Russia’s invasion of Ukraine has inflicted incalculable hardship on the whole globe. Vladimir Putin, Russia’s despotic president, had grossly miscalculated the cost of the unprovoked invasion even on Russia as a nation.
While everyone from Europe to North America is groaning under the weight of the inflation triggered by Putin’s ego trip in Ukraine, about 1.7 billion people in 44 impoverished nations in Africa, Latin America, and South Asia are on the throes of catastrophic famine caused by the war.
The first effect of the invasion was the surge in crude oil price which is fuelling high inflation rates. The pump price of petrol in the U.S. has hit a record $4.6 per gallon as the cost of a barrel of crude oil leisurely crosses the $120 mark.
In some high brow retail outlets in California, America’s richest state, the pump price of petrol has risen as high as $6.4 per gallon. That would be in the range of N800 per litre based on the parallel market exchange rate of N610 to the dollar.
Cooking gas price has escalated in the European Union (EU) as most member countries scramble to reduce their dependence on Russian oil and gas.
Before the invasion of Ukraine, the EU was spending $30 billion daily on Russian crude oil and gas. Now most countries have reduced it to less than 50 per cent in compliance with western sanctions on Russian sources of energy.
The EU and North America are gallantly bearing the inflationary trend inflicted on their economy by Putin’s cruel war in Ukraine.
However, the plight of 1.7 billion people in 44 impoverished countries is the major concern of global economy watchers.
Boston Consulting Group (BCG) in a recent report entitled “The war in Ukraine and the rush to feed the world” argued that 1.7 billion people in 44 countries will suffer increased food insecurity as a result of the war in Ukraine.
The reason for the Ukraine war-induced famine is obvious. Besides the escalated cost of energy resulting from western sanctions on Russian oil and gas, Russia and Ukraine account for 30 per cent of global wheat and grain supplies.
Russia has mounted a naval blockade of Ukrainian ports. About 30 ships fully loaded with Ukrainian grain meant for Africa and other parts of the world have been barred from sailing to their destinations.
The result of that is acute scarcity and higher cost of wheat and other grains in countries depending on the two warring nations for supplies. Besides the devastating effect of Russia’s naval blockade on grain prices, the escalating cost of crude oil has pushed the cost of energy beyond the comfort zone of manufacturers and individual consumers.
Nigeria, the world headquarters of poverty, is listed by BCG as one of the 44 countries to be plagued by unprecedented famine as a result of the war in Ukraine.
Under normal circumstances, Nigeria has no business being listed among the impoverished countries whose citizens will pay the price for Putin’s invasion of Ukraine.
With crude oil price standing menacingly at $123 per barrel and the permission by the Organisation of Petroleum Exporting Countries (OPEC) to produce 1.7 million barrels of crude oil daily, Nigeria should be smiling to the banks with bumper harvest from crude oil exports.
Unfortunately, corruption and poor governance has robbed Africa’s largest economy of its naturally assigned place in the comity of globally respected economies. High net worth criminals with powerful connections to government steal 500, 000 barrels of oil from Nigeria’s fields daily. Nigeria is consequently bankrupt.
The looming famine may be more catastrophic in Nigeria than other impoverished countries in Africa and Latin America. The average inflation rate in Sub-Saharan Africa remains at single digit. Nigeria is the only country in the sub-region with inflation rate sailing perilously close to 20 per cent.
The high cost of energy and over-dependence on imported food with a persistently depreciating currency will leisurely push inflation rate to 20 per cent before the end of 2022.
That alone will price many food items beyond the reach of Nigeria’s 122 million people toiling below poverty line. Nigeria has all the deficiencies listed by BCG as the visa for membership of the 44 countries marked for the impending devastating famine.
It has high double digit inflation. It has the largest number of extremely poor people in the world. It is so heavily indebted that it spends well over 80 per cent of its meager revenue on debt service alone. It has social unrest in practically all parts of the country. These are the deficiencies listed by BCG.
Even with the price of crude oil deep in triple digits due to Russia’s invasion of Ukraine, Nigeria’s energy crisis would have been minimised if it was not importing all its refined petroleum products with a depreciating currency.
With the total dependence on imported refined petroleum products, Nigeria will spend N4 trillion on petrol subsidy in 2022 because a withdrawal of petrol subsidy could push inflation rate perilously close to 30 per cent.
The pump prices of deregulated refined petroleum products are already inflicting calamitous inflationary trends on the economy. Aviation fuel and diesel sell well above N700 per liter. Consequently, Nigeria is the only country where fuel constitutes 90 per cent of the cost of operating a flight. Air fares have consequently doubled.
The nation’s embattled manufacturers are groaning under the weight of outrageous pump price of diesel. The high cost of diesel could not have come at the worst time for Nigerian manufacturers. Public power supply is almost always on stand-by while the factories run on diesel-powered generators.
The Manufacturers’ Association of Nigeria (MAN) laments that power supply accounts for 60 per cent of production cost.
The banks are so troubled by the high cost of diesel and the epileptic public power supply that they have unilaterally decided to cut the number of hours they spend attending to customers. Banks now close by 3pm to cut cost.
The high cost of energy is simply being passed to consumers by way of higher prices of goods and services. The price of a standard loaf of bread now ranges between N700 and N900 depending on the mindset of the baker. Two years ago it was N350.
A medium size tuber of yam sells for N2, 500. That automatically is beyond the reach of Nigeria’s 122 million people living in extreme poverty.
The message from BCG is that Vladimir Vladimirovic Putin has succeeded in worsening Nigeria’s poverty rate. By the time he musters enough courage to end his ego trip in Ukraine, the famine he triggered would have killed thousands of Nigerians.
