As tensions escalate in the Middle East, experts have expressed concern that the consequences extend far beyond the region.
 
They also warned that it could have severe implications on the cost of oil, production and manufacturing, inflation and general day-to-day living in Nigeria.
 
Despite being Africa’s largest oil producer, Nigeria still imports a part of its refined petroleum products and is susceptible to price volatility, with the cost of petrol and diesel already climbing at the start of this week.
  
Experts have noted that production, logistics, and transportation costs would escalate, worsening inflation, raising food prices, and deepening the cost-of-living crisis in the country.
 
The Director-General of the African Centre for Supply Chain (ACSC), Dr Obiora Madu, expressed hope that the ongoing unrest and global trade disruptions would teach Nigeria and, in extension, the rest of Africa an important lesson.
 
Madu hoped that the situation would prompt the country to focus on and properly develop the African Continental Free Trade Area (AfCFTA).
 
He regretted that, years after Nigeria and other African countries had been talking about AfCFTA, intra-African trade was still less than 15 per cent, while trading within Europe was over 60 per cent, and in Asia, over 50 per cent.
  

He expressed that this was the right time for the country to look inwards.

He noted that as a result of the unrest in the Middle East, most shipping companies have temporarily stopped their ships from moving until the situation calms down, which he said is a huge blow to the supply chain.
  
Stressing that oil prices are projected to rise even more than they already have, Madu said the increase should be used aggressively to develop the non-oil sector and expand it.
 
He added, “As it stands right now, after that single guided trade that was done last year or so, and some shipments exported, there has been nothing since then. AfCFTA has not gone far or really taken off in the real sense of what it was supposed to do for us in terms of improving our trade.”
  
“There has always been a law in the oil industry that a certain percentage of oil proceeds must be used to develop non-oil exports. This was said years ago, but sadly, this has never been done. Every single time oil prices rise; Nigeria quickly forgets about non-oil goods and commodities. When it goes down a little, then we all start shouting from the rooftops about developing non-oil exports and diversification,” he said.
  
He stressed that Nigeria must use this situation to its advantage by consciously developing its non-oil sector and strengthening the manufacturing of finished goods.  

Expressing deep concern that prices of imported goods and raw materials needed for production were about to skyrocket, he said shippers are now adding ‘emergency cost of containers’ to shipping costs due to the ongoing unrest in the troubled zones.
 
“Movement is increasingly becoming more difficult with all the shipping companies being cautious, and of course, insurance costs have also gone up.
 
“All these would be passed onto consumers, so expect the cost of goods and products to rise in the next couple of days and weeks. None of us is going to find the situation palatable,” he added.

Also speaking, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, expressed worry that the ongoing hostilities would have significant implications on the manufacturing sector and other real sectors of the economy, especially if the crisis continued.
 
“First of all, the manufacturing sector is highly energy-intensive. There is high energy intensity in terms of production and logistics. These are the two major areas where there is often significant pressure on production and operational costs.

“The current crisis will lead to a spike in energy cost, which may be significant, given the scope of the crisis and the implications for oil production and oil prices. So, we have a situation where petrol, diesel and gas prices go up, which will definitely affect manufacturers’ production and logistics-wise,” he said.

Yusuf added that a prolonged crisis would significantly affect the macroeconomic environment and lead to a slowdown in the global economy.
 
He said if the global economy were depressed, it would naturally affect consumer demand and the ability to buy goods and services.

Yusuf said: “In addition, this kind of situation generally often leads to higher inflationary pressures because there’s a significant correlation between energy prices and inflation. Higher inflationary pressure means prices are rising and purchasing power is declining. This would of course, affect the manufacturing sector.”

He pointed out that shipment costs are now through the roof, saying that, as many local industries import machinery, raw materials and intermediate products, they would face significant increases in shipment costs that they would have to pass along to consumers.

Also, Yusuf expressed that Nigeria must pay closer attention to AfCFTA development, lamenting the slow progress across the continent.

He maintained that the winners under the trade agreement would be competitive countries, saying that when it comes to international trade, the name of the game is competitiveness.

He stressed that Nigeria was not competitive, stressing that there was no way the country could benefit optimally from it.

“While our services sector may be very strong, our manufacturing sector continues to struggle. If you look at the infrastructure and manufacturing environments in South Africa, Egypt, Algeria, and Morocco, whatever is produced there would be almost impossible to compete with.
 
“Now is the time to move very fast. Before looking at creating new agreements with the rest of the world that is now troubled, we must look inwards by creating a much better environment for our manufacturers so that they can become more competitive and effectively trade regionally and then, under AfCFTA,” he added.