The Centre for the Promotion of Private Enterprises (CPPE), on Wednesday revealed how the conflict between Russia and Ukraine will affect the Nigerian economy.
The Chief Executive Officer, CPPE, Dr Muda Yusuf, in a statement released on Wednesday, said the crisis would cause energy prices (diesel, aviation fuel, kerosene, and gas) to escalate, petrol import and subsidy bills to soar, and petrol smuggling to aggravate.
In terms of macroeconomic outcomes, Yusuf predicts a larger fiscal deficit, higher debt levels, and higher debt service payments as well as depreciation of the Naira and a rapid rise in inflation.
Yusuf continued: “Additionally, the cost of flour, the price of bread and other confectionery may also take a hit.
“The summary is that if the conflict is protracted, these would be the downside risks to the Nigerian economy.”
He noted that with Russia as the world’s second-largest oil producer, the conflict in the region would disrupt oil supplies, reduce output and trigger higher prices.
“Already, oil prices are above $100, and the impact on energy prices is already being felt around the world.
“In Nigeria, the deregulated components of petroleum products would witness sharp increases. These include diesel, aviation fuel, and kerosene and gas would suffer the same fate.”
The escalation of these costs would have serious inflationary implications across sectors.
Also, there will be an upsurge in Nigeria’s petrol import and subsidy bill in the coming months as the landing cost of petrol increases on the back of the rise in crude oil price.
He added that since Nigeria remained a major importer of petroleum products, and typically when oil prices increase, petrol import bill and subsidy payment also increase.
Additionally, the cost of flour, the price of bread and other confectionery may also take a hit. The summary is that if the conflict is protracted, these would be the downside risks to the Nigerian economy.
Yusuf, however, said there would be a positive investment effect on companies in the upstream segment of the oil and gas sector, because of the positive correlation between crude oil price and return on investments.
Furthermore, he said the war would disrupt the supply of wheat in the global market. “Ukraine and Russia are major producers of wheat and account for about 30% of the global wheat export used for bread and some other confectioneries.
“There is, therefore, a risk of a hike in the cost of wheat, which will affect the price of flour and a knock-on effect on the price of bread and other confectionery.
“Nigeria also imports a substantial amount of wheat, which would also suffer some disruption and impact on prices.”
Besides, he said the ongoing tension may also affect bilateral discussions, especially as discussions had significantly progressed between Nigeria and the Russian government on the resuscitation of the Ajaokuta Steel Plant. As such, the conflict may cause a major setback to this agreement because of the torrent of sanctions against Russia.
