Russia’s invasion of Ukraine rattled global financial and energy markets, causing oil prices to spike and financial instruments to fall after Russian troops moved into Ukraine by air, land and sea.
Although crude oil price yesterday soared to about $105 per barrel, a development is last seen in 2014, Nigeria’s economy may face fresh uncertainties.
Already, analysts expect the increased global energy prices to filter into the domestic economy in the form of higher gas and other fuels prices.
Given that the utility sub-basket constitutes 32.6 per cent of the core inflation, they expect the core inflation to continue its ascent over the short term, with an overall negative implication for the headline inflation, especially with the lingering scarcity caused by adulterated fuel import.
Similarly, with major food items like wheat being imported from Russia, there are concerns about food inflation if the tension lingers.
From Europe to Asia to Africa, the tension triggered by the conflict peaked as President Vladimir Putin called the bluff of his critics and other global leaders and declared a full-scale military operation in Ukraine.
And across the global and investment clusters, the global economy was rattled, causing investors unmatched losses. Foreign exchange (forex) and cryptocurrency markets, which trade round the clock, were the first casualties of the invasion.
Pumping far below the 1.8 million barrels per day projection in the 2022 appropriation, rising crude oil price, which should have provided revenue windfall of an extra $43 on every barrel from the $62 per barrel envisaged in the 2022 fiscal document, now poses fresh challenges for the country due to importation and payment of subsidy on Premium Motor Spirit (PMS).
While natural gas prices gained about five per cent hovering around $5 per billion British thermal units, crude moved to about $105 per day mid-day yesterday.
Without local refining of petroleum products, Nigeria reverted to petrol subsidy, which is expected to cost N3 trillion this year. If the crude oil rally continues, there are indications that the subsidy may hit N5 trillion.
As the global markets buckled, bitcoin, the flagship cryptocurrency, lost about 10 per cent within hours, leading to the liquidation of over $72 million long positions in the early hours of the day. The entire crypto future position holders lost $242 million to liquidations as meme and altcoins lost between 10 per cent and 35 per cent in a free fall.
Stock markets across the world did not escape the bloodbath with Moscow Stock Exchange, as expected, topping the losers’ table, as over 50 per cent of capitalisation was wiped from asset dumping panic across Europe and the rest of the world.
Safe-haven bargains pushed gold up by over 1.5 per cent to the highest prices in more than a year, suggesting heightened de-risking, which started at the beginning of the conflict.
Amid the rising tension, the Nigerian capital market went up marginally by 0.1 per cent. But experts said it was not an indication that Nigeria will not share the negative repercussions of the Ukraine attack.
A consultant at the Economic Community of West African States (ECOWAS) and economist, Prof. Ken Ife, believed that “the global interconnectedness means turmoil on both the financial market for the banking, insurance and investment sectors exposed to Russia and Ukraine”.
According to Ife, countries, businesses and consumers dependent on Russian gas and oil would be punished just as “the global economy will see a sharp rise in oil and gas, further increasing inflationary pressure, rising monetary policy rate as well as lending rates”.
Rising speculation, the professor also noted, would increase with attendant consequences for economic performance.
Victor Ogiemwonyi, a retired investment banker and economist, also warned of negative repercussions for stock markets, including that of Nigeria.
“That is why you have seen global equities markets responding to the uncertainty. Equities prices are down globally, while commodity prices are up. The uncertainty in the global economy has a chilling effect on all markets,” he said, adding that the full implications will be felt much later.
“In Nigeria, we are poised to gain from the situation, only if we can put in place all and everything that will allow us to make full use of whatever capacity that exists. We should also make plans to accelerate our capacity, give the right incentives and the needed investment will come. This crisis might be longer than we think,” Ogiemwonyi suggested.
The equities market is a barometer measuring the direction of the economy. That the Nigerian market gained yesterday could be revealing of the perception of investors about how Nigeria’s economy will respond to the crisis. Over the year, admitted Ogiemwonyi, Nigeria’s equities market responded positively to the prices of oil, which have been projected to go up as Russia, a leading producer, faces global sanction and war financing.
Russia and Ukraine, which are at the epicentre of global tension, are the largest exporters of wheat. They account for about 25 per cent of the global supply of the commodity.
Already, there are fears that the prices of the commodity would shoot up in the coming months as the region gets increasingly ‘cut off from the rest of the world. Experts said this could worsen the country’s rising food prices.
MEANWHILE, Nigeria relies majorly on imported wheat, importing 650,000 tonnes in 2020. The volume of imports has been on the increase as local production dwindles. In the first quarter of 2021 alone, Russia’s wheat exports to Nigeria were valued at N37.2 billion.
A former adviser at the Nigeria Extractive Industries Transparency Initiative (NEITI), Dauda Garuba, who noted that Russia occupies a central place in the international oil and gas production and distribution, decried the rising oil price due to the war and added that it may have no benefit for Nigeria.
