How Russia, Israel Wars Affect Business in Nigeria — Dr. Enang
An Adjunct Professor of the North Dakota University, USA, Engr. Dr. Wisdom Patrick Enang, says that the Russian/Ukraine and Israel/Palestine hostilities have taken a huge toll on the Nigerian people and economy in various ways.
The renowned Energy Expert hinted this while interacting with newsmen recently in Uyo, the Akwa Ibom State capital.
According to him, the spillover effects of both wars include the surge in commodity and fuel prices, which is further worsened by the hike in PMS (Premium Motor Spirit) price, following the recent fuel subsidy removal.
“Since the beginning of the Russian/Ukraine war in January 2022, the price of diesel has risen from about N288 per litre, to over N800 per litre in December of the same year, and currently sells above N1000 per litre. This price hike is negatively affecting the operations, sales and profitability of businesses like manufacturers and banks.”
Dr. Enang, observed that, prior to the removal of fuel subsidy in May 2023, Nigeria was unable to cash in on the oil price windfall, which was occasioned by the outset of the Russian/Ukraine war. He noted that, despite crude oil price skyrocketing in the global market from $76 USD per barrel in January 2022, to about $130 USD per barrel in March 2022, Nigeria was unable to cash in on this price windfall due to a number of militating factors including low production volumes, massive fuel subsidy bills, crude oil theft, and subsisting futures and crude swap contracts, which significantly reduced the actual production volume that could be sold for earnings.
“Both conflicts have also resulted in a hike in the price of aviation fuel, which now threatens the operations of many airlines in the country. Arguably, the aviation sector has suffered the most as a result of both wars, with an astronomical rise in the price of Jet-A1 fuel from N200 per litre in December 2021, to over N400 per litre in February 2022, and now over N800 per litre.”
The Energy expert highlighted further that, between December 2021 and today, the economic base fare for domestic airline tickets has increased from N35,000 to over N100,000, which has negatively impacted both personal and business travels.
While reviewing the impact of both wars on Nigeria’s Agro allied sub-sector, he stressed that the prices of fertilizers have been increasing rapidly within the time in review, primarily due to supply shock.
“Since the Israel/Palestine war started, the price of fertilizer feedstock like Ammonia, Nitrogen, Potash, Urea, Phosphates, Sulphates and Nitrates have risen by about 30%”
He averred that the average price of a 50kg bag of NPK (Nitrogen, Phosphorus, Potassium), a critical type of fertilizer mainly used by small-scale farmers, has surged by 181.3% to N22, 500 from N8, 000 last year.
“Similarly, since the onset of the Israel/Palestine war, there has been a 50% increase in the price of Wheat, and unsurprisingly, a corresponding decline in its importation into Nigeria by 16%. Before the hostilities, the price for a 100kg bag of Wheat was about N28,000. Now it currently sells for N42,000.
“Arguably, the current sporadic increase in the global market prices for major food commodities mirrors the situation during the global economic meltdown of 2008, and possess a threat to food security. The situation is particularly severe in Africa, where several global disruptions (the COVID-19 pandemic, the Russian/Ukraine crisis, and the Israel/Palestine crisis) have exposed subsisting vulnerabilities within the food systems of the continent, particularly in countries like Nigeria, that relies heavily on imports of major staple foods such as rice and wheat.”
While elaborating further, he maintained that, 50% of the food consumed by Nigerian households come from importation, as such, price inflation threatens to place many Nigerians in a worsening food insecurity situation. The situation is further compounded when considered in context of the Nation’s population of nearly 217 million people, which is roughly about 15% of Africa’s population.
Dr. Enang also argued that price inflation portends a dire situation for Nigeria, considering the fact that 42.6% of its citizens live below the poverty line, and unemployment stands at 33%.
“Sadly, Nigeria’s import dependency may not reduce anytime soon, due to fundamental problems associated with low adoption of agricultural technologies, slow progress in agricultural research and development, and shocks due to climate-driven disasters and armed conflicts.”
The scholar opined that the subsisting war-related global market disruptions and rising commodity prices has led to product scarcity, which has forced consumers to adjust their consumption patterns or switch to cheaper substitutes.
On other opportunities occasioned by the aforementioned hostilities, Dr. Enang expressed hope that even as the food security situation looks increasingly worrisome, the subsisting crisis presents an ample windfall FOREX (Foreign Exchange) earning opportunity for the Nigerian fertilizer industry, which is designed primarily to serve the export market.
“Nigeria’s annual domestic Urea fertilizer demand is about 700,000 metric tons, while its annual production stands at about 1,400,000 metric tons. The newly commissioned Dangote Urea fertilizer plant with an annual production capacity of 3,000,000 metric tons should significantly increase the subsisting supply surplus, which will further improve Nigeria’s prospect for fertilizer exportation”, he maintained.
“Similarly, Europe’s quest to find alternative energy suppliers, and reduce its overdependence on Russian oil and gas, also presents an opportunity for Nigeria to improve its earnings from gas exportation. Nigeria currently supplies Liquified Natural Gas (LNG) to several European countries, and this gas export potential is expected to increase with the planned Trans Saharan Gas Pipeline, and the ongoing NLNG (Nigerian Liquified Natural Gas) Train 7 project.”
According to him, Nigeria must strategically address its dependence on food imports, in addition to building long-term resilience to food crisis and other shocks. To achieve this, Dr. Enang advised the federal government to focus on enhancing key policy areas such as increasing domestic agricultural production; accelerating the implementation of the National Agricultural Technology and Innovation Policy (NATIP) 2022-2027; promoting the adoption of technology to improve agricultural productivity; in addition to establishing an Agricultural Development Fund.
“To effectively address both the short-term and long-term challenges within the Nigerian Agricultural value-chain, NATIP implementation must begin with a priority-setting exercise that evaluates various policy options on the basis of key performance indicators like poverty reduction, agricultural productivity improvement, and attainment of food sufficiency”, he stressed.
While craving the indulgence of the federal government to reform distortionary agricultural trade policies, Dr. Enang hailed the recent reopening of land borders as a step in the right direction, which according to him will reduce the vulnerability of Nigerian households to food price increases in the short-term, through the moderation of supply disruptions by commodities from the West African regional market.
He noted that addressing trade restrictions is key to Nigeria’s participation and leadership in the implementation of the African Continental Free Trade Area (AfCFTA) agreement, and called on the federal government to capitalize on Nigeria’s competitive advantages in fertilizer and gas exportation to cash in on the economic opportunities occasioned by both the Ukraine/Russia conflict, and the Israel/Palestine conflict.
On the issue of alleviating the hardship felt by Nigerians sequel to the fuel subsidy removal, Dr. Enang advised that the federal government should partner and synergize with the state governments to drive citizen-oriented post-subsidy policy thrusts such as: the introduction of subsidized or free mass transit road transport vehicles; increased funding or business support grants for SMEs (Small and Medium-size Enterprises); increased minimum wage; increased financial support for farmers; and increased drive to diversify the Nigerian economy, as well as expand the mid-stream, downstream and gas sectors of the nation’s petroleum value-chain.
Dr. Wisdom Enang, a Fellow
of both the Nigerian Society of
Engineers (FNSE) and the Nigeri-
an Institution of Safety Engineers
(FNISafetyE) is a Nigerian born,
British trained Chartered Engineer
who is fully registered with, and
accredited by British Engineering
Council (BEC). He is widely known and appreciated for his massive sustained
campaigns and advocacy for
the adoption of a value-driven
approach to leadership and gov-
ernance.
