World Bank warns Nigeria against increasing electricity tariffs
December 28 (THEWILL) – The World Bank has warned Nigeria and other emerging economies against increasing electricity tariffs.
The Bank, in its latest forecast on the outlook for commodities markets, argued that such measures would lead to higher inflation in 2022, adding that electricity prices, which have peaked at 80% this year compared to 2020, will remain high next year. However, it has been said that prices will start to decline in the second half of the year, as supply constraints ease.
He said global inflationary pressures and the potential shift in economic growth to energy-exporting countries from energy-importing countries will define the new year.
Ayhan Kose, chief economist and director of the World Bank’s Outlook Group, said the surge in energy prices poses significant near-term risks to global inflation and, if sustained, could also weigh on on growth in energy importing countries.
The Bank added that the strong rebound in commodity prices is proving more pronounced than expected. Recent price volatility could complicate policy choices as countries recover from last year’s global recession, he added.
According to the Bank, non-energy prices, including agriculture and metals, would decline in 2022, after sharp increases this year.
Over the past year, prices for some commodities have reached (or exceeded) levels not seen since the peak of 2011.
The Bank said prices for natural gas and coal have reached record highs amid supply constraints and rebounding demand for electricity, although they are expected to decline in 2022 as demand declines. and that the offer improves.
However, further price increases may occur in the short term amid very low inventories and persistent bottlenecks.
The Bank has projected the price of crude oil per barrel at $ 74 in 2022 as demand for oil strengthens and reaches pre-pandemic levels.
The use of crude oil as a substitute for natural gas presents a major upside risk to the demand outlook, although rising energy prices may begin to weigh on global growth.
As global growth slows and supply disruptions are resolved, metal prices are expected to fall 5% in 2022, after increasing by around 48% in 2021.
After an expected 22% increase in 2021, agricultural prices are expected to decline slightly next year as supply conditions improve and energy prices stabilize.
John Baffes, senior economist in the World Bank’s Prospects group, said high natural gas and coal prices are impacting the production of other commodities and posing an upside risk to the forecast. price.
Baffes said, “Fertilizer production has been curtailed by rising prices for natural gas and coal, and rising fertilizer prices have pushed up input costs for major food crops. The production of some metals such as aluminum and zinc has also been reduced due to high energy costs. “
The Bank explained that the events of this year have highlighted the extent to which climate change due to climate change poses a growing risk to energy markets, affecting both demand and supply.
With a view to energy transition, the Bank has expressed its concerns about the intermittent nature of renewable energies, stressing the need for reliable electricity production at base load and back-up.
The bank said: “These will increasingly need to come from low-carbon sources, such as hydropower or nuclear power, or from new methods of storing renewable energy.
“At the same time, soaring prices for natural gas and coal have made solar and wind power even more competitive as an alternative energy source. Countries can benefit from accelerating the installation of renewable energy and reducing their dependence on fossil fuels.
The report noted that the forecast is subject to substantial risks, including adverse weather conditions, the uneven recovery of COVID-19, the threat of new epidemics, supply chain disruptions and environmental policies.
In addition, rising food prices, along with the recent surge in energy costs, are pushing food price inflation upward and raising food security concerns in several developing economies.
As the global shift from rural to urban life continues, the special section of the report explores the impact of urbanization on the demand for basic commodities. Although cities are often associated with increased demand for energy products (and therefore greenhouse gas emissions), the report also found that high density cities, especially in advanced economies, can have a per capita energy demand lower than in low density cities.
He said as the share of people living in urban areas continues to increase, these findings underscore the need for urban planning to maximize the beneficial elements of cities and mitigate their negative impacts.
The Bank noted that cities are at the forefront of climate change and that strategic planning, especially for transport links, can help reduce their consumption of resources and, most importantly, their greenhouse gas emissions. tight.