An economic expert, Mr. Muda Yusuf, has said that if the Russian hostilities in Ukraine sustains, there would be profound and multidimensional implications for the Nigerian economy.

Yusuf who is the chief executive officer, Centre for the Promotion of Private Enterprise (CPPE), in Nigeria, the deregulated components of petroleum products would witness sharp increases.

Petroleum products’ components include diesel, aviation fuel and kerosene.  He said gas would suffer the same fate.

“The impact is already being felt, as diesel and aviation fuels have risen above N600 per litre, thus putting additional pressure on businesses owners and airlines, and increasing cost of goods and services,” he said.

Speaking to newsmen in Abuja at the weekend, he explained that the escalation of these costs obviously has serious inflationary implications across sectors. The geopolitical tension of the recent weeks may get worse if the conflict escalates, he reckons.

According to him, the lingering global tension would affect cost of production, profit margins, purchasing power and may further worsen the poverty situation.

In Nigeria, there may be an upsurge in petrol import and subsidy bill in coming months as the landing cost of petrol increases on the back of the rise in crude oil price.

“Regrettably, we remain a major importer of petroleum products and as is typical when oil prices increase, petrol import bill and subsidy payment also increase. Only recently, the NNPC made a request of N3trillion variation for petrol subsidy,” he said.

Yusuf envisages that with current turn of events, the subsidy bill would rise, resulting to “serious fiscal challenge for government at all levels, which will equally produce serious implications for the budget and government finances,” he posited.

He argued further that the situation would definitely scale up petroleum products smuggling because of the impact of the crude oil price hike on relative prices.

The CEO of CPPE said the difference in unit prices of petroleum products in Nigeria (subsidized by government) and unit prices of their equivalents in other countries in the subregion would be further widened.

According to him, the situation will push up smuggling of petroleum products across the borders, with the accompanying oil sector crimes.

What it means is that the current Nigeria domestic petrol consumption, estimated at 60 million litres per day, may jump up, and provide even greater incentives for smuggling and bunkering.

“That will put further pressure on the NNPC for petroleum products supply for domestic consumption and may perpetuate the current scarcity and fuel queues beyond initial expectations.

“Ideally, high oil price increase should be good news for oil producing countries.  It typically impacts positively on foreign exchange earnings, foreign reserves and government revenue.  But Nigeria is a peculiar case because of the dysfunctional policies and regulations in oil and gas sector. 

It is an irony that crude oil price increase emasculates the Nigeria economy, rather than benefit it.  This is because of the escalating petroleum products and subsidy bill.

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