Venezuela and Nigeria’s economic crisis: The troubling similarities

President Bola Tinubu recently declared that he should be included in the Guinness Book of Records for having the guts to remove fuel subsidy on his first day in office—something that no other Nigerian president has ever done. Yes, he does deserve a spot like that, but sadly, it’s not for the wrong reason. The damage Tinubu has done to the country’s economy is comparable to chopping off a person’s legs without giving them anaesthesia or providing drugs to prevent inevitable infections. And in a short while, Nigeria’s economy will fully fit Venezuela’s collapsed economy in all its ramifications unless his government reverses itself soon enough. Nigerians are dying.

The bird dancing in the middle of the road has its drummers in the adjacent bush, according to a Nigerian proverb. The president has received praise from the IMF for the “success” of his rash economic measures. The same week when hunger protests broke out in Nigerian cities, particularly Minna and Kano, and many more warming up was when Nigerians were reading the IMF’s death wish for their country. Since the military era, the IMF and the World Bank (the Bretton Woods institutions) have always wanted Nigeria to be in this situation, thus demonstrating for whom and why the abrupt fuel subsidy removal was carried out.

As if removing the fuel subsidy wasn’t enough, the Tinubu administration also floated the naira, another measure influenced by the same Bretton Woods institutions, allowing market forces to determine the naira’s value, against the dollar, pounds, Euro, and the rest; much like yours sincerely going into the boxing ring against Iron Mike Tyson in his hay days.

Since the nation exports very little other than crude oil—much of which was mortgaged by the previous Buhari government—the naira flotation was also carried out without any safety nets. A very crazy idea really because the naira stands no chance without any export base and an import-dependent economy. According to the National Bureau of Statistics, up to 75% of the nation’s exports are dependent on petroleum and the crude has so whittled down to salvage the situation.

The two severe economic measures were ill-planned, and hastily executed, and have unleashed two economic headwinds that have crushed the country’s economy and yielded hyperinflation. In the six months after the policies went into effect, the cost of commodities has more than tripled, with staple foods, medications, and other necessities being the most hit.

In Nigeria, the value of the dollar, which is used to measure everything, has more than doubled, rising from 700 to over 1400 naira in six months, and steadily rising daily.

Predictably, as Nigeria receives insufficient revenue from exports, the skyrocketing cost of the dollar cannot be stopped, slowed down, or reversed. Multinational corporations are fleeing the country in large numbers, and there is no production base to generate fresh foreign exchange while the political elites mop up the little dollars available as a store of value since naira is on a free fall.

The economy of Zimbabwe under Robert Mugabe and that of Venezuela under Hugo Chavez and his successor Maduro, where people had to carry a wheelbarrow full of cash just to buy a loaf of bread, are fast emerging in Nigeria.

Venezuela is a significant crude oil exporter, much like Nigeria. However, as Nigeria is currently experiencing, terrible economic policies and incompetent leadership have eroded that nation’s economic foundation, making it practically irretrievable since roughly ten years ago and worsening every day.

The economic crisis has resulted in one of the world’s fastest-growing humanitarian crises in Venezuela, which is experiencing misery on a par with a war zone. Nigeria currently matches this definition as well.

Here are a few things to be aware of regarding Venezuela’s economic crisis, which Nigeria’s situation closely resembles. Ninety percent of Venezuelans live in poverty now, and it is safe to say that the percentage of Nigerians living in poverty should be approaching that of Venezuela.

The sectors that formerly supported a wide social safety net have mostly collapsed as a result of the nation’s economic collapse, just like Nigeria is also experiencing today. Because of this, Venezuela’s inflation rate this year reached an astoundingly high percentage and the average price of basic products quadrupled every 19 days, making essentials like bread almost unaffordable for the bulk of the people. In Nigeria, the majority of homes are unable to purchase bread, which currently costs upto N1300 in most cities.

Food insecurity created a crisis that shook the Venezuelan nation in 2015, and since then, conditions for getting food have gotten much worse. In Nigeria, the actions of bandits, terrorists, and killer herdsmen have also caused a comparable food crisis and getting worse.

Hospitals in Venezuela are running out of supplies due to the economic collapse, and medical personnel are leaving the nation in large numbers. Nigeria is practically in this situation. Official report has it that in the last 3 years, over 40,000 Nigerian nurses have left Nigeria, to say nothing about the medical doctors who also heading out in comparable numbers. In the past six months, the cost of prescription drugs has more than tripled in Nigeria, particularly for those with diabetes, blood pressure, and other serious health conditions. As a result, many Nigerians have been forced to switch to herbal remedies, quackery, and faith-healing homes in place of the prescription drugs they can no longer afford.

The ‘Japa’ phenomenon has impacted Nigeria’s education system just as it has in Venezuela. A significant number of lecturers and teachers are departing Nigeria as the educational sector is threatened by the wider humanitarian crisis. Similar to Nigeria, millions of children in Venezuela are missing all or part of their school days, hundreds of teachers have left the nation, and school attendance has sharply decreased.

Similar to Venezuela also, a confluence of these and other causes has set off one of Nigeria’s fastest-growing humanitarian crises, resulting in widespread protests against hunger in both countries’ cities.

Similar to Venezuela, as the Nigerian economy collapses, people are leaving the country; women and children are becoming especially exposed to violent crimes and human trafficking. Children are being coerced into begging and unpaid labour, and many married and single women in Nigeria are being driven into the illegal sex trade. People are frequently coerced into abusive circumstances by an overwhelming need to make ends meet – paying house rent, food, school fees, and other necessities.

But how did Venezuela end up in such an economic mess? While opponents of the administration claim that years of economic management incompetence and corruption are to blame, supporters of Chávez and Maduro said that the country’s business elite, declining oil prices, foreign sanctions, and an “economic war” on Venezuela are to blame.

Like Nigeria, Venezuela, which was formerly one of the richest countries in Latin America, was mostly dependent on its enormous oil reserves for income. However, the Venezuelan economy collapsed as a result of corruption, mismanagement, a sharp drop in oil production and prices. The same thing is happening today in Nigeria.

Nigeria shares all the causes of the economic catastrophe in Venezuela, including corruption and poor management. To add to it, Nigeria has recently implemented currency flotation and the abrupt and unplanned removal of fuel subsidy. In addition to the nation not taking any measures to mitigate the effects of the withdrawal of fuel subsidy, the floating of the naira is a policy that should not have been coupled with the removal of fuel subsidy.

The Tinubu government can still, however, take advantage of a small window of opportunity to avert the economic catastrophe: the president has to fix the dollar (as Sani Abacha did for four years at his time) and fix the fuel price for a minimum of a year, and seriously restrict access to the usage of foreign exchange for purposes other than economic production, health care, and education.

If these harsh steps are not taken to stop and reverse the country’s economic decline tending towards the Venezuelan experience, doing so when it eventually reaches that boiling point will be extremely expensive for both the country and the Nigerians who will manage to survive the tomblike onslaught.

Dr. Law Mefor, an Abuja-based forensic and social psychologist, is a fellow of The Abuja School of Social and Political Thoughts. He can be reached via [email protected]; Twitter: @Drlawsonmefor