As countries, including Nigeria, continue to record rising inflationary rates occasioned by the Russian-Ukrainian war, foreign affairs experts in Nigeria have predicted that citizens would experience more hardships in the months ahead unless the warring countries reach a lasting truce.
A former Minister of Foreign Affairs and Professor of Political Science, Bolaji Akinyemi and a former Director-General of Nigeria Institute of International Affairs (NIIA), Prof. Bola Akinterinwa, who spoke in separate interviews with The Guardian, therefore urged Nigerians to brace up for the challenges ahead.
They, however, blamed the Federal Government for its failure to prepare for uncertainties like the Russia-Ukraine war, which has strained its economy and pushed more households into poverty following the rising cost of living.
Figures released by the National Bureau of Statistics (NBS) last Tuesday showed that Nigeria’s inflation rate has defied monetary tightening, hitting 19.64 per cent in July, a level not seen in over a one-and-a-half decade.
However, the trend is not peculiar to Nigeria as the annual inflation rate of its West African neighbour, Ghana, accelerated for the 14th straight month to 31.7 per cent in July from 29.8 per cent in June.
Overseas, a country like the United Kingdom recorded a 10.1 per cent inflation rate in July, the first time it has registered a double-digit increase in 40 years. In June, the annual inflation rate in the United States hit a 40-year high of 9.1 per cent but slowed more than expected to 8.5 per cent in July.
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Speaking on the trend, Akinyemi stated that the economy of the world has become global, hence the situation in Nigeria and elsewhere.
His words: “No country is an island of itself; we are not the only country who imports wheat from Ukraine; about 40 countries do. Then, the high price of oil, both crude and refined, affects practically all the countries in the world. Don’t forget that we are just getting out of the negative consequences of COVID-19 and Omicron when this war came slamming into the world economy. The price of cooking and industrial gas in Europe had gone up, which affects goods produced. That alone shoots up the prices of goods all over the world, especially countries that depend on importation of crude and refined oil.”
He added that Nigerians should expect their sufferings to continue, but noted that saying so does not mean there would not be palliatives.
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He noted: “No matter the relationships between what is happening in the rest of the world with what is happening in our own country, it must be emphasised that there is no substitute for effective leadership that can manage the crisis of the world economy. Effective leadership can cushion the negative effect of the world economy and an effective leadership style can actually take advantage of the negative aspect of the world economy.
“As an illustration, the news that came out of Saudi Arabia last week was that the profits of the Saudi Arabia crude export had gone up considerably; that Saudi oil export had taken advantage of the negative aspect of the world trade in crude oil. This is an example of effective crude management. While some are bemoaning Russia’s oil not coming into the market, others have actually used that advantage to increase their profit margin. In a case like Nigeria’s where there is stealing half a million barrels of crude oil, there is no way it can take advantage of the scarcity or high oil price when it cannot meet the quota that OPEC ascribed to it. So, it is against that backdrop that I would say the Nigerian economy is not immune from the negative aspect of the Russian-Ukrainian war.
“It is not even the war directly because the ban on Russian export of oil should not affect a country like Nigeria; if anything, the prices that shut up in the oil market should have been of advantage to us. But as I said earlier, since half a million of our barrel of crude is being stolen, we cannot take advantage of that. On the contrary, since we import all our refined products from abroad, the prices of that refined products will be a function of the increase in crude oil. In fact, instead of benefiting, we are now suffering from the shortage of crude and consequently the high increase in importation.
“The second area is in food supplies; the very obvious one is the high cost of flour and consequently the high cost of bread. Until the United Nations’ successful agreement between Russia and Ukraine to restart the export of Ukrainian wheat to bring the flour into the world, again we have become victims of a shortage of wheat and flour. Consequently, the price of bread has shut up and there has been a shortage of bread leading to high prices and inflation in the food sector in the country. Even though the UN has arranged a new agreement to ease this shortage, it would take time for a sufficient quantity of wheat and flour to get into the world market and bring down the price of flour.”
He noted that as more of the wheat from Ukraine gets into the world market, the inflation index in the food sector would probably come down a bit.
“But again, we are an importing country. We import almost everything; therefore we are not going to be immune from what is happening in the world market, whereas those who make their wealth from importing will have an economic backward integration; if you are importing flours, invest in wheat production.
“If you are importing tomatoes, invest in tomato farmlands and factories that will can these tomatoes. In other words, take measures that will make our economy less dependent on importation, that will be the long-term way of preparing Nigeria for the next war that will break out somewhere else, hopefully not on our own territory, but wars are going to be breaking out.”
“We could see it between China and Taiwan, which was almost a global war. So, we really should be thinking far ahead how to insulate our economy from aggressions or wars around the world.”
Akinyemi urged the Federal Government to stop oil theft as part of efforts that must be geared towards strengthening the economy in the face of the current challenge.
