The Effects of the Russia– Ukraine War on the Nigerian Economy
The war in Ukraine has created wide ranging effects on the global economy and supply chains. In Africa’s most populous country and biggest economy, Nigeria, the effects have been devastating.
Let me start by stating that Nigeria is thousands of miles away from Ukraine and Europe, but the spillover is been felt from a close range.
Nigeria as a country richly blessed with human and material resources should ideally be insulated from such conflicts. In fact, as one of the key members of the Organization of Petroleum Exporting Countries (OPEC), Nigeria should have been reaping huge benefits and increases in the foreign reserves from the escalating price of crude oil.
However, this is not the scenario currently experienced in Nigeria now. Due to a combination of factors including mostly incompetence, corruption and nepotism, a richly blessed nation finds itself on the precipice, partly attributed to a conflict going on miles away.
Nigeria faces a severe shortage of generated power in the national grid. This has forced many households and firms into using diesel and petrol powered generating plants as the main source of power for domestic and industrial use. To tell the story better, Nigeria recently recorded two incidences of total grid collapse and a rationing of power. A nation of over 200M people making do with less than 2,000MW of electricity! Absolutely insane.
To paint the picture better, Nigeria currently has next to zero oil refining capacity. The country has to import every drop of gas and diesel used internally. To add to this, produced gas which can be used to power turbines to generate electricity is flared and wasted off during the oil production process!
How this came about should be the subject of a research project: “How to run a prosperous country aground”.
The war in Ukraine has caused a massive jump of crude oil prices consistently above $100 per barrel. Consequently, the prices of diesel and petrol which are derivatives from crude oil, have risen in Nigeria.
Curiously, an oil producing nation that maintains a subsidy on petrol but lets the price of diesel be determined by market forces. Therefore, petrol is still relatively available at affordable prices but diesel is not easily available and the prices are just not sustainable in this kind of economy.
We are now experiencing a gradual shut down of the economy as virtually every sector is affected by the power and fuel crisis. From Radio Stations that are forced to shut down early to businesses that cannot even afford to be open without power. The unfolding scenario is best imagined than experienced.
To cap it all, Nigerian and other African students in Ukraine have been forced to relocate back to their countries or dispersed all over Europe to escape the hostilities in Ukraine. There is a serious cost to this as Universities in Nigeria are currently shut due to strike actions by academic staff
The situation is quite complex but very understandable. The three pronged nemesis of incompetence, corruption and nepotism seems to have finally caught up with Nigeria.
When a nation has misplaced priorities like; having the leaders go on medical trips abroad instead of fixing local hospitals, having the children of the elite school abroad instead of fixing local schools, you get the paradox called Nigeria.
