How Russia-Ukraine war affected Nigeria's economy

The Russia-Ukraine war, which is now in its eleventh month, has taken a toll on the Nigerian economy in many ways.

The conflict caused disruptions to the global supply chains as sanctions have affected the global market, sending oil prices to as high as $130 per barrel.

Its spillover effects include the surge in diesel price in Nigeria and the disruption in petrol supply.

Here are five major effects of the Russia-Ukraine war in Nigeria.

Durum wheat

The ongoing war between Russia and Ukraine brought about a decline in the importation of durum wheat importation into Nigeria, according to data from the National Bureau of Statistics (NBS).

Nigeria imported durum wheat worth N753.59 billion in nine months (January to September), down from N898.19 billion in the corresponding period of 2021.

Durum wheat is a variety of spring wheat that’s typically ground into semolina and used to make pasta.

Since Russia invaded Ukraine in February, the price of durum wheat rose by 50 percent while its importation has declined by 16 percent.

“Before the war, it was selling for N27,000-N28,000 for 100kg; it is N41,000 to N42,000 now,” Tola Ogunnubi, national public relations officer of National Wheat Farmers, Processors and Marketers Association of Nigeria, said.

The ongoing war in Ukraine has forced importers to start importing from the United States and other countries.

Oil price rally

Oil prices were rising globally prior to the full escalation of the war.

However, when Russia attacked Ukraine, the price of crude oil in the global market skyrocketed from around $76 per barrel at the start of January 2022 to over $130 per barrel in March.

Nigeria relies on crude oil for most of its foreign exchange and two-thirds of government revenue. The oil price rally meant an increase in crude export revenues for the country but this was offset by higher petrol subsidy cost incurred by the Nigerian National Petroleum Company.

Soaring price of diesel

Diesel has a stronghold on the Nigerian economy as it powers a large part of the industrial and commercial activities in the economy, from the trucks used for long-distance haulage of both industrial and finished goods, to small machines used by small-scale enterprises.

Since the war, its price has risen from about N288 per litre in January to over N800 in December. The spike in diesel prices is affecting businesses in terms of operations and sales, especially for manufacturers and banks. Many banks had to issue notices stating that some of their branches would close by 2 pm due to diesel costs.

“We used to buy a truckload of diesel when it was at N270, but now, we buy in drums because of the fluctuating market price, and even the suppliers do not take orders ahead again; they prefer to supply as it is,” said Jerry Ifijen, a supervisor at a furniture industry in Abuja.

Aviation fuel

The conflict also led to a rise in the price of aviation fuel that now threatens the operations of many airlines in the country.

Given that aviation is critical to the survival of businesses and any economy, the sector has suffered the most with the astronomical rise in the price of JetA1 from N200 per litre in December 2021 to over N400 per litre in February and N800 per litre in the third quarter.

One year ago, the economic base fare for tickets was between N25,000 and N30,000 but the airlines increased economy tickets to N50,000 and N60,000 in February.

The operators later increased base fare from N50,000 to over N80,000. Currently, the cost of a one-way ticket for a one-hour flight costs between N75,000 and N130,000, depending on the destination and the number of airlines operating the route.

Fertiliser

Findings showed the prices of fertiliser have been climbing rapidly as the war created a supply shock.

BusinessDay had reported in April that the Russia-Ukraine war had trapped four inbound vessels containing over 70,000 metric tons of potash – a key raw material input for producing NPK, putting food security in Africa’s most populous nation at risk.

Since the war started, prices for fertiliser raw materials that make up crop nutrients – ammonia, nitrogen, potash, urea, phosphates, sulphates, and nitrates – have risen by 30 percent.

The average price of a 50kg bag of NPK, a critical type of fertiliser mainly used by smallholder farmers, has surged by 181.3 percent to N22,500 from N8,000 last year, according to BusinessDay findings.