Abuja: The Risk Managers Society of Nigeria (RIMSON) has outlined the possible impact of the ongoing crisis in the Middle East on Nigeria and its economy. The United States and Israel recently launched a large-scale offensive against Iran, sparking regional escalation.
According to News Agency of Nigeria, RIMSON President, Dr. Abbas Idriss, stated in a recent announcement that the potential consequences of the war could have significant implications for Nigeria and its economy in several ways. Idriss, who is also the Chairman of the Governing Board, highlighted that the war could impact Nigeria’s oil price and revenue. He noted that Nigeria, being one of Africa’s largest oil producers, is highly sensitive to global oil prices. A conflict involving Iran could lead to increased oil prices due to supply disruptions or fears of instability in the Middle East, which could result in higher revenue for Nigeria. Conversely, if the conflict leads to a global recession or reduced demand for oil, Nigeria could suffer economically.
He further explained that Nigeria may find itself navigating complex geopolitical dynamics as Iran supports certain groups and governments in the West African region. The ongoing crisis in the Middle East involving Iran may influence Nigeria’s diplomatic relations and foreign policy, especially regarding its Muslim population and regional stability.
The president also raised security concerns, emphasizing that any conflict could worsen the already tense regional security dynamics in the country. Nigeria has been grappling with its own security issues, including terrorism, banditry, and ethnic conflicts. Increased instability in the Middle East may lead to a focus on security spending, which can divert resources from economic development and infrastructure projects.
Dr. Idriss also mentioned that sustained conflict could disrupt international trade routes and impact global supply chains. As Nigeria relies on imports for certain goods, disruptions could lead to increased costs and inflation domestically. Additionally, the war could negatively impact remittances, which are vital parts of Nigeria’s economy. Many Nigerians have family members abroad, including in the Middle East, and instability in the region could affect remittances, leading to decreased household incomes and increased poverty.
He further warned that global conflict could lead to increased risk aversion among investors. If investors perceive Nigeria as a risky environment due to global instability, it could lead to decreased foreign direct investment, crucial for economic development. Humanitarian and refugee issues were identified as another concern, as conflicts typically lead to humanitarian crises. If tensions spilled over into the region, Nigeria might face an influx of refugees, placing additional pressure on its resources and social services. There could also be a proliferation of arms, increasing the insecurity the nation faces.
Overall, Dr. Idriss noted that the consequences of such a conflict will depend on several factors, including the duration and intensity of the conflict, Nigeria’s diplomatic responses, and the resilience of its economy. The interplay of global energy markets, security issues, and regional dynamics will play crucial roles in shaping the outcome for Nigeria. The price of oil is expected to rise to up to $150 per barrel, with Dangote already responding by increasing the pump price. Others are expected to follow.
He urged the Federal Government to implement risk management measures to manage, retain, and transfer certain risks as appropriate.