Russia’s military invasion into Ukraine has put the global economy in a case of one step forward, two steps backward. The world was already dealing with rising global prices prior to the war and this has now been exacerbated. For the first time since 2014, Brent crude price crossed the $100pb threshold, rising as high as $117pb. In the same vein, commodity prices are reaching new record levels with wheat now at a 14-year high. While the spike in oil price has a silver lining for Nigeria due to the expected boost in oil revenue, the war presents the country with a myriad of challenges. Foremost among these is the risk of higher inflation, increased debt service cost and heightened exchange rate pressures.
Renewables to the Rescue
The Nigerian economy has been heavily dependent on generators for electricity supply. In a power sector data assessment, the National Bureau of Statistics found that generators (diesel, petrol, and gas) contribute 48.6% of the electricity consumed by both families and enterprises across the country. An estimated $100 billion in investment over the next 20 years is required to bridge the gap. Renewable energy sources are likely to form the bulk of Nigeria’s energy solutions as global warming and climate change restrict investment in traditional energy sources.
Reform Agenda – on hold…again.
The Petroleum Industry Act’s implementation has been postponed again due to the fear of pushback from labor. In spite of all the sound arguments for deregulated pricing, many remain skeptical that the elimination of subsidies will have the far-reaching consequences that politicians and many economists predict. Their position is backed up by historical evidence. If higher oil revenues did not result in more domestic oil refining or lower unemployment, why should the general public bear the brunt of lower oil revenues?
In this edition of the FDC bi-monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
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