BusinessDay

How Nigeria is paying for Russia-Ukraine war

As Russia’s war in Ukraine passes the 100-day mark on Friday (today), its ripple effects are reverberating across sectors of Africa’s biggest economy, inflicting more pain on Nigerians.

Russia’s large-scale invasion of Ukraine, which began on February 24, 2022, has pushed the prices of crude oil, natural gas, aluminium, nickel, wheat, and other commodities to record highs.

This development has taken a toll on many economies, including Nigeria’s, and worsening the economic woes facing Nigerians.

The distance between Nigeria and Ukraine is an estimated 8,287 kilometres but the conflict has led to higher petrol subsidy bill and a surge in the prices of diesel, aviation fuel, cooking gas and some food items.

Russia is the world’s second-largest producer of natural gas, largest exporter of wheat and one of the world’s largest oil-producing nations.

Analysts say this development has pushed up the cost of living for millions of Nigerians and further exposed the country’s inability to make the most of its oil fortunes.

The country’s dependence on goods from refined petroleum products to fertilisers, and food, especially wheat, has seen Nigerians paying for a war they are not a part of.

Between 2017 and 2021, Nigeria’s imports from Ukraine included ‘milk preparations’, wheat, and maize seed, while wheat, mackerel, herrings, blue whitings, other fish products and vaccines were imported from Russia.

In 2021, Nigeria imported N215.7 billion worth of food-related goods from Russia, but others such as fertiliser components were not listed in the trade data by the National Bureau Statistics (NBS) that was analysed. More than half of Nigeria’s imports from Russia were for wheat, and for almost three months now, that market has ceased.

Even though food prices were already on the rise in Nigeria before the war, food inflation rose to 18.37 percent in April, attributed to increases in the prices of bread and cereals, food products, potatoes, yam, wine, fish, meat, energy, and oils.

“As at this time last year, NPK fertiliser sold for N7,500 but currently sells around N30,000 and farmers are expected to buy it in producing food for the populace,” said Olufemi Abioye, who heads the Igangan Agropark Investors Association, with 39,000 hectares of farmland in Oyo state.

“The challenge of this in food production is clear. Expensive fertilisers mean farmers avoid it, farm outputs reduce, and food shortages increase.”

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Russia is the world’s largest exporter of fertilisers, accounting for 23 percent of ammonia exports, 14 percent of urea exports, 10 percent of processed phosphate exports, and 21 percent of potash exports, according to data from The Fertilizer Institute.

As BusinessDay previously reported, while Nigeria is rich in urea, it imports 34 percent of the raw materials needed to produce NPK.

BusinessDay reported in April that the country had four trapped inbound vessels containing over 70,000 metric tonnes of potash – a key raw material input in producing NPK — owing to the Russian-Ukraine war.

It was gathered that the cost of ploughing an acre has risen from N8,000 per acre last year to N15,000 this year.

According to Abioye, some labourers even get paid with motorcycles after 10 months. The motorcycle may have been made in India, China or assembled locally, but its primary importation is done with dollars, and the naira’s weakening has been exacerbated since the Ukraine conflict started. Now, more naira is required to buy the same goods, implying losses for the local purchasers or those using it to pay for labour like Abioye.

According to the World Economic Forum, while crop failures are to be expected in Ukraine in 2022, Russia has imposed an export ban on products such as wheat until the end of June 2022, leading observers to predict shortages and rising prices among their trade partners and on the world market.

Read also: U.S. ‘adding fuel to fire’ by supplying Ukraine with rockets – Russia

Ukraine and Russia are also among the world’s top exporters for other important food staples. Around two thirds of the global exports of crucial sunflower products like oil and feed come from Ukraine and Russia.

Both countries account for 27 percent of global wheat output, and 63 percent of sunflower oil and seeds, according to the United Nations Conference on Trade and Development, and countries like Nigeria that depend on imported wheat will feel the impact a lot. Even when they switch to other countries, rising prices mean they would be paying more.

In Nigeria, wheat is used in the production of major staples such as semolina, bread and pastries from wheat flour, noodles, and pasta, among others, which form a regular part of meals in most households across the country.

“There is no downplaying the blow that the war has dealt to food systems, already fragile from two years of COVID-19 disruptions, climate extremes, currency devaluations, and worsening fiscal constraints,” said Mari Elka Pangestu, World Bank managing director of development policy and partnerships.

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