Specifically, crude oil has experienced an upward price spiral since tensions began to brew in Eastern Europe.
By the end of February, Brent crude, one of the most popular crude oil grades, was up 30% from the start of 2022 and 12% in February alone, reaching an eight-year high of $105 per barrel at the end of the month.
With Russia controlling about 10% of the global oil supply, there are fears of disruption from the world’s second-largest oil producer. In addition, energy analysts believe more price hikes are imminent especially if the crisis prolongs. For instance, Bank of America expects oil to hit $120 per barrel by the middle of 2022 as sanctions on Russia could cripple the country’s ability to finance oil production.
The Russian-Ukraine crisis and the resulting higher crude oil prices have been bitter-sweet for Nigeria’s financial markets, specifically, the foreign exchange, equities, and fixed-income markets.
With high oil prices, foreign reserves will potentially increase. However, low oil production quantities and a rising import bill could worsen Nigeria’s FX market than when the crisis started.
Historically the equities market often rally with higher crude oil prices. But, higher energy prices could negatively impact businesses’ operating costs and bottom line, sending investors to other safe havens such as the fixed income market.
Whenever oil is involved, you know Nigeria can’t be too far from the story. Fast-moving developments in the Russia-Ukraine crisis and the