The Russian invasion of Ukraine, according to Nigeria’s Centre for the Promotion of Private Enterprises (CPPE), has serious implications for the Nigerian economy, especially if it continues.
The ongoing war, according to CPPE Chief Executive Officer Dr. Muda Yusuf, may inflict a huge setback in bilateral relations between Nigeria and the United States due to the slew of sanctions imposed on Russia.
There have been concerns over the Nigerian Government’s continuous expenditure on inactive assets, as statistics from the country’s Budget Office’s annual appropriation bill revealed that the Federal Government allotted N20.4 billion to Ajaokuta Steel Company Limited from 2016 to 2021, despite the company’s inactivity. Ajaokuta Steel Company Limited is built on 24,000 hectares (59,000 acres)and is the largest steel mill in Nigeria.
The plant was built by Russia’s Tyazpromoexport and incorporated in 1979. The steel factory was 98 percent complete in 1994, with 40 of its 43 plants completed before it became stalled, leaving 2% for external infrastructures such as canals and viable ports.
Despite the annual budget, the steel business has yet to resume full operations after 42 years of failed privatization and concession attempts by the government.
According to Yusuf, the crisis will result in an increase in energy costs (diesel, aviation fuel, kerosene, and gas), a rise in the cost of petrol imports and subsidies, and an increase in petrol smuggling, all of which will have a detrimental impact on the Nigerian economy.
He went on to say that there were also substantial macroeconomic consequences, such as an increase in the fiscal deficit, rising debt levels, an increase in debt service payments, and an increase in the money supply.
Depreciation of the local currency and increased inflationary pressures, among others, he noted.
“Flour prices, bread prices, and other confectioneries prices may also be affected. In essence, if the violence continues, these are the negative consequences for the Nigerian economy,” he stated.
“Ukraine and Russia are major wheat producers, accounting for roughly 30% of global wheat exports used for bread and other confectioneries.
“As a result, the current situation will disrupt wheat supply on the global market.”
“As a result, there is a chance of a price increase in wheat, which would affect the price of flour and, in turn, the price of bread and other confectioneries.”
“Nigeria also imports a significant amount of wheat, which would be disrupted and have an influence on pricing,” he added.
In terms of the world economy, the CPPE President stated that due to Russia’s vital role in the global oil and energy market, energy costs will rise globally, exacerbating the problem of inflation.
With Russia as the world’s second-largest oil producer, producing 10 million barrels per day, the CPPE boss predicted that the violence in the region will disrupt oil supply, restrict output, and raise prices.
“Oil prices are already above $100, and the impact on energy prices is being felt all around the world.” The deregulated components of petroleum products in Nigeria would see significant hikes.
Yusuf also predicted an increase in petrol import and subsidy bills in the coming months, as the landing cost of petrol rises as crude oil prices rise.
He lamented the fact that Nigeria remained a big importer of petroleum goods, and that when oil prices rise, so do fuel import bills and subsidy payments.
However, Yusuf stated that the upstream portion of the oil and gas industry saw a good investment effect.
Because of the favorable association between crude oil price and return on investments, he said this was good news.
“Diesel, aviation fuel, and kerosene, as well as gas, will be affected,” Yusuf stated. The increase of these expenditures, he claims, has major inflationary repercussions across all sectors.
“Even before Russia’s current onslaught, the previous geopolitical tensions had actually bolstered oil prices.”