BREAKING: Nigeria’s economy grew 3.54% in Q2 2022 - NBS
File: Market in Nigeria


There are growing concerns across sectors that only drastic and urgent steps by the federal and state governments can save the Nigerian economy from imminent collapse.

The situation is compounded by the inability of the country to take advantage of opportunities created by the global market with the raging Russia-Ukraine war, which has instead escalated the woes of Africa’s largest economy.

Rising prices of crude since the Russia-Ukraine war began, coupled with exchange rate instability in Nigeria, among others, had pushed up the prices of refined petroleum product, especially the deregulated ones such as diesel, kerosene and aviation fuel across the country.
Oil industry data seen on Thursday showed that Brent, the global benchmark for crude, appreciated in price by 8.34 per cent to $106.19/barrel.

The situation could get much worse as Russia warned last week of $300-a-barrel oil and threatened to cut off gas supply to Europe amid sweeping Western sanctions over its invasion of Ukraine. Russia is the world’s third-largest oil producer. The country also supplies about 40% of Europe’s gas demand.

Rather than gain from the global supply shortfall, Nigeria, a major oil producer in the world, sixth largest in OPEC, and number one in Africa, is losing in two ways, no thanks to its almost zero refining capacity and inability to meet OPEC quota.

Nigeria’s oil production quota as approved by Organisation of Petroleum Exporting Countries (OPEC) is pegged at about 1.8 million barrels per day but in the last few years, the country has struggled between 1.3 and 1.4 million barrels per day.

President Muhammadu Buhari recently asked the National Assembly to approve an additional N2.557 trillion budget for petrol subsidy in 2022, even as experts fear that if the trend (oil price increase) continues in another six months, Nigeria should be looking at a subsidy cost of about N5 trillion or more.

Groaning businesses

In Nigeria, the debilitating effect of the global energy crisis is compounded by a national grid collapse with a sharp decline in power supply that has left businesses and households in many parts of the country groaning in blackout. However, President Buhari, on Wednesday assured that “the blackouts seen in the national grid are also being addressed.”

“A dip in hydroelectric generation due to seasonal pressures has coincided with technical and supply problems at thermal stations. On this, the government is also working tirelessly to resolve the issues at the latter to guarantee sufficient power flows into the national grid.”

Similarly, the issue of aviation fuel scarcity is also threatening continued operations of airlines in the country. However, local airlines under the aegis of Airline Operators of Nigeria (AON) have suspended their threat to shut down flight operations over the outrageous hike in the price of Jet-A1 fuel.

On March 15, AON had threatened to shut down their operations on March 18 if the government could not find a lasting solution for the marketers to reduce the price of Jet-A1, which rose to as high as N670 per litre.

“We are not going to shut down flight operations because discussions are ongoing between us and the relevant players in the oil and gas value chain to find a lasting solution to the problem”, said AON Vice President and Chairman of Air Peace, Allen Onyema while announcing this on Friday.

“We are negatively affected by the increasing price of aviation fuel, but as patriotic investors, we will not take any action that will paralyse the economy. As patriotic Nigerians and investors, we will continue to engage the government and its agencies on the way out of this problem.”

Stakeholders in the aviation sector had agreed to peg the price of the aviation fuel at N500 per litre. AON had insisted on N400 per litre or be granted licence by NNPC Ltd to import directly. However it was announced by the operators that government has acceded to the second option.

It is no longer news that bakers under the aegis of Premium Bread Makers Association of Nigeria (PBAN) are mulling a total shutdown of operations, following steady and fast increases in the price of diesel in the past few days. This is also worsened by the war in Ukraine, as over 60 percent of wheat, a major ingredient in bread and confectionery making is produced by Russia and Ukraine.

Speaking during a monitored AIT Kakaki telephone interview, the PBAN President, Emmanuel Onuorah, said the continued rise in the price of diesel had made the price of the commodity to be doubled, thereby taking a serious toll on bread production for its members.

“This country may collapse on everybody. Industries will shut down operations, and all of us will go down. Imagine the price of diesel going towards N850/litre”, Onuora said.
“Remember, I said wheat is not the problem, and that it is energy that will be the major problem in this Russian-Ukraine war. Almost at N850 for a litre of diesel, and they are still increasing it every day.

“Diesel is what we use in running our generators; diesel is what we use in running our oven. What we were buying N350 is now about N850 in less than a week.”

In the same vein, telecommunications services providers under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON), have said a tariff review for telco services may happen if the rise in the price of diesel is sustained.

“We are actually in a very bad situation. And how this will play in end-user pricing requires us to follow the right channel, the regulatory procedure for conveying our complaint to the regulator.” ALTON Chairman, Gbenga Adebayo, said on Friday.

According to Adebayo, telcos will continue to ensure that there are no service disruptions in the nation. However, he added that there might be a need for a tariff review if the present diesel crisis persists.

