ON the heels of the US-Iran conflict, several countries across the World are offering economic relief to their citizens to cushion the impact of the higher global energy prices, while Nigeria is borrowing more money despite selling oil at a higher price of $100 per barrel.
Already, there is a growing concern as the Nigerian government expected relief is not forthcoming. Additionally, crude-for-Naira swap deal with Dangote Refinery has not fully insulated the citizens from the effects of the volatile oil prices.
From Australia to Pakistan, India and Egypt, leaders are taking initiatives that help citizens rise out of the economic crisis occasioned by the US-Iran conflict.
Conversely, Nigeria is borrowing more, with the latest $6 billion external loan request approval by the legislature on Tuesday, March 31, an indication that the government has not maximised gains from the oil windfall, selling about $100 per barrel.
The conflict has pushed global oil prices up, benefiting Nigeria’s oil exports but also increasing fuel costs for citizens. Nigerians are bearing the brunt of the cost of transportation and food prices on the rooftops.
Analysts believe that the first quarter inflation figure, when released by the National Bureau of Statistics (NBS), would reach 19 per cent as a result of the US-Iran conflict.
“PMS at N1,370 is the new normal. The impact of this on various levels of economic activities, fertiliser, diesel and aviation fuel is feeding into the global rate of inflation. The government must think of a way of allowing the windfall to favour the people through a structured management plan,” an economist and the CEO of financial derivatives, Bismarck Rewane, said.
Notably, the Nigerian government is benefiting from the windfall, whereas the Nigerian people are taking the heat on inflationary pressure.
“There’s a windfall in income for the government and a shortfall in income for Nigerian consumers. The question is how do we transfer income into the pockets of the people,” Rewane queried.
He suggested to the federal government of Nigeria to liaise with the refiners and give crude at a subsidised rate that will push down the price. It could be a temporary measure.
“This could help to offer transportation relief and avoid rising energy costs, which affect food prices and other logistic costs,” he said.
Countries’ response to the US-Iran conflict
Meanwhile, as the conflict has lasted more than a month now, several countries are rolling out economic relief measures. For instance, India, Australia, the Philippines, and Egypt are among those taking proactive steps.
Australia is currently cutting off fuel taxes and offering transport relief to its citizens.
India had a 30-day emergency waiver from the US Treasury, allowing it to snap up stranded Russian oil cargoes and keep domestic fuel prices stable.
Pakistan’s government has followed suit and slashed energy consumption with a four-day work week and shut schools for two weeks.
In a similar vein, the Philippines has declared a state of emergency, trying to stay ahead of a transport workers’ strike and potential economic disruption.
The World Bank, on its own part, stepped in with financial aid for countries hit hard by the conflict, using its fast-disbursing policy financing tools to help governments cope with the energy cost crunch.
Analysts stressed that the government needs to transmit monies into the pockets of businesses and the working class by paying contractors, offering school grants, and properly concessioning roads to ensure Nigerians are properly shielded.
Remembering how Ya’adua handled a similar situation
The ICIR reports that this wasn’t the first time there has been a global economic crisis. Under former President Umaru Musa Yar’adua, there was a global economic meltdown, and he initiated some programmes and policies to cushion the effect.
His government set up a global economic response strategy that was reviewed after each Federal Executive Council meeting to assess strategies.
At that time, shortly before he died, Ya’ardua set up an economic team and launched a ₦1.3 trillion stimulus package, targeting key sectors like agriculture, manufacturing, and infrastructure to get Nigeria’s economy moving.
The then government increased spending to stimulate growth, while the Central Bank of Nigeria (CBN) cut interest rates to encourage borrowing and boost liquidity.
Analyst suggestions
The Chief Executive Officer (CEO) of CFG Advisory, Tilewa Adebajo, who spoke on the development, said the shocks currently being experienced showed that Nigeria’s economy is more linked to the global economy.
He said that the crisis will expose Nigeria to cost-push inflation and it’s impacting the price of economic activities.
“Nigeria has built its reserves to over $50 billion currently, and we have had some gains, although not maximally as expected. What we expect is that inflation will go up, and there’s going to be cost-push inflation. It’s going to cause a good price hike.
He suggested that a shift in policy could come through structural reforms and ensuring strategic reserves in the oil sector to avoid volatile price shocks.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.