….Two Global Wars and our Economic Plight
There is fire on the mountain. It seems too far away, and the fire looks more like a smouldering fire than a volcano. However, the molten lava is simmering in the belly of the volcano, waiting to be unleashed. No matter what we do, although living in a faraway land, the lava shoots out like a rocket-propelled missile, and the ensuing heat will eventually reach and affect us.
Should we be overwhelmed by the fear of the unknown? Or should we not work out the unknown from the known and put our house in order, as every good family head will do? Some facts are not just obvious but apparent. It would be best if you connected the dots to get the full import of the picture.
We are in such a situation now. Fact number one: the world is headed for a prolonged war in the Ukraine / Russia crisis, and now the Israel/ Hamas conflict has ensued. After nearly 18 months of Russia-Ukraine gruesome warfare and its adverse impact on living standards, no one can wish for another row of any dimension. Fact number 2: the global economy will be affected if this conflict continues in its current trajectory and may get complicated if the sphere of war expands to Iran. Fact number 3: the Nigerian economy would be significantly negatively impacted if we do not take steps to hedge our economic projections and plans. The latter is the focus of our discourse for today.
The ramifications of these conflicts are too huge to contemplate. The sensitive nature of the Israel-Palestine brouhaha touches the emotional nerves of the world, polarizing the world into two dominant frames: supporters of Israel versus supporters of Palestine. The baggage behind this support is generational and more heuristic than logical. It is tainted with elements of religious dichotomy.
The economic interlinkages of the global community are manifesting clearly as the Russia- Ukraine war ravages the economies of nations and is now further complicated by the hostilities between Hamas and Israel. The global economy would sink deeper in three significant ways. Israel- Hamas conflict will most likely engender a spike in energy costs. It would add to inflationary pressure already escalated by COVID-19 and the Russia- Ukraine war. And it may lead to a global recession. Bloomberg economists predict global growth may drop to 1.7% and, in the worst-case scenario, may lead to another recession.
Nigeria is already grappling with multiple economic challenges, and other developing economies are seriously and multidimensionally impacted. The discourse around mitigating the adverse negative economic impact of the two war fronts in Nigeria must be on the table. This new scenario presents another addition to issues that must be considered in navigating the complex global linkages to strengthen our economy and reduce the burden on citizens. If the crisis between Israel and Hamas expands to a regional one involving Iran, Lebanon, and Syria, crude oil prices will spike, and if not, the price rise will be marginal.
For Nigeria, a crude oil-producing nation, this is paradoxical in two ways. First, the attendant shortfall in supply resulting from disruption in production in the Middle East may boost oil supply revenue. But we may not harness those benefits because of the Niger Delta oil production conundrum. We have yet to be able to meet our OPEC quota. Hence, only a little may be gained through an increase in supply, at least in the short run. Second, the prospect of an oil price increase seems reasonable especially if Iran is drawn into the conflict . The government of Nigeria would earn additional income from the sale of crude, and that can help shore up our currency, which is crashing like a house built on sand. However, when you juxtapose this with the fact that we import all our petroleum products and export less than our OPEC quota, whatever benefit there is vanishes to the air.
….Two Global Wars and our Economic Plight
