Nigerian business leaders consider drive to back poorest as prices surge

Nigeria’s private sector should work with the government to develop welfare initiatives after economic reforms left people struggling with the cost of living, the country’s top business leaders told Semafor Africa, according to a report by Semafor.

President Bola Tinubu scrapped a popular fuel subsidy and attempted to unify the exchange rate in his first few days in office. Petrol prices have roughly tripled since Tinubu announced the subsidy removal at his inauguration on May 29, this week hitting a record high of 617 naira ($0.78) per liter. Meanwhile, the naira lost 40% of its value after the currency was allowed to be traded freely against the dollar.

The changes have contributed to rising food prices. Tinubu last week declared a state of emergency to tackle rising food prices and shortages. It involves initiatives that include allocating money saved by the fuel subsidy removal to provide fertilizer and grain to farmers. The president also announced a plan to give 8,000 naira ($10) a month to 12 million low-income households for six months. But on Wednesday the government backtracked on the plan after widespread criticism that the proposed offer falls short of the level needed to ease the pains of vulnerable Nigerians.

“The private sector can help. It’s not only the responsibility of the government,” billionaire tycoon Aliko Dangote told Semafor Africa. Dangote, who reportedly lost his position as Africa’s wealthiest person after 12 years due to the naira’s devaluation, added that companies could employ more people.

Dangote joined forces with Access Bank, Nigeria’s biggest lender by assets, to provide treatment and isolation centers during the COVID-19 pandemic, in partnership with the government. Herbert Wigwe, the bank’s group CEO, said the private sector should again provide support to those hardest hit by the skyrocketing cost of living. However, he said it was important to “avoid anything that is inflationary or encourages arbitrage.”

Removing the petrol subsidy, which cost the nation $10 billion in 2022, was a bold step that could enable Tinubu’s administration, and others in the future, to allocate more funds to health and education. But the pain caused by its removal threatens to be deeper and more long lasting than the short, sharp shock he may have hoped for.

We spent this week in Lagos, the country’s commercial capital, and the cost of petrol — the highest ever seen in Nigeria — was mentioned in most conversations. It affects everyone in some way, from the cost of transport and the generators that many people rely on for power, to the higher food prices after importers and wholesalers passed on their ballooning costs to consumers. The change is even obvious in the unusually quiet streets, an oddity in a city renowned for its traffic, that many told me was due to the inability of motorists to afford the new prices.

The other subject raised by every businessperson was the makeup of Tinubu’s cabinet, which he is expected to name within days. His ministerial team, with the right figures and a willingness to delegate, could offer solutions.

The challenge faced by Tinubu and his team is that attempts to provide assistance, through cash handouts for example, are likely to be inflationary. The same is likely to be true of help provided by the private sector.

Nigeria has many dynamic business leaders who showed they can use their acumen to support the most vulnerable people in society during the pandemic. But the risk of driving more price rises is high.

Bismarck Rewane, an economist, said efforts to reduce the pain felt by Nigerians struggling financially would largely be undone by a measure announced by the central bank on Friday. The central bank said it would cut the cash reserve ratio — the amount lenders must keep with the central bank — for banks that lend exclusively to companies. Rewane said the move was “fundamentally counterproductive” because it would encourage the banks affected to lend more, which would stoke inflation.

In the northern Nigeria city of Kano, consumers and small business owners told Semafor Africa they are struggling with the severe economic aftershocks of the fuel subsidy removal. “The hike in the price of petrol will cause unimaginable problems in the country,” said Aminu Muhammad, 42, a local businessman. Muhammad warned that the unintended consequence of the decision could be an increase in insecurity. “How can there be security with massive joblessness? It is not possible.”

The number of Africans seeking tertiary education outside the continent reached a record high in 2020 at over 620,000 students. This is an increase of 122% since the year 2000, according to a tally by the Carnegie Endowment for International Peace’s Africa Program. France is the top destination, accounting for a fifth of African students abroad. While other western countries like the United States, Germany, the United Kingdom and Canada are in the top 10, African students have also flocked to China, the UAE and Saudi Arabia in recent years. Using state-sponsored scholarship schemes, these countries are increasingly attracting attention from African students.

Nigeria African economic powerhouse faces significant challenges and great possibilities for energy

Nigeria, an African economic powerhouse, faces significant energy challenges and great possibilities. The country’s impressive human and natural resources can be the basis for a growing and highly diversified energy sector, one increasingly able to meet its own needs. 

Nigeria today sees expanding markets for its natural gas, a nascent yet growing field for renewables, and a promising opening to new green fuels. These resources, combined with ongoing reform in the power sector, offer vast potential to meet the needs of Nigeria’s young and growing population while raising its capacity to supply international energy markets.

The challenges in the country’s power sector are clear. Nigeria is a country of more than 200 million people, about 40% of whom (some 80-90 million people) live in homes without electricity. Millions more have just intermittent access. Installed power generation capacity is approximately 13 GW, but actual available capacity is just (approx.) 5 GW. Lack of access to electricity is limiting Nigeria’s economic development and holding back the potential of its people.

Despite significant and ongoing reforms in the power sector, problems persist in transmission and distribution. As electricity supply through the country’s grid is relatively scarce and unreliable, many families and businesses rely on diesel generators for backup energy supply. Similarly, many households lack access to gas or electric cooking technology, putting pressure on wood resources. These deficiencies exasperate the climate threat facing Nigeria and the world.

Nigeria is Africa’s largest producer and exporter of oil, which accounts for much of the government’s revenues and most of its foreign exchange earnings. And the country enjoys enormous gas reserves, some 200 trillion cubic feet, which could go far to fuel its power sector. Yet infrastructure and refining capacity are lacking to allow the country to deploy these resources as low-cost domestic energy. 

Nigeria’s electricity generation is largely reliant on natural gas. The country must import large amounts for power generation, as well as gas products such as cooking fuel. Yet power plants are often idled for lack of fuel supply. The government is incentivizing gas pipeline development while investing in power transmission and distribution infrastructure to raise grid capacity.

Renewable power does make an important contribution in the power sector, mostly in the form of hydropower. However, solar PV plays a small but growing role, both utility-scale and distributed. Last year the federal government launched the Solar Power Naija (SPN) program to expand energy access to 5 million rural households, through home hook-ups or connections to mini grids.

Solar panels on rooftops are helpful and needed, but they will not be sufficient to power the country’s economic and industrial development at large scale. Ongoing upgrades to Nigeria’s power generation, transmission and distribution capacities will be required. The country will need to develop its natural gas resources for domestic power production even while it expands renewable power.

Meeting these complex challenges requires expert input, which will be forthcoming at this month’s Nigeria Energy 2022 in Lagos (20-22 September). Leaders in Nigeria’s energy sector, advocates, investors, and other African and international energy experts will convene, opening diverse perspectives on the key questions. They will share a stage to form partnerships and develop solutions to meet Nigeria’s energy challenges.

Nigeria Energy attendees will find opportunity to engage with the highest level of decision makers and international partners. They will meet key stakeholders from Nigeria’s energy sector, from government ministries and regulators, to gas companies supplying fuel to grid-connected plants, to independent power producers, distribution companies, and the bodies mandated to facilitate the development of renewable energy and off-grid solutions.

Nigeria Energy 2022 will provide a blueprint for Nigeria’s power sector in the coming years, opening pathways to improving access to electricity, driving economic growth and creating jobs for Nigerians.

Energy & Utilities has recent news from Nigeria’s energy sector on its home page, and insights from Nigeria Energy exhibition director Ade Yesufu.