“Russia exerts a strong control and influence over the Caspian Sea, which holds the gas pipeline to Europe. To this extent, it can be imagined that any slightest impulse in that axis will automatically reverberate globally,” he said.
While the world is still struggling with the impacts of the COVID-19 pandemic, Garuba stated that international oil prices up to $104 per barrel would be painful for non-producing countries, even though a big plus for producing countries like Nigeria.
“As positive as this seems, Nigeria needs to moderate her expectations, especially being an import-dependent economy. Whatever one thinks Nigeria will gain from the present face-off can easily be expended on imported goods whose prices are going to rise as well. So, it’s only going to be ‘what goes around comes around,” Garuba said.
Managing Partner, The Chancery Associates, Emeka Okwuosa, said while the war would lead to a hike in both the prices of crude oil and natural gas prices, it should portend well for Nigeria but for dependence on import.
“We have to seek a solution wherein global increases in oil and gas prices translate to lower domestic prices for our products and huge earnings on our exports. Our market for oil and gas is too opaque,” he said.
Okwuosa noted that the passage of the Petroleum Industry Act (PIA) should force Nigeria to be more transparent and accountable in managing proceeds from oil.
An industry expert, Micheal Faniran, also said that the rise in crude oil prices above $100 has created a sordid situation for Nigeria.
“It is a bitter-sweet situation because the increased crude revenue that will accrue to the nation will be canceled out by the subsidy burden the economy is carrying. We may actually be worse off at the end of the day,” Faniran said.
According to him, unless the subsidy issue is solved once and for all, Nigeria will continue to be in a situation where both low and high crude prices would not favour the country.
He insisted that the country could only do better if local value addition to the petroleum resources as enshrined in PIA is implemented.
REACTING to the outbreak of war, a lawyer, Henry Chibuike Ugwu, said what is playing out is the crystallisation of a meticulously orchestrated plot by Russia to assert itself in the international community and to remove itself from a position where it can be easily threatened or bullied by the West.
“In 2014, following the Ukrainian Revolution that led to the removal of the President of Ukraine who was an ally of Russia, Crimea was invaded by Russia and many countries, and the EU responded with sanctions against Russia. However, Russia responded with its own sanctions, and tensions had become intensified from that point till recently when Russia launched its attack,” he said.
According to him, the bane of the controversy is the expansion of the West, EU, and NATO into the countries in Eastern Europe, especially those that were part of the defunct USSR.
Ugwu argued that with countries like Lithuania, Poland and Latvia (all former USSR territory) now fully part of the EU and NATO, critical allies to the West, it jeopardises Russia’s control of the area, as a world superpower.
He explained that Russia by the recent series of invasions in Ukraine is asserting itself in its area of control and repelling the subtle infiltration of the West into its region.
For Nigeria, he noted that Russia’s attack implies that international politics is not a sentimental affair, but a game of interests.
“Nigeria must consolidate its relationship with critical stakeholders in the international community and take a clear-cut stance on issues in a way that protects the interests of Nigeria. Our leadership must strive to get governance right because if we continue to deteriorate as a country, there is no guarantee that our interests would not conflict with that of a superpower or emerging power in Africa that will lead to dire consequences for the country. We must take active measures to assert Nigeria as a regional and global power in a way that can guarantee our survival and security,” he declared.
Senior Partner, Law Chest, Chijioke Ifediora, said powerful nations have always invaded weaker ones in the past.
“So it is not new in contemporary history for sovereign nations to be invaded by a more powerful nation. The question is what is the motive for the invasion, is it justifiable under international law? Or is there justification for such?” He asked.
According to him, Putin represents conservative Russia or rather the pride of the communist Soviet Union, who sees former states of Soviet Union as part of historical Russia and has been vocal about his demands and philosophy.
His words: “His reason being that Ukraine is a historical part of Russia and should not embrace either NATO or Western policies which he sees as a security threat to Russia.”
He, however, stated that the challenge with the invasion is the fact that it is unprovoked, adding that the issue of Ukraine joining NATO does not justify the military invasion by an ally who feels betrayed, rather diplomacy and all other channels are the proper tools to resolving this issue.
According to Ifediora, the actions of Putin will have a strong impact on the economy of the European community and the entire West, which could affect world peace, adding that Russia is a world power and Putin’s action may trigger world war 111.
He stated that Nigeria is expected to be neutral, knowing full well that Russia and China are good allies, even though Russia is not really a major trade partner of Nigeria because of its strong trade relationship with China.
Former Director-General, Nigeria Institute of International Affairs (NIIA), Prof. Bola Akinterinwa, said the attack was expected following the reaction from NATO and the West, which could be seen in sanctions imposed, adding that the Westerners and Russia are dishonest about the crime in Ukraine.
He explained that Western countries told Russia that there would never be an expansion of NATO membership at the time of dismantling the Soviet Union, adding that Russia, on its part, has not been faithful to its agreement to respect the territorial integrity of Ukraine.
