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Russia-Ukraine Conflict, an Economic Perspective



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By Coronation Merchant Bank Economic Research Team

The ongoing disruptions in Europe following Russia’s invasion of Ukraine has potential economic implications. The Russia-Ukraine crisis has been brewing for eight years since Russia occupied Crimea, a region along the Southern Russia –Ukraine border. Russia and Ukraine are regarded as emerging European economies.

In the latest regional economic outlook published by the IMF, GDP growth for Russia is estimated at 2.8% y/y this year and 2.1% y/y in 2023. Meanwhile, Ukraine’s GDP growth is projected at 3.6% y/y in 2022 and 3.4% y/y in 2023. On a broader level, the emerging market and developing economies group, where Russia and Ukraine fall under, is expected to grow by 4.8% y/y in 2022.

Given the ongoing crisis, a downward revision may be on the horizon due to the obvious economic challenges Ukraine and Russia will experience.

Over the past weeks, speculations around the ongoing Russia-Ukraine conflict placed upward pressure on oil prices. Oil prices surged above USD100 per barrel to hit their highest level since 2014 after Russia launched an invasion of Ukraine. Since July ’21, OPEC+ has struggled to meet its production quota.

It is worth highlighting that Russia is the world’s largest natural gas exporter, it supplies about c.38% of natural gas to countries within the Eurozone. The ongoing conflict has an impact on gas prices. Steady upticks in gas prices could be recorded on the back of potential retaliation actions from Russia as a reaction to sanctions.

Supply-chain disruptions could heighten. Regarding shipping, commercial vessels have been advised to avoid any transit or operation within the exclusive economic zone (EEZ) of Ukraine or Russia within the Black Sea. Furthermore, the airspace over the whole of Ukraine has been declared closed and air traffic has been suspended.

The rise in oil and natural gas prices as well as the potential worsening of global supply chain constraints would contribute to inflationary pressure and weaken purchasing power, particularly in the Eurozone area and the United States. To tame rising inflation in select advanced economies, central banks have been postured to kick-off policy rate hikes this year. At this point, we do not expect a reversal in this stance. However, we continue to monitor global trends closely.

Russia and Ukraine are major exporters of agricultural commodities, particularly grains. Based on data from FAO, both countries accounted for about c.30%, c.80% and c.14% of global wheat, sunflower seeds, and maize exports respectively in 2020.

Meanwhile, according to the National Bureau of Statistics (NBS), Nigeria imported N144bn (USD346.2m) worth of durum wheat in 2020 and N123.9bn (USD297.8m) worth of durum wheat between January – September ’21 from Russia. Nigeria also imports different types of seafood such as mackerel, herrings, and blue whiting from Russia.

Furthermore, the NBS data show that Nigeria imported milk worth N721.5m (USD1.7m) from Ukraine in 2021. Regarding capital importation, since 2019, Nigeria has received a total of USD84.3m in capital imports from Russia.

On a separate note, the price of gold, which is considered a haven asset in times of uncertainty has increased. Gold was USD32/oz firmer at USD1,808/oz, on 25 February compared with USD1,776/oz recorded in the corresponding period of 2021.

From a fiscal perspective, higher oil prices bodes well for Nigeria. However, the presence of the fuel subsidy regime undermines expected benefits. The ongoing conflict also has a potential negative impact on the country’s imported food inflation rate, potential (but minimal) disruptions to trade activity and capital importation.


Inflation and Forex Mismanagement Drive Petrol Truck Prices from N7M to N25M



Petrol Importation -

The Chairman of the Independent Petroleum Marketers Association of Nigeria in the Satellite Depot branch, Akin Akinrinade, has raised an alarm over the rising cost of petrol trucks in Nigeria.

According to Akinrinade, the cost of a petrol truck has surged from N7 million in May to an astonishing N25 million at present, attributed to inflation induced by poorly managed foreign exchange rates.

Akinrinade pointed out that the forex mismanagement has significantly impacted the landing cost of premium motor spirit (PMS), commonly known as petrol, consequently leading to a surge in pump prices.

The unstable business environment, coupled with the astronomical rise in expenses, has created challenges for marketers in the downstream oil sector.

Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), highlighted in October 2023 that foreign exchange challenges have hindered private companies from importing petroleum products.

As a result, the NNPCL has become the exclusive importer of petrol.

The decision to limit private entities from importing fuel comes after President Bola Tinubu’s initiatives aimed at deregulating the fuel market.

Initially, the plan was to allow private companies to import fuel starting June 2023, aligning with efforts to balance the market after removing petrol subsidies.

The ripple effects of the soaring petrol costs are already evident, with commercial transporters increasing fares, and private car owners seeking fuel-saving alternatives.

As Christmas approaches, the surge in demand for interstate travel is expected to further elevate costs, posing financial challenges for many Nigerians amidst stagnant income levels.

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Nigeria’s Presidential CNG Initiative Allocates N100bn for CNG Buses and EV Adoption




The Presidential Compressed Natural Gas (CNG) Initiative has allocated N100 billion to expedite the deployment of CNG buses nationwide, according to a statement released on Wednesday.

The initiative, designed to catalyze an Auto-gas and Electric Vehicle (EV) revolution in mass transit and transportation, aims to enhance sustainability and cost-effectiveness.

The statement revealed that the fund would be instrumental in supporting the adoption of auto-gas and electric vehicles, signaling a commitment to a more sustainable and economical future in the transportation sector.

The Presidential CNG Initiative plans to leverage over 11,500 CNG and electric-fueled vehicles, along with the deployment of 55,000 conversion kits.

This strategic approach is intended to reduce transportation costs for Nigerians and mitigate the challenges posed by the rising cost of living.

Under the Renewed Hope Agenda, the Presidential CNG Initiative is dedicated to realizing the President’s vision, guided by its steering committee led by FIRS Chairman Zacch Adedeji.

The statement highlighted recent achievements, including strategic technical partnerships and the ongoing commissioning of CNG Conversion centers in key states such as Lagos, Abuja, Kaduna, Ogun, and Rivers.

Several more centers are slated for commissioning in the coming weeks, reflecting the initiative’s momentum and commitment to achieving its objectives.

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Nigeria’s Power Transformation: 53 Projects Worth N122bn on Track for May 2024 Completion



power project

The Central Bank of Nigeria (CBN), in collaboration with the Transmission Company of Nigeria (TCN) and power distribution companies, is set to complete 53 power projects by May next year.

Valued at N122 billion, these projects aim to add over 1,000 megawatts to TCN’s wheeling capacity.

During a recent tour of three ongoing projects in Lagos, TCN’s Programme Coordinator, Mathew Ajibade, assured that the projects were not abandoned, refuting speculations.

He confirmed that work is progressing smoothly and is expected to be completed by May 2024, as initially planned.

Assistant Director/Head of Infrastructure Finance Office at the CBN, Tumba Tijani, highlighted the CBN’s support for the power sector, revealing that the bank released a loan at a 9% interest rate in August last year for the projects.

The funding, part of the Nigeria Electricity Market Stabilisation Facility-3, amounts to N122,289,344 and aims to address transmission/distribution bottlenecks, enhance supply to end-users, and unlock unutilized generation capacity.

Tijani disclosed that N85.43 billion has been disbursed into the Advance Payment Guarantee account of the 53 contractors responsible for executing the projects.

The comprehensive project list includes the delivery of power transformers, re-conductoring existing transmission lines, upgrading existing substations, and constructing 33KV line bays.

The initiative reflects a concerted effort to enhance Nigeria’s power infrastructure and meet growing energy demands.

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