At one of Nigeria’s busiest markets, Ndubuisi Benjamin Nweke complains about the toughest business environment Africa’s biggest economy has faced in years.
“Customers are not coming the way they’re supposed to,” said the 46-year-old, whose trade in Chinese-made fabrics at the Idumota market in the commercial capital, Lagos, like many Nigerian importers, is being squeezed by a plunge in the naira. “Everyone is crying for money.”
Nigeria is being hammered on two fronts as it heads toward general elections in February. In the face of plummeting crude prices, the central bank devalued the naira and the government proposed budget cuts. At the same time, Islamic militants of the Boko Haram group have stepped up attacks in their five-year insurgency, and the security forces in Africa’s top crude producer are struggling to stop them.
Northern Nigeria is faring even worse than the south. Cosmetics seller Madu Masa Fantami has witnessed a drop in business after suicide bombers killed dozens at the Monday Market in the North-eastern city of Maiduguri last month.
“Before these two attacks we have been making a lot of sales but now the situation worsens, sometimes we make very little,” Fantami, 35, said by phone from Maiduguri. “People don’t come like before for fear of being attacked by Boko Haram.”
The violence will probably intensify, with the elections in February expected to be disputed, Brussels-based International Crisis Group said in report last month.
President Goodluck Jonathan’s ruling Peoples Democratic Party (PDP) will face an opposition led by former military ruler Muhammadu Buhari in the tightest contest since the PDP came to power at the end of military rule in 1999. Both Jonathan and Buhari have pledged to stop the Islamist rebellion that’s killed more than 13,000 since 2009.
“There will be some form of struggle for quite a number of businesses,” Adedayo Idowu, an economist at Lagos-based Vetiva Capital Management Limited, said over the phone. “Between the security crisis and the severe austerity going on in the economy, because it’s not just the exchange rate, it’s also the austerity, the sense is that this is just the beginning of it.”
Finance Minister Ngozi Okonjo-Iweala proposed an eight percent spending cut in next year’s budget in reaction to the 45 percent decline in oil prices this year. Nigeria, which gets about 70 percent of government revenue and almost all of its export earnings from crude, is expecting prices to stabilize at about $65 to $70 a barrel next year, from $60.75 currently.
The central bank responded with the devaluation and by raising interest rates to a record 13 percent. The actions were a bid to stem capital outflows and stabilize the currency, which has retreated 10 percent this quarter against the dollar, the worst performer in Africa after Malawi’s kwacha.
“The devaluation of the official exchange rate and depreciation pressures will quickly push up import prices and lift headline inflation into double digits in early 2015,” David Faulkner, a Johannesburg-based sub-Saharan Africa economist at HSBC Holdings Plc, wrote in a December 18 report. The inflation rate was 7.9 percent in November.
The currency’s plunge has forced Iheoma Obibi to raise the cost of her sex toys. Obibi, 49, increased prices this month by 9 percent to 15,300 naira ($84) for one of her best-selling vibrators sold via her Intimate Pleasures Desires of the Heart website.
“People tell me ‘Madam, it’s expensive, I really have to think about that,’” said Obibi, who set up her business in 2010 after returning from the U.K. to Lagos. “The dollar is not the same today as it will be tomorrow,” she said in an interview at her home where a small pile of Leloi AB sex-toy boxes was stacked next to her dining table.
Conditions are similar at the opposite end of the country in northern Nigeria’s largest city, Kano, according to Bature Abdulaziz, the head of the Northern Businessmen Association.
“We are in a tight situation due to Nigeria currency devaluation,” Abdulaziz, a 64-year-old textile trader, said in an interview. “If you sell the goods at the same price you used to sell; you are going to lose and if you increase the prices people don’t buy.”