Israeli-Iran War: Nigeria may witness petroleum price surge —CPPE warns

THE Centre for the Promotion of Private Enterprise (CPPE) has warned that if not quickly addressed, the ongoing Israeli-Iran war may lead to a surge in the price of petroleum, diesel, jet fuel, gas and related products in Nigeria.

The Centre, in a statement issued by its Chief Executive Officer, Dr Muda Yusuf, stated that the development would also have far-reaching implications for a floundering global economy.

It argued that since energy cost remains a major factor in the Nigerian inflation equation, the war, it stated, may impact 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.

“There is also a global inflation dimension. Energy prices have global inflationary implication. Therefore, there is also an expectation of imported inflation in the unfolding geopolitical scenario,” the Centre argued.

CPPE noted that since high inflation drives interest rates, as monetary authorities therefore respond to the inflation outcomes of current geopolitical headwinds, a tighter monetary policy regime is expected in Nigeria and other monetary jurisdictions.

It warned that economies around the world may experience renewed pressures on interest rate, with higher global interests likely to adversely impact portfolio flows with its implications for foreign reserves.

“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,” the Centre added.

CPPE, however, believed the nation’s economy could also profit from the crisis, since the surge in crude oil price would impact on foreign exchange earnings, with its trickle-down positive effects on the nation’s economy, since oil remains the biggest forex earner for the country.

 “Crude oil price has surged to $75 per which is about 15 percent higher than before the outbreak of the Israeli–Iran conflict. This development would also positively impact the country’s foreign reserves, ensure better forex liquidity and ultimately the stability of the naira exchange rate,” it argued.

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