He stressed: “A tanker that could carry three million barrels that left Nigeria has just been seized in Equatorial Guinea and that was a tanker involved in smuggling. If you cannot depend on Nigeria’s security forces, seek help from those that have the capability. For example, it is in the interest of Americans for Nigeria to meet its export of crude quota, because if we can get that half a million that is being smuggled out of Nigeria legally into the market, it increases the availability of crude, which the Americans are interested in. That is why President Biden went to Saudi Arabia to secure the supply of more crude into the world market. This will be in America’s interest and in our own interest too because we will earn more money so we don’t continue to borrow money, even though we can’t even borrow because of our inability to pay our debts.
“We have been on the issue of sanitising the activities in the oil sector and I will say this – I don’t believe in destroying illegal refineries; it is not the solution. These people are providing a service; if the standard of the refined oil they are producing is bad, they will not get customers patronising them. What the government should do is to bring them; they have local refineries that are working, while our four refineries are not working.
“So, we should bring these people into the economy, help them through technical assistance to better refine the crude and get them to pay for the crude you supply to them, then they won’t be breaking the oil pipes polluting the environment.
“I grew up at a time when goods coming in from China and Taiwan were so inferior; we used to laugh at them, but their government did not go and close down those factories but helped to modernise those factories. Today, nobody is laughing at Japanese or Chinese goods. So, why do we send in troops to break down those refineries and the next day they go back to them instead of our troops to fighting terrorists.”
On his part, Akinterinwa explained that rising inflation in Nigeria and elsewhere have much to do with the Russia-Ukrainian war in several ways.
His words: “First, when an event takes place in any given place, there is always the domino effect, no matter how minute. When a statement is made by an important public figure in a country, it is internationally reported. People in other countries can listen to the statement in the comfort of their homes. Based on that statement, new opinions are formed: there can be agreement or disagreement with and even condemnation. This is a permissible interference. If the statement is about a government’s intention to raise taxes or about nationalise some businesses, international stakeholders cannot but be so concerned.
“The issue of the rising inflation is not different because it is not limited by territorial boundaries. Goods are manufactured in one country; the buyers are in another country. The instruments of payment are administered elsewhere. This is a message that the Russo-Ukrainian war has communicated to the world: messages of disruption in the domestic and global order with all their attendant implications in Ukraine; disruption of demand and supply in EU countries; disruption of import and export, disruption in international communications, disruption in social services, in other countries of the world, etc. The domino effects can largely explain the inflationary trend you raised.”
He pointed to the economic sanctions taken against Russia by the European Union (EU) and the United States as part of the causes of the current disruptions in the global economy.
He added: “The sanctions cannot but generate inflation. Russia supplies a lot of gas to the EU. Russia was compelled to introduce the use of its own national currency as international money as a result of the sanctions. The BRICS (Brazil, Russia, India, China and South Africa) is also preparing to introduce a new convertible currency as an alternative to the pound sterling and the US dollar. All these measures go beyond micro and macro-economic considerations. In fact, aviation costs, as well as wheat and other cereals that Ukraine normally exports to the world, including to Africa, have been adversely affected.
“True enough, the war has created scarcity in various domains. The scarcity generates inflation and inflation is spreading worldwide because the international community lives interdependently and based on demand and supply. When there is scarcity, inflation follows. Nigeria cannot be an exception in terms of impact, especially because, as I have said, the war creates different problems ranging from politico-diplomatic to economic-cultural and military for other members of the international community.”
On why Nigeria seems to be heavily impacted by the war, Akinterinwa noted: “First, Nigeria maintains diplomatic ties with both Ukraine and Russia and the relationships are both warm. Nigeria’s diplomacy should, under normal circumstances, be to avoid being the friend of one and enemy of the other. But because of the misapplication of Nigeria’s policy of non-alignment, and particularly by carelessly aligning with Ukraine, by asking Russia to withdraw its troops from Ukraine, it is now on record that Nigeria has taken a side, which is apparently not in Nigeria’s national interest. Nigeria has become the enemy of Russia and the friend of Ukraine. The friendship with Ukraine is not really a big deal when compared to the implications for Nigeria’s industrial development for which Russia stands on a higher pedestal than Ukraine.
“While it is true that thousands of Nigerians are studying in Ukraine and other thousands are doing the same in Russia, Nigeria’s ties with Russia are more notable because of the Ajaokuta Steel project. The former Soviet Union took the side of Nigeria during her civil war. Based on the Russo-Nigerian agreement of 2019, by which Russia agreed to help complete the Ajaokuta project, and in light of the pledges made at the Russia-African Summit held in Sochi, Russia in 2019 to bring development assistance to African countries, there is no way Nigeria will not be heavily impacted upon by the war, especially in terms of future punitive measures from the side of Russia.”
He also concurred that with the end of the conflict nowhere in sight, Nigerians should expect the worst scenarios going forward.
His words: “When a conflict persists without any quick end in sight, the worst scenarios must be expected. First, further hardship in lifestyle must be expected. Increasing loss of lives, rising inflation, and deepening animosity, not only vis-à-vis the invader but also towards the Ukrainian leader who paved the way for the war. War weariness cannot but become a fresh factor. Costs of prosecuting the war will not only increase but will not be available for any development purposes. In other words, it can be argued that security takes priority and that no development can take place in an environment of inclemency. Coups d’état cannot be ruled out as well as animosity towards those aiding and abetting the prolongation of the war.”