From the production of noodles to the consumption of petrol, the decision of Russian forces to launch its long-feared attack on Ukraine is having a far-reaching impact on families in Africa’s biggest economy. From the production of noodles, pasta, cakes and other confectioneries to the consumption of petrol, the decision of Russian forces to launch its long-feared attack on Ukraine is having a far-reaching impact for families in Africa’s biggest economy.
Russia’s attack on Ukraine and retaliatory sanctions from the West may signal good news to petrol-dollar economies like Nigeria as Brent, the gauge of Nigeria’s crude oil, surged past $100 a barrel for the first time since 2014. Yet, the conflict threatens to inflict more pains on Africa’s biggest economy through higher subsidy pain, higher gas prices, and increasing cost of pasta foods, given Russia’s role as the world’s second-largest producer of natural gas, largest exporter of wheat and one of the world’s largest oil-producing nations.
Brent has been marching upward and has jumped more than $20 a barrel since the start of the year amid escalating Russia-Ukraine tensions. On Thursday, Brent crude futures rose more than 8.1 percent to trade at $104.69 a barrel during afternoon trade in London. While US West Texas Intermediate futures climbed over 7.7 percent to trade at $99.15. “The next day will be quite critical – will definitely see prices exceeding 100/bps in the coming weeks,” Carlos Casanova, senior economist for Asia at UBP in Hong Kong, told Al Jazeera.
“In case supply from the US or talks in Vienna don’t go as planned, this could result in further appreciation pressures in the $150-170 range,” Casanova said, referring to talks in Vienna aimed at reviving the Iran nuclear agreement, which would provide a fresh boost to supply.
For several months, Russia has been accused of intentionally disrupting gas supplies to leverage its role as a major energy supplier to Europe amid an escalating dispute with Ukraine. The development was a subject of rare public rebuke from the International Energy Agency (IEA), which called on Russia to increase gas availability to Europe and ensure storage levels were filled to adequate levels during a period of high winter demand.
Kateryna Filippenko, principal analyst for Europe gas research at Wood Mackenzie, said, “Things could obviously get a lot worse” if Russian exports to Europe were disrupted.” Findings by BusinessDay show the global natural gas price has soared to an eight-year high to an average of $4.53 per cubic feet, highest since the close of 2014
With the current price of crude oil higher than the $62 per barrel oil benchmark in the 2022 budget, Nigeria is expected to earn an extra $42 on every barrel of crude sold — but the country’s subsidy shortfall payments will erode the gains. President Muhammadu Buhari, who touted subsidy as ‘a scam’ before coming to power in 2015, is preparing to spend $2.6 Billion on the scheme in 18 months, and analysts say it may not be unconnected with the imminent 2023 general elections.
BusinessDay’s calculations show Nigeria’s petrol subsidy bill of N3 Trillion could rise higher than Nigeria’s total revenue of N5.09 Trillion as of November 2021. The country’s rising fiscal deficit makes a mockery of the government’s continued petrol subsidy regime that gulps over a trillion Naira per annum.