“So, Russia is equally guilty of what they are accusing the Westerners of,” he pointed out.
He said that Ukraine wanted to use its sovereignty to determine its own fate, while two regions in Eastern Ukraine want to be autonomous by being a part of Russia.
“The implication is that the crisis in Ukraine is likely to be encountered in Nigeria. If Russia succeeds in Ukraine, it means the West failed, the whole of West Africa would have more ‘Russianisation’ because the people of West Africa have already started tilting towards Russia relations, as the vacuum created is being filled by Russia,” he said.
In his reaction, a Port Harcourt-based internal law and jurisprudence lawyer, Chief Festus Oguche, said
Russia has violated the instruments on its international obligations.
He said: “If Russia’s sovereignty and existence are being threatened, it can take actions in any manner that it deems fit to protect itself.
“I think that is what Russia is doing essentially though it fears could be unfounded but then again you look at it from the point of international human rights law where the existence and life of persons who are civilians and not combatants are threatened.
“At the end of the day, the refugee situation in Kyiv would implode on the rest of the eastern European countries.”
Ogwuche stated that Russia should have settled the issues diplomatically rather than in a full-blown war. “I guess the Russian president was really hasty in his action because there are a lot of alternatives that could have been taken, he argued.
He advised the Federal Government to take care of its citizens in such a situation, adding that no nation abandons its citizens in times of war in foreign lands.
“A lot of countries, particularly African countries have gone to evacuate their citizens, especially those very vulnerable to attacks. The FG can’t leave Nigerians there to their fate for whatever reasons be it finance. I don’t think Nigeria is so poor that it cannot evacuate its citizens,” he said, adding that Russia’s action is contrary to the principles upon which the United Nations was founded.
As the war rages on, an International constitutional law expert and the Executive Director of The Integrity Friends for Truth and Peace Initiative (TIFPI) Livingstone Wechie has chided the Federal Government for what he described as “nonchalance” towards evacuating Nigerians from the war-zone.
According to him, Ukraine today is one of Nigeria’s highest education tourism destinations with hundreds of thousands of Nigerians locked in that territory, which should not be taken for granted.
He stressed that the Nigerian government should be held accountable for any loss of life of “our citizens for failing to do the needful.”
IN the same vein, Ohanaeze Ndigbo Worldwide yesterday called on President Muhammadu Buhari, as a result of urgency facilitate the evacuation of over 3,500 Nigerians mainly Igbo, who are stranded in Ukraine.
In a statement in Abakaliki the Secretary-General of Ohanaeze Ndigbo Mazi Okechukwu Isiguzoro said reports available show that Nigerians especially, students, medical tourists, and others are trapped and stranded in Ukraine, noting that they deserve to be evacuated from the crisis-ridden country before the war escalates.
He added that the Nigerian Government should establish contact with her Foreign mission and Embassy in Kyiv to facilitate the process of making it easier for the evacuation, adding that the Federal Government should take responsibility for their safety and security.
“We can not afford to lose any Nigerian to the current Russian military invasion of Ukraine. The highest number of Nigerians schooling in Europe are in Ukraine, it’s surprising that Presidency has been quiet now the nations of the world have condemned the actions of Russian President,” the group said.
Also, the House of Representatives yesterday called on the authorities to evacuate Nigerians from Ukraine.
The decision followed the adoption of a motion of urgent Importance sponsored by Mr. Ahmed Munir at the plenary by Speaker Femi Gbajabiamila.
The House justified the position, saying it was based on the worsening conflict between Russia and Ukraine.
In effect, the House mandated the Majority Leader, Hon. Alhassan Ado-Doguwa and Chairman, House Committee on Foreign Affairs, Hon. Buba Yakub to liaise with the Federal Ministry of Foreign Affairs and Nigeria Intelligence Agency (NIA) with the view to airlift Nigerians, particularly students back to the country without further delay.
The House also mandated the Majority Leader and his team to travel to Ukraine on Friday (today) to achieve the goal.
The House mandated the Committees on Foreign Affairs and Diaspora in conjunction with the Federal Ministry of Foreign Affairs to ascertain the exact figures of Nigerians affected by this conflict and put in place comprehensive monitoring, evaluation and evaluation mechanism.
HOWEVER, the Federal Government has said it would embark on the evacuation of Nigerians living in Ukraine as soon as the airports in the country are opened.
The government in a statement yesterday by a spokesperson, Ministry of Foreign Affairs, Francisca Omayuli, said it received a surprise, reports of the invasion of Ukraine by Russia.
The FG added that Nigerian Embassy in Ukraine has assured of the safety of Nigerians and measures being taken to keep them safe and facilitate the evacuation of those who wish to leave.
“The Federal Government wishes to assure the families with loved ones in Ukraine that as soon as the airports in the country are opened, it would assist in facilitating the evacuation of Nigerians who are willing to leave,” it said.
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