Tony Chukwunyem 
Nigeria is among several countries that may survive the global economic crisis triggered by Russia’s invasion of Ukriane unscathed, analysts at United Capital Plc have said.
The analysts, who stated this in a report released at the weekend, noted that although Nigeria will feel the impact of the war on its inflation rate, foreign exchange liquidity and fiscal balance, the crisis would have “minimal” effect on the country’s economic growth. According to them, “Nigeria appears to be one of several countries likely to feel the minimal impact of the crisis on economic activities.
The biggest concern for Nigeria will be the impact of the crisis on inflation, trade balance, Fiscal balance, and FX liquidity. The implications for economic growth for 2022 are likely to be muted or marginal at most.
“Although higher energy prices could be a key concern for the manufacturing sector while higher inflation could weaken consumer purchasing power, we expect key growth drivers (Agriculture & Services) to remain upbeat amidst the crisis.
Thus, we retain our GDP forecast of 2.1 per cent for 2022.” Specifically, commenting on how the crisis will impact Nigeria’s inflation, the analysts said: “We note that Nigerians should be set for another year of unabating an uptick in prices. First, energy prices are projected to be higher if the crude oil price remains at elevated levels (above $90.0/ bbl).
However, the impact on energy cost is likely to be moderate as petrol prices remain regulated with fuel subsidies still in place. “The effect will be mainly on diesel prices, gas prices and other energy sources. In addition to energy cost pressures, we are likely to see the impact on food prices over the next couple of months. Prices of raw agricultural inputs like wheat, barley, and corn are expected to sustain the uptrend, which would impact the prices of items like flour (and consequently pastries, bread etc.), fertilisers etc. Lastly, we expect to see the pass-through impact of imported inflation given the sizeable portion of imported goods consumed in Nigeria.” Similarly, on the impact of the crisis on the forex situation in the country, they stated: “Another significant implication for Nigeria is the economy’s trade balance and the consequent impact on foreign exchange. The surge in global price level and higher cost of importing petroleum products will likely drive upward pressure on the nation’s import bill. The higher crude oil price environment is a positive for Nigeria as it would support increased earnings from crude oil exports.
“However, that is likely to be capped by suboptimal production levels caused by unabating oil theft. Overall, we expect the net impact to be a case of sustained trade deficit with the possibility of a wider deficit relative to 2021. “This would have a negative ripple effect on FX liquidity and pricing.
We expect this to prolong the nation’s FX shortage, particularly given expectations of weaker official inflows into the capital account. This reinforces the possibility of a devaluation but may be put on hold till post-2023 general elections, given political interests.”
