First Bank

Friday, February 10, 2023

Fuel and cash shortages rile Nigerian voters heading into election

At a fuel station in Nigeria's commercial capital Lagos, tempers flare and harsh words are exchanged as motorists wait in line for hours to fill up their tanks at one of the few outlets with petrol left in the vicinity.

Recurring fuel shortages in Africa's top oil producer are adding to voter frustration as Nigeria prepares to hold presidential and parliamentary elections on February 25. They are a stark example of the economic hardships that have dogged Nigeria for years, including surging inflation, widespread unemployment and acute shortages of foreign exchange that have severely weakened the naira currency.

"People are suffering, there is no money, there is no food," said Titus Nwafor, a 53-year-old bus driver as he waited to fill up at the Lagos station.

With elections around the corner, he expressed frustration with the candidates, who he said were "blaming this, blaming that" without offering any solutions.

President Muhammadu Buhari, who will be stepping down in May after serving his constitutionally allowed two terms, promised to revive the economy and improve livelihoods when he took office in 2015.

He has prioritised state-funded infrastructure, investing billions of dollars in new roads, bridges, airports and rail.

Nigeria's poor transport and power networks have stymied economic growth for decades, holding back the distribution of wealth in Africa's biggest economy where 63% of people live below the poverty line, according to the national statistics bureau.

Building infrastructure has, however, come at a cost.

Nigeria's foreign debt has risen fourfold to $40 billion under Buhari, and the budget deficit has widened every year. The government spent 98% of the revenue it collected in 2022 on debt servicing, finance ministry data showed.

Buhari has also pushed protectionist policies, including import bans on the staple rice. This initially spurred local production, but spreading insecurity is hurting farmers' ability to plant, while the high cost of fertiliser and diesel have pushed the price of a 50 kg bag of rice nearly 90%, to 55,000 naira ($120) last year.

Victoria Okafor, a vendor at a local market in Abuja, said the price for a cup of garri (processed cassava root) had doubled.

"It is affecting my market, the customers are complaining that things are very expensive," Okafor told Reuters on Tuesday (February 7).

In 2017, the central bank introduced a multiple exchange rate system to avoid devaluing the naira currency, but this has contributed to dollar shortages, and the local unit has weakened to record lows against the greenback on the black market.

A central bank decision to replace old banknotes with new ones - part of an initiative to curb cash in circulation and control double-digit inflation - has caused huge controversy because there are not yet enough new notes in circulation. Enterprising Nigerians are selling cash at premiums of up to 20%.

"I cannot withdraw more than one 1,000 naira," said a frustrated Abuja resident.

All candidates have promised to reform the economy, including ending the multiple exchange regime and a fuel subsidy that cost the government $10 billion last year.

But that has proven difficult in the past. Nigerians say cheap fuel - at 184 naira ($0.40) a litre - is one of the few benefits they get from their government.


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