A key member of the Organised Private Sector (OPS), Centre for the Promotion of Private Enterprise (CPPE), has said the outbreak of war between Israel and Iran portends high risks for Nigeria’s economy with an imminent surge in the price of petrol, diesel, jet fuel, gas and related products in the near term.
In addition, the CPPE also stated that Nigeria’s economy is expected to witness further inflation, high interest rate, low profit margins, risk of money supply growth, and energy cost escalation, which will have far reaching implications on businesses in the country.
The Drirector/ Chief Executive Officer (CEO) of CPPE, Dr. Muda Yusuf, who made this known to New Telegraph in Lagos yesterday, said that the war had added a troubling dimension to the challenges of an already floundering global economy.
He said that economies around the world were currently grappling with elevated geopolitical tension triggered by the Russian Ukraine war and the Israel-Hamas conflict as well as the profound uncertainty created by the unprecedented tariff disruptions by the President Donald Trump administration.
According to him, for the Nigerian economy, the implications are mixed and the development portends a combination of risks and upsides for the economy. While speaking on the risks to the Nigerian economy, Yusuf pointed out that it would result to energy cost escalation, saying: “A major driver of energy prices in Nigeria is the global crude oil price.
With the outbreak of the Israeli-Iranian war, crude oil prices had surged to $75 per barrel from $65 per barrel a week before. This is a 15 per cent jump within days.
“This has obvious implications for petroleum product prices globally. Economies around the world [Nigeria inclusive] would witness a surge in the price of petrol, diesel, jet fuel, gas and related products in the near term.
This would have far reaching implications for many economies and businesses.” On the implications for Inflation, the renowned economist explained that “energy cost is a major factor in the Nigerian inflation equation. It impacts production cost, logistics cost, transportation costs, and the cost of power generation.
This presents an inflationary scenario. These additional costs would be passed on to final consumers, depending on the degree of consumer resistance.” He added that there was also a global inflation dimension, saying that “energy prices have global inflationary implication. Therefore, there is also an expectation of imported inflation in the unfolding geopolitical scenario.”
On the interest rate implication, the CPPE CEO explained that “high inflation drives interest rates as monetary authorities respond to the inflation outcomes of current geopolitical headwinds. “A tighter monetary policy regime is expected in Nigeria and other monetary jurisdictions. The expectation is that economies around the world may experience renewed pressures on interest rate.
“Higher global interests could adversely impact portfolio flows with implications for foreign reserves.” Speaking on profit margins, he said that “high energy cost, elevated inflationary pressures and a spike in interest rates are all headwinds that could undermine the profitability of businesses in the economy.
“Investors in the non-oil sector are likely to be more vulnerable in the present situation. Nigerian firms with strong business links in the Middle East and those with strong supply chain linkages in the region would be vulnerable at this time because of the current instability in the region.”
