The Centre for the Promotion of Private Enterprise (CPPE), a frontline organized private sector advocacy group in Nigeria, has advised the Federal Government on urgent policy measures it needed to adopt in order to avert devastating impact of the ongoing U.S-Isreali war against one of the biggest oil producing countries – Iran.
The Centre, in a Policy Brief issued on Sunday by its Chief Executive Officer, Dr. Muda Yusuf, noted that sundry policy measures had become imperative in view of the likely disruptions to Nigeria’s economy, given the implications for oil output, foreign exchange earnings and other economic performance indices.
Having critically appraise the implications of the escalating U.S-Isreali war air strikes against Iran, which entered the third day today, for the nation’s oil sector, investment market, inflation trend, revenue generation, particularly foreign exchange (FX earnings, and other critical sectors, the OPS group noted that the escalating conflict had injected a new wave of geopolitical risk into the global economy, with energy markets being the first transmission channel.
Specifically, it stated that of particular strategic importance remained the Strait of Hormuz, through which roughly 20 percent of global crude oil supply is transported daily.
- Advertisement -
The CPPE maintained that any disruption to this corridor had immediate implications for global oil prices, shipping costs, insurance premiums, and supply chains as well as output disruption effect, as Middle East countries are major oil producers.
It clarified that for Nigeria, an oil-dependent economy where crude accounts for over 85% of export earnings and about half of government revenue, the implications remained significant and the effects would be both positive and adverse, depending on the duration of the conflict and the quality of domestic policy responses.
To protect the nation’s economy from the shocks of the conflict, the Centre tasked the Nigerian government on the need to adopt some strategic responses, including the strengthening of the oil Production Capacity by intensifying anti-theft operations and incentivize upstream investment to maximise output within OPEC limits; and Build Fiscal Buffers in form of channelling excess revenues into stabilization and sovereign savings frameworks.
Similarly the CPPE dvised the Federal Government to Accelerate Refining Capacity by deepening domestic refining to reduce vulnerability to imported refined products; Sustain FX Market Reforms in order to enhance transparency and liquidity in the foreign exchange market to mitigate volatility; Deploy Targeted Social Protection in order to cushion vulnerable households against energy-driven inflation shocks, and Fast-Track Economic Diversification to expand non-oil exports, manufacturing, agro-processing, ICT, and services to reduce external vulnerability.
In his concluding remarks on the Centre’s position on the worrisome attacks on Iran by the US-Israeli military force, the CEO clarified: “The Iran–U.S.–Israel conflict represents a classic double-edged shock for Nigeria. Higher oil prices may strengthen fiscal and external balances in the short term. However, inflationary pressures, welfare deterioration, capital flow volatility, and global growth risks pose significant countervailing threats.
“The ultimate impact will depend less on external events and more on domestic policy discipline. Strategic savings, production efficiency, macroeconomic prudence, and structural diversification will determine whether Nigeria converts geopolitical turbulence into macroeconomic resilience”, Yusuf added.
