Nigeria is currently facing one of its worst economic crises in recent years, marked by high inflation and a plummeting currency value. This dire situation has sparked protests across the country.
According to CNBC, on Thursday (21/02/2024), Nigeria's currency, the Naira, has depreciated by 70% since May 2023, when President Tinubu took office. This significant depreciation has led to inflation in Nigeria reaching nearly 30%.
"The weakening exchange rate is fueling inflation, which will exacerbate price pressures in Nigeria," stated Pieter Scribante, a senior economist at Oxford Economics.
Nigeria, with the largest economy in Africa and a population of over 210 million, heavily relies on imports to meet the needs of its citizens.
Inflation in Nigeria has soared to 29.9%, the highest level since 1966. This steep inflation is attributed to a 35.4% spike in food prices, sparking outrage among citizens who took to the streets to protest last week.
Additionally, the plummeting currency value has further exacerbated negative sentiments toward the government, which had previously removed gas subsidies, resulting in a threefold increase in gas prices.
In addition to inflation and sharp currency devaluation, Nigeria also grapples with a large national debt, high unemployment, inadequate electricity supply, and declining oil production, which is the country's main export.
According to Oxford Economics, inflation in Nigeria is expected to peak at 33% in the second quarter of 2024, with a possibility of further increases due to unforeseen economic risks in the future.
"Excessive market demand, continued weakening exchange rate pressures, and shortages of food and fuel threaten price stability, while inflation risks are increasing significantly," added Pieter Scribante.
President Tinubu announced that the government plans to raise at least $10 billion to boost foreign exchange liquidity and stabilize the Naira, according to several local media reports.
The President also stated that the government has saved over $666.4 million from the subsidy removal, which will be redirected to infrastructure investments in the country.
As Nigeria grapples with its economic challenges, urgent measures are needed to stabilize the economy, alleviate inflationary pressures, and restore confidence among citizens and investors alike.