It has been widely reported that Nigeria, the most populous African country and largest oil producer, has experienced significant unrest over the last three weeks. This unrest stemmed from widespread hunger protests led by young people across major cities like Lagos, Kano, Kaduna, Ibadan, Benin, and Port Harcourt. The protests, spanning from August 1 to August 10 and lasting 10 days, were in response to soaring inflation and the high cost of living. These issues were attributed to the removal of petrol subsidies and the liberalization of the nation’s currency, the Naira, through a free-floating exchange system introduced by President Bola Ahmed Tinubu.

Tragically, the protests resulted in loss of lives, particularly in Kano, the largest city in Northern Nigeria. Additionally, some individuals took advantage of the unrest to vandalize government properties and loot local businesses. Protesters have put forward several demands, including the reinstatement of fuel subsidies, an end to the liberalization of the foreign exchange, and improved salaries and welfare for workers.

Removal of petrol subsidy

President Tinubu took office on May 29, 2023, and on the same day announced the end of the fuel subsidy, which had kept the price of petrol at 185 naira (0.15 cents) per litre. However, a few days after the subsidy was removed, the cost of petrol skyrocketed by 300 percent to 650 naira (0.50 cents) per litre.

Furthermore, one month later, the Central Bank of Nigeria implemented a free-floating exchange rate system in an effort to liberalize the foreign exchange market and address previous issues. This led to a rapid depreciation of the Nigerian local currency, with the exchange rate dropping from 470 naira to one US dollar to around 1000 naira per dollar within three months of the new system's introduction.

Liberalisation of Nigeria’s foreign exchange market

The Central Bank of Nigeria introduced a floating exchange rate system in June 2023, allowing the value of the nation's currency to be determined by market forces. This marked a departure from previous administrations, which had intervened periodically to influence the value of the Naira. Under the new system, the value of the Naira is determined by buyers and sellers based on demand and supply, which is influenced by factors such as trade balances, interest rates, and capital flows. The Central Bank reduced its intervention in the foreign exchange market significantly with the adoption of the floating system.

However, instead of achieving stability as intended, the adoption of the floating exchange system has worsened the economic situation in the country. The Naira's devaluation by over 100% in the last year due to volatility in the foreign exchange market has eroded the purchasing power of citizens. The resulting increase in the prices of imported goods has made them unaffordable for many citizens.

Exit of multinational companies and the collapse of local firms

Since the current government took office last year, a significant number of foreign companies have pulled out of Nigeria. The devaluation of the Naira has diminished the revenue and profits of both multinational and local companies operating in the country, resulting in poor performance and financial losses. Companies such as GlaxoSmithKline, Procter & Gamble, Shoprite, Sanofi-Aventis, Kimberly-Clark Corporation, and Woolworth Holdings, among others, have ceased operations in Nigeria due to foreign exchange and economic crises.

Major conglomerates operating in Nigeria, including Nestle, Dangote Sugar, NASCON, MTN, BUA, Lafarge Africa, and Nigerian Breweries, have incurred significant foreign exchange losses totaling over 500 million dollars in the past year, largely due to the devaluation of the local currency. This loss is primarily attributed to the importation of raw materials required for their production.

Over the past year, numerous companies have shut down operations and halted production due to the high costs associated with importing equipment and materials necessary for manufacturing. This unfortunate situation has resulted in the closure of both foreign and local companies, leading to widespread layoffs.

Herder/Farmer crisis

The ongoing conflicts between farmers and herdsmen in several Northern states like Sokoto, Zamfara, Katsina, Benue, and Kaduna have resulted in loss of lives and properties. Many farmers and families have been forced to leave their ancestral lands and relocate due to the violence. These recurring conflicts over the past six years have caused food shortages in the country, leading to high prices for food items and worsening living conditions for low-income earners.

The rise of inflation

The people of Nigeria are currently experiencing a severe cost of living crisis never before seen in the country in the last 30 years. This is due to the Nigerian government's removal of subsidies on petroleum products. The current inflation rate is about 40 percent, and the prices of essential food items such as rice, beans, yam, maize, meat, chicken, tomato, and onions have increased by over 150 percent in the past year.

The rising cost of transportation has been identified as a major factor contributing to the high increase in food prices. Most of the food consumed in Nigeria is produced in the northern region and transported to the south using diesel trucks. The removal of subsidies has doubled transportation costs, leading to a significant increase in the prices of food items across the country. This has pushed many households into poverty, as they are unable to afford their basic needs on their current wages.

Furthermore, the cost of renting apartments and flats in many cities across Nigeria has increased by 70 percent, and in some cases, even up to 100 percent, depending on the location and city. Many civil servants and workers have been compelled to leave the cities and move to the suburbs and nearby villages due to the high cost of rent. As a result, many citizens have become homeless due to their inability to afford rent payments.

Some protesters have been arrested by the police and are currently being tried in courts in the federal capital territory, Abuja. However, it is uncertain whether this will quell the anger on the streets. The Nigerian government should listen to reason and reverse the policies that have impoverished the people. The average Nigerian's quality of life has deteriorated in the past year due to the government's policies. It is the responsibility of the government to take proactive measures to stabilize the nation’s currency and reduce volatility. Steps should be taken to address high energy prices, including reinstating the petrol subsidy to alleviate the people's suffering.

Welfare packages and support should be introduced to alleviate the suffering of the vulnerable members of society. There are palpable fears that if tangible action is not taken, the next protest may be spontaneous, possibly leading to chaos and regime change, as witnessed in Bangladesh a few weeks ago.