West Africa in Focus /

Russia-Ukraine conflict has enormous implications for Africa inflation

  • Putin's war on Ukraine will cost Africa, as rising commodity prices worsen the region's inflation outlook

  • Nigeria is already in a bad place. In addition to petrol scarcity, airline fares, diesel and cooking gas prices are up

  • African startups continue to attract interest, with Big Tech committing funds to grow the region's startups

Russia-Ukraine conflict has enormous implications for Africa inflation
Janet Ogabi
Stuart Culverhouse
Ayobami Omole
Tellimer Research
10 March 2022
Published byTellimer Research

Globalisation means African economies are caught in the crossfire from Russia's war in Ukraine and the economic response from the US and Europe. Soaring global commodity prices will soon feed through to Africa's inflation statistics and give the region's central banks a headache. We highlight how Ghana is responding to the crisis by increasing its investment in precious metals.

Away from the conflict, African startups continue to attract interest from Big Tech and VC, and with good reason: Africa is a fertile ground for tech disruption, with its rising population and low levels of financial inclusion. Growing smartphone penetration is also a plus for startups, and telcos like Orange are trying to deepen access. We also examine Nigeria's ongoing fuel crisis and preview the key upcoming data releases including inflation, 2021 foreign inflows, and the MPC rate decision.

Inflationary wave from Russia-Ukraine conflict to engulf Sub-Saharan Africa

In recent months inflation has not risen uniformly across Sub-Saharan Africa (SSA), although most countries have still to release their February data. In West Africa, inflation has already picked up in Ghana (13.9% in Jan) and some of the Francophone West Africa states (notably Benin at 7.9%), while Nigeria's inflation remains high and sticky.

Looking forward, the region's inflation picture is likely to worsen due to the impact that Russia's war with Ukraine is having on global commodity prices – food prices still have a significant weight in the CPI index for many African countries (and frontier markets more generally). The consequences of higher inflation will begin to have important implications for African policymakers and their populations.

Inflation in Sub Sahara Africa

Ghana is shopping for investments in precious metals

As gold and other precious metals rally due to Russia-Ukraine tensions and stagflation fears, Ghana will invest US$60mn this year in local and international mining companies through its Minerals Income and Investment Fund. With a war chest of US$200mn, the fund also plans to invest in 400 small-scale gold mining companies.

Ghana is the largest gold producer in Africa and the sixth-largest in the world, and these investments will bolster that position. The country's new gold refinery is also set to come on board in June, adding refining capacity of 400kg of gold per day at 99% purity to the current 680kg capacity. In addition to rising prices, the new investments and upcoming refineries are positive for Ghana's trade, as gold accounts for 47% of total merchandise exports (in 2020).

Ghana's major exports as a % of total merchandise trade

Microsoft's new initiative to help grow 10,000 African startu

Microsoft recently partnered with Venture Capitalists (VCs) and accelerators to back 10,000 startups in Africa over the next five years. The plan is to provide the startups with access to skilling programs, technology, markets, and funding. The US$500mn in potential funding will come from VC funds, which will dedicate some of their investments to startups in the Microsoft network.

A few months ago, Google announced plans to invest US$50mn in African startups through its Africa Investment Fund. The increasing support from global tech giants like Microsoft and Google can be linked to the success of the African tech ecosystem, particularly the fintechs. Despite the changing global investment landscape, we expect to see more investor interest in African startups as product development increases rapidly.

Africa 2021 start-up funding is well up on prior years

From ride-hailing to bus rides to airlines, ticket prices are skyrocketing in Nigeria

We have written in recent weeks about Nigeria's ongoing fuel scarcity and how prices of public transportation, ride-hailing apps and food delivery apps have ballooned. Recently, local airlines increased base fares for economy class tickets by an average of 63% across the board.

Tickets costing between NGN26k and NGN35k have increased to NGN50k, leaving several prospective Nigerians travellers – including me! – frustrated. Airlines cite the high cost of aviation fuel, FX scarcity and inflation as the reasons for the abrupt increase.

It is not just petrol and aviation fuel of course. Diesel and cooking gas prices are rising rapidly too. We expect February inflation numbers to show another leg up, worsening the living conditions of Nigerians.

Cumulative price increases of Nigeria's main petroleum products

Orange and Yabx collaborate with Cofina to facilitate smartphone financing in Côte d'Ivoire

Orange, a Mobile Network operator in Sub-Saharan Africa, has partnered with Yabx (a fintech offering credit products) and Cofina (a financial institution in Côte d'Ivoire) to provide smartphone financing in Côte d'Ivoire. The aim is to increase internet usage and facilitate the telco's 4G capacity utilisation.

Despite increasing internet coverage, Africa's internet usage gap has actually been expanding over the past few years. The reasons for the usage gap include access problems, a lack of relevant web content and a shortage of knowledge and skills, but prime among them is affordability – by which we specifically mean internet and smartphone affordability. Mobile network operators such as Orange and Kenya's Safaricom are attempting to solve this problem by providing smartphone financing.

Internet usage gap in Sub- Sahara Africa continues to widen

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Nigeria's FPI and FDI data for Q4 21 – today

Foreign portfolio investment has been lacklustre since the outbreak of Covid-19. We do not expect any significant improvement in FPI and FDI flows, given the hawkish monetary policy direction in developed markets, the heightened political risk in Nigeria as election draws closer, and continued FX illiquidity.

Nigeria's February inflation – 15 March 2022

Nigeria's inflation numbers for February may not be pretty. We expect inflation to increase again, as energy costs skyrocket on the back of fuel scarcity and higher crude oil prices. Nigeria's inflation rate is likely to remain in double digits for the rest of 2022, driven by rising energy prices, insecurity in the food-producing states and election spending.

Nigeria MPC rate decision – 22 March 2022

At its last MPC meeting, the committee voted unanimously to leave policy parameters unchanged – the benchmark Monetary Policy Rate (MPR) at 11.5%, the asymmetric corridor around the MPR at +100bps/- 700bps, the cash reserve requirement (CRR) at 27.5%, and liquidity ratio at 30.0%. We expect the MPC to maintain the status quo despite the high inflation rate and low levels of foreign portfolio investment. In our view, we could see possible rate hikes from H2 22.


Nigeria’s all-share index declined by 0.2% wow, partially offsetting the 0.3% gain recorded last week (ytd gain now 10.7%). The sentiment towards Nigeria's equities was broadly negative, as 37 stocks declined in price, while 28 stocks gained.

Among the major stocks that lost ground was SEPLAT (-4.3%), as a result of reports that the Nigerian National Petroleum Corporation (NNPC) blocked its purchase of Exxon Mobil's Nigerian business. However, SEPLAT issued a statement reaffirming the validity of the transaction and dismissing rumours. Major banking stocks also declined, including GTCO (-1.9%) and ZENITH (-0.7%), as their FY 21 results showed declining profitability. On the positive side, PRESCO, a palm oil producer, was the highest gainer, up 10.5% due to the company's plan to issue bonus shares.

Nigeria's equity market seems to be relatively uncorrelated to the volatility in global markets, because foreign participation has dwindled given the FX illiquidity issues since 2020. These FX issues will still keep major FPI inflows at bay, alongside both international (Russia-Ukraine conflict, hawkish monetary policy) and local (pre-election year, insecurity) risks.

Tellimer's West Africa Equities Coverage

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Nigeria's yield curve (%)

Ghana's yield curve (%)