Russia-Ukraine crisis: Nigeria to pay more for fuel subsidy, as capital projects may take a hit

The current crisis between Russia and Ukraine is set to have a debilitating effect on the nation’s oil and gas industry with analysts predicting that should the tension not doused, oil price could hit $150 per barrel.

The implication of rising oil prices, according to industry observers, will lead to an increase in the already N3 trillion budget of fuel subsidy in 2022 while many oil and gas projects that depend largely on iron and steel imports from Ukraine and Russia may suffer delay.

Measures forcing Russia to supply less crude or natural gas would have “substantial implications” on oil prices and Nigeria’s economy, said Sue Trinh of Manulife Investment Management.

Already, the invasion of Ukraine by Russia has distorted global financial and energy markets causing oil prices to soar above $100 per barrel, the highest since 2014.

Nigeria’s receipt from oil accounts for about 90 per cent of its earnings, hence a distortion in the global oil market affects the country.

Last week, amid heightened tensions between the two countries, the international oil benchmark, Brent crude, rose to $103.43 per barrel

Brent crude, against which Nigeria’s oil is priced, hit a fresh eight-year high of $103.43 per barrel as of 4:39pm Nigerian time, last Thursday as Russian forces made their way into Ukraine in a show of force not seen in Europe since World War II in a multi-pronged attack.