…Says Nigerian economy faces double-edged shock
The Centre for the Promotion of Private Enterprise, CPPE, has sounded a strong warning over the intensifying conflict involving Iran, Israel and the United States, describing the geopolitical strain as a classic double-edged shock for Nigeria’s economy.
Although the crisis threatens to unsettle global supply chains, it also creates a difficult paradox for the country, with the prospect of higher government revenue unfolding alongside mounting inflationary pressure on households.
As a mono-product economy in which crude oil accounts for more than 85 per cent of export earnings, Nigeria stands to record an immediate rise in fiscal inflows if oil prices climb. Friction around the Strait of Hormuz, through which about 20 per cent of global oil supply passes, typically triggers price swings of between five and 15 dollars per barrel, increasing volatility in the international market.
Yet the CPPE cautions that any fiscal gains would rest on shaky foundations because of entrenched domestic constraints. National output has remained largely flat at between 1.4 and 1.6 million barrels per day, hampered by persistent oil theft and ageing infrastructure. Unless production efficiency improves quickly and decisively, the country risks squandering the benefits of any price surge.
The think tank identifies inflation transmission as the gravest threat to ordinary Nigerians. With a deregulated downstream petroleum sector, shifts in global crude prices are quickly reflected in the cost of petrol, diesel and aviation fuel across the country.
“Rising pump prices will drive up transportation and food distribution costs across the country. Local industries face margin compression as energy and input costs escalate. With purchasing power already fragile, these sustained price hikes could deepen national poverty levels,” the policy brief stated.
According to the CPPE, the situation could produce a troubling gap between public finance and social welfare, as government revenues expand while living standards for many citizens continue to decline.
Dr Muda Yusuf, Chief Executive Officer of the CPPE, calls for a break from previous expenditure patterns, arguing that the current moment demands restraint and foresight. He advises that authorities approach the period with disciplined fiscal consolidation at the forefront of policy.
Among the measures proposed are the channelling of surplus revenue into stabilisation buffers, a renewed crackdown on oil theft to lift production levels, and the deployment of targeted social protection schemes designed to shield vulnerable households from energy-driven shocks.
The policy institute adds that Nigeria’s capacity to withstand the fallout will hinge less on developments abroad and more on the consistency and discipline of domestic economic management.
