efforts to rebuild the economy are also adding to the burden.

Nine months ago, on the day he was sworn into office, the new president announced an end to long-standing fuel subsidies.

Although this kept gasoline prices low for the citizens of this oil-producing country, it was also a huge drain on public finances. In the first half of 2023, it accounted for 15% of the budget, more than the government spent on health and education. Tinubu argued that this could be better utilized elsewhere.

However, the subsequent significant increase in gasoline prices also increased other prices as companies passed on transportation and energy costs to consumers.

Financial analyst Tirewa Adebajo said another factor pushing up inflation was a problem Tinubu inherited from his predecessor, Muhammadu Buhari.

He told the BBC’s Newsday program that the previous government had asked the country’s central bank for a short-term loan to cover spending amounting to $19 billion.

Banks printed money, which fueled inflation, Adebajo said.

Tinubu also ended the policy of pegging the price of the Naira currency to the US dollar, rather than leaving it to the market to determine it based on supply and demand. Central banks were spending large sums of money to maintain levels.

However, with the end of the peg, the naira’s value plummeted by more than two-thirds, hitting an all-time low at one point last week.

In May last year, 10,000 naira could buy you $22, but now it only costs about $6.40.

The price of all imported goods has increased due to the devaluation of the Naira.

Although the President is unlikely to reverse decisions on fuel subsidies and the Naira, arguing that strengthening the Naira economy will pay off in the long run, the government has introduced several measures to alleviate suffering. did.

Nigeria’s Vice President Kassim Shettima has announced the establishment of a commission to control and regulate food prices. The government also ordered the National Grain Reserve to distribute 42,000 tonnes of grain, including maize and millet.

This is not the first time the government has announced it will distribute aid to poor and vulnerable Nigerians, but unions have often criticized the government’s method of distributing food, saying much of it does not reach poor households. Ta.

The government also said it was working with rice producers to get more rice into the market, and customs officials had been instructed to sell seized bags of grain at cheaper prices. In a sign of how bad the situation is, local media reported on Friday that this sparked clashes in the largest city, Lagos, in which seven people were killed. These distributions are currently suspended.

The rice was seized under the previous government, which had banned rice imports to encourage local farmers to expand production. The ban was lifted last year in an attempt to cut costs, but it was ineffective due to the decline in the value of the naira.

About 15 million poor households also receive a monthly cash transfer of 25,000 naira ($16, £13), which is not far off these days.