“The diesel situation is a problem at this time. We are doing all that we can to ensure the business continues as usual in all cases every other circumstance”, said Adebayo.
“The assurance for the public is that there would not be a time of outage because of the current diesel crisis. What I cannot assure is that at some point there may not be a consideration for some form of tariff review. I cannot guarantee that it will not happen sometime in the near future. I cannot guarantee that.”

At a media media briefing in Abuja on Thursday, the Director-General the Debt Management Office (DMO) revealed that Nigeria’s total public debt stock increased to N39.56tn in 2021 from N32.92tn in 2020.

Oniha said, “Nigeria’s total public debt as at December 31, 2021, was N39.56tn or $95.78bn. The amount represents the total external and domestic debts of the federal government of Nigeria, 36 state governments and the federal capital territory.”

She, however, stated that despite the debt increase, the country is still within the total public debt stock to the Gross Domestic Product limit of 55 per cent set by the World Bank and 70 per cent set by the Economic Community of West African States.

According to her, the federal government is “mindful of the relatively high debt-to-revenue ratio” and has established certain measures to increase revenues through the strategic revenue growth initiative and the introduction of Finance Acts since 2019.”

Missed opportunity

Meanwhile, the Lagos Chamber of Commerce and Industries (LCCI) has blamed Nigeria’s poor infrastructure for the country’s inability to take advantage of the global energy supply shortfall caused by Russia’s invasion of Ukraine.

The chamber in a statement regretted that Nigeria should have been a major harvester of opportunities from the war between Russia and Ukraine in areas like gas supplies to Europe but “unfortunately, we do not have the infrastructure in place to produce enough gas for supply to Europe.”

The chamber said Nigeria would have been in a position to supply oil and gas to countries rejecting Russian oil and gas due to the sanctions imposed on the Eastern European country for invading Ukraine.

The statement quoted the President of the chamber, Asiwaju Michael Olawale-Cole, as noting that the war between Ukraine and Russia would likely make the world’s hunger crisis even tougher to fight, given that the two countries in the war were major suppliers of staple grains like wheat to many nations.

“Nigeria’s food supply will surely come under some pressure as it imported four per cent of wheat from Ukraine and 27 per cent wheat from Russia in 2021, according to Gallup News.
Data from the National Bureau of Statistics (NBS) show that Russia was the sixth major exporter to Nigeria as of the third quarter of 2021, coming only after China, India, USA, Netherlands, and Belgium in that order,” the statement read in part.

Wheat is the second-highest contributor to the country’s food import bill, putting strain on the country’s foreign reserve, with over $2 billion spent annually on the importation of more than 5 million Metric Tons (MT) of wheat.

It is estimated that with only 1%, or 63,000 metric tons MT of the 5-6 million MT of wheat eaten yearly grown locally, Nigeria occupies a prominent position on the list of nations with high need for wheat and inability to meet the demand.

Reacting to the situation in the country, Chairman of United Bank for Africa Plc (UBA), Tony Elumelu, regretted that while other oil-producing nations are smiling over Russia-Ukraine war, Nigeria is facing tough times.
“This morning, I am listening to my colleagues at the office bemoan the very pressing issues that they face every day in this country, and how things have been getting worse and worse – no electricity for 5 days, hikes in the price of diesel, frightening food inflation, etc”, Elumelu twitted on Thursday.

“How can a country so rich in natural resources have 90% of its citizens living in hardship and poverty? I have often said that access to electricity is critical for our development, alleviation of poverty and hardship. And speaking of security, our people are afraid! Businesses are suffering. How can we be losing over 95% of oil production to thieves?
“Look at the Bonny Terminal that should be receiving over 200,000 barrels of crude oil daily, instead it receives less than 3,000 barrels, leading the operator @Shell to declare force majeure.

Elumelu’s position is contrary to the views earlier expressed by the Minister of State for Petroleum Resources, Chief Timipre Sylva, who had attributed Nigeria’s inability to meet its oil production quota to low investments.

Early this month, Sylva said Nigeria’s inability to meet the oil production quota was due to the lack of investments in the oil and gas sector following recent spate of exits by International Oil Companies such as Shell and ExxonMobil.
In its intervention, the Centre for the Promotion of Private Enterprise (CPPE), called for the suspension of planned imposition of excise duties on manufacturers.

Earlier this year, the Finance Minister, Mrs. Zainab Ahmed, hinted that excise duty would be imposed on a range of manufactured goods in the country anytime soon.

“But these are very difficult times for manufacturers as they contend with escalating cost of production arising from elevated energy costs, rising operating expenses, sharp currency depreciation, forex market illiquidity, galloping inflation and numerous structural bottlenecks”, CPPE said in a brief by its founder and CEO, Dr Muda Yusuf.

“The cost of diesel has risen by close to 200 percent in the past few weeks. It was at an average of N288 per lire in January this year and jumped to as high as N625 per litre in some locations. The cost of gas is similarly on the increase and there are also sharp increases in electricity tariffs”, Yusuf also noted.



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