Nigerians are likely to pay more for bread following the growing prices of wheat, which started skyrocketing due to the ongoing crisis between Russia and Ukraine, Ari Aisen, the International Monetary Fund (IMF), chief rep to Nigeria, has said.
Aisen, who spoke during an ABC Economic Update: ‘The Opportunities and Imperatives for Businesses,’ organised by American Business Council in Lagos recently, said the prediction was based on the fact that about 30 percent of the global wheat supply comes from that region.
“The Russia-Ukraine crisis, the geo-political crisis and interest rates abroad are going to create quite uncertainty on inflation because oil prices are high, wheat prices are high meaning that bread prices are likely to be high. We are already seeing an increase in commodities coming from that region,” Aisen explained.
Read also: Russia-Ukraine Conflict: WTO expresses concern
On how Nigeria’s economy can navigate the risks, he said Nigeria needs to consolidate its fiscal positions through mobilising more affected drivers by spending more on social infrastructure because spending in the country is currently very low.
According to him, Nigeria’s fiscal position is not very good and there is a need for financing to actually meet the spending targets.
While emphasising that Nigeria’s debt position has been increasing, Aisen said the increasing debts in the midst of financing needs would lead to a time the debt position will put very strong pressure on the economy.
“Government needs to raise the revenue to GDP ratio to about 15 percent from 7.5 percent in the next three years. Then, there would be a need to raise VAT rate, broaden the tax base, and tax administration needs to be strengthened through digitalisation. So, the fiscal position is a risk,” he said.
On the opportunities for Nigeria in 2022, he said getting the Dangote Refinery to work as forecast, could be an upside for the Nigerian economy.
He added that the African Continental Free Trade Agreement (AfCFTA), less protectionist policies as well as reduction in tariff and non-tariff trade barriers can enable Nigeria to enjoy other markets in the African region.
Dinesh Rathi, chief executive officer of Lagos Free Zone, who noted that the manufacturers of FMCGs have a strong window of opportunities to grow in 2022, said the manufacturing sector can leverage the African Continental Free Trade Agreement (AfCFTA), to not only produce for Nigerian market but to also export products into other African countries.
On outlook for 2022, Margaret Olele, CEO/executive secretary of American Business Council, who pointed out the need for businesses to navigate the challenging business environment, said the forex and monetary policy environment would continue to pose serious challenges for businesses.
According to her, exports will create huge business opportunities for FMCGs and other manufacturing sectors.
She however advised the private sector and government to work together in order to navigate the risks that would confront businesses this year.
On what businesses can do to stand tall amid economic uncertainties, Adi Bongo, a professor from Lagos Business School, said that shortage in forex supply has been a huge risk for businesses in Nigeria, and there is need to improve the capacity for businesses to look inward for import substitution and to export more.
Noting that logistics will also pose huge limitations for businesses, Bongo however called on the government to solve logistics challenges by expanding the rail network to enable companies to locate their markets and raw materials supply.
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