A small roadside mechanic fixing broken oil tankers beside one of the main trade routes in West Africa stands as apt metaphor for Nigeria’s broken oil economy.
The mechanic here, Edwin Obinna, has his head deep inside the oily engine of a tanker truck as he tries to replace the pistons as he explains the problem:
“When there’s no oil in the vehicle, the engine won’t work because you need oil to move it. When there’s no oil, it won’t work,” Obinna explains.
Nigeria relies on oil for over 90% of its foreign exchange earnings, but the price of oil has crashed this year from over $100 to $50 a barrel. But there is a bigger problem than the oil price crash: Nigeria is not selling its oil.
Nigeria has few contracts with countries – it sells on “spot” – and as U.S. shale oil output has increased it has displaced Nigeria’s traditional markets. Now the latest U.S.-Iran deal threatens to displace even more of Nigeria’s oil market share in countries such as India.
As a result, the naira, Nigeria’s currency, has fallen to record lows against the dollar, international investment has stalled, construction contracts have not been paid and there are persistent fuel shortages across the country.
Obinna’s mechanic shop sits on the Lagos-Ibadan expressway, one of the busiest roads in West Africa, linking the mega-city and port of Lagos to the rest of the country. The federal government’s promises to expand and rehabilitate the road have fallen quiet. There simply is no money.
Energy analysts worry there is no clear plan to fix the problem:
“There needs to be communication about the economic policy of the government – a case of, this is how we are going to drive the economy forward, how we want to open the economy,” says Dolapo Oni, an energy expert based in Lagos. “But that communication does not exist right now.”
The problem is starting to affect Obinna’s mechanic business:
“Today, I’m hungry for my family. I don’t have money to eat. Last year, I had something to do, when I needed money I can get it. But this year, we never see anything,” Obinna said.
Obinna manages to start up his engine to get the truck back on the road. He hopes Nigeria’s leaders will do the same with the economy soon.
Opinion: How did Africa’s largest oil producer almost run out of gas?
