Thursday, February 4, 2016

Supercar sellers in Nigeria hit by economic slow-down

Nigeria's wealthy elite would be hard pushed to find a clear road in this traffic-clogged city that would allow them to floor the pedal and get anywhere near approaching top speed.

But now sales of luxury sports cars have slumped as Africa's biggest economy and largest oil producer is battered by the fall in global crude prices.

A Porsche showroom in Lagos is full of top-of-the-range models selling from $100,000 (£70,000) and upwards.

In the good times, high-spending Nigerians would roll into the garage with fat wallets and drive out in a Porsche - now the showroom is deserted.

The managing director, Parvin Singh, told me that sales were down 50% last year compared to 2014. He blames the crash on the crude oil crisis.

While gas and oil sales only account for around 15% of the country's GDP - "Nigeria is not Saudi Arabia," as one analyst put it to me - the industry has a disproportionate effect on the economy as a whole.

Oil revenues account for 75-80% percent of the government's budget and if it does not have cash, it cools overall spending.

"The government is Nigeria's biggest spender," says Mr Singh. "When the government stops spending, it has a cascading effect on the corporate sector."

Nigeria's new government - elected last year - has grand plans to diversify the economy. It wants to invest in infrastructure such as power plants, roads and bridges, to boost growth.

But without oil revenues, the money is not there for this investment, even if government officials say that they will claw back cash by cracking down on corruption.

President Muhammadu Buhari finds himself battling rising inflation, a currency that has collapsed to record lows on the parallel market, a stock market slump, and the slowest pace of economic growth in more than a decade.

The government has started talks with the World Bank and African Development Bank with the hope of raising some money to help it fund a forecast $11bn (£7.7bn) budget deficit.

All this means this nation of entrepreneurs will continue doing business while battling against extraordinary odds.

One of them is Gbolahan Eyiowuawi, who runs a catering company after studying at a cooking school in the UK.

In order for Mr Eyiowuawi to run his business he needs a generator for his fridges because of power cuts.

He must constantly explain to furious customers they have to pay more because of fluctuating prices. And, then, when he has cooked the food, he needs to negotiate Lagos' notorious traffic.

His worst disaster: He turned up at a wedding two hours late.

"The person hiring our services got really mad as people were already leaving," he told me.

"At first I couldn't face the bride but then I gave her a vacuum cleaner and water dispenser and she seemed OK."

The hungry bride may have been happy with her vacuum cleaner but many Nigerians are not happy with their lot.

Millions live in poverty and an astonishing two million young people are entering the job market every year.

Economist Bismarck Rewane says the government faces enormous challenges.

"If the youth see some hope and direction they will put their energies to positive use," he said. "But if they see hopelessness and despair then you will have militancy, insurgency and social breakdown."

"It's either you win big or you lose big time."

It is a stark warning. Oil may have once buoyed Nigeria but now the slump in global prices is proving extremely painful to Africa's largest economy.


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