Oil bust hits hard in petroleum-driven countries

ABUJA, Nigeria—Cars, motorcycles, and tricycles crowd the Nigerian National Petroleum Corporation (NNPC) petrol station in Abuja’s Gudu district. A single row of waiting cars stretches for nearly half a block. Unlike several other petrol stations, NNPC sells fuel 10 cents cheaper per liter than the set rate many drivers find expensive.

“It’s not a big difference, but as things are difficult, people like it that way,” said Veronica Simon, one of the workers at the petrol station.

Simon said customers hardly fill up their tanks as they complain of having no money. The impact of Nigeria’s struggling economy is spreading across different sectors in the country. The oil-dependent economy began to crumble earlier this year as demand for oil declined. Prices of local and imported goods have now doubled, and the government has barred access to foreign currency for some goods in a bid to save foreign reserves.

Husseini Ibrahim, a tricycle driver for the past seven years in Abuja, said the spike in petrol prices has affected his business.

“We are not seeing passengers like before because we increased the amount from about 50 naira to 100 naira,” Ibrahim said.

Nigeria’s banking sector also is feeling the brunt of the financial crisis. In past weeks, banks across the country have sacked more than 2,000 employees. Two months before Diamond Bank laid off 200 employees, the bank announced its profits before tax fell by nearly $10 million from the first quarter of 2015.

The Nigerian minister of labor and employment, Chris Ngige, has asked the banks to stop the retrenchment, but many of the banks are private establishments and hold the right to fire their staff.

On Wednesday, U.S.-based United Airlines announced it will run its last flight in Nigeria on June 30. The Nigerian government owes nearly $600 million in air ticket sales, a deficit blamed on the country’s foreign currency shortage.

“The airline industry is a competitive business operating on thin margins,” said Tony Tyler, CEO of the International Air Transport Association. “It is not reasonable to expect airlines to invest and operate in nations where they cannot efficiently collect payment for their services.”

Yemi Olakojo, a senior research fellow at the Center for the Study of the Economies of Africa, said the problems now manifesting in Nigeria began with Nigeria’s oil monopoly. Olakojo called on the Nigerian government to consider investing in other domestic resources while restructuring the tax system to generate more revenue.

“The solution is not going to be in a short time,” Olakojo said.