The Russia-Ukraine war and its associated supply chain disruption which induced global inflation has continued to elicit hawkish monetary policies from across global economies. Ukraine is the world's top producer of sunflower meal, oil, and seed and the world's top exporter of sunflower meal and oil. It is also a major supplier of graphite, titanium, nickel, manganese, magnesium, iron, and steel. Russia is a key supplier of not just oil and gas, but also wheat, metals, and fertilizers. Russia alone exports about 20% of nitrogen and 10 percent of phosphate. Ukraine and Russia make up 30% of global wheat exports and 75% of the sunflower oil supply. Consequently, supply disruption from both countries has kept inflation up. The United Nation’s Food and Agricultural Organisation FAO Food Index, for instance, peaked at an all-time high of 159.7 in March immediately following the outbreak of the war. By extension, economic growth has weakened across economies while exchange rates have become more volatile. 

In the United States of America, Inflation rose steadily year-on-year (save for April 2022) to 9.1% in June 2022 from 7% in December 2021. This was driven largely by food and energy inflation. However, it declined steadily to 7.1% in November 2022. The real Gross Domestic Product (GDP) growth moderated from 7% in Q4 2021 to -1.6% in Q1 2022 and -0.6% in Q2 2022 but grew by 2.9% in Q3 2022. In response to the high inflation rate, the Federal Reserve raised the Federal Funds Rate consistently from 0.25% in January 2022 to 4.5% in December 2022. In the United Kingdom, save for the slight moderation to 9.9% in August from 10.1% in July, Inflation rose steadily year-on-year to 11.1% in October 2022 from 5.4% in December 2021. However, it moderated to 10.7% in November 2022. This was driven largely by a steady rise in food inflation. The real Gross Domestic Product (GDP) growth moderated from 1.6% in Q4 2021 to 0.7% in Q1 2022 and 0.2% in Q2 2022 while declining by -0.2% in Q3 2022. In response to the rising inflation rate, the Bank of England raised the interest rate consistently from 0.25% in January 2022 to 3.5% in December 2022. Similarly, the European Central Bank (ECB) raised interest rates to 2.5% in December 2022, marking a fourth rate increase in 2022. 

It is widely expected that most economies will plunge into recession in the first half of 2023. According to Fitch Rating, the U.S. economy is expected to enter genuine recession territory in the second quarter of 2023. The Bank of Canada has projected that Canada’s GDP growth will slow to between 0% and 0.5% through the end of 2022 and the first half of 2023. The Bank of America has also predicted that Britain will fall into recession in 2023 as higher inflation, aggressive interest-rate hikes and weaker consumer demand hit growth. This is expected to impact negatively on emerging markets and developing economies. 

Nigeria’s economic growth has remained fragile owing to the low crude oil production numbers, dwindling agricultural production (constrained by widespread insecurity) and weak manufacturing sector growth. The risk of FX depreciation persists due to capital reversal from emerging markets (EMs) and frontier markets (FMs) as inflation continues to bite in developed markets. As such, beyond stemming the country’s rising inflation, the CBN has continued to increase the monetary policy rate to enhance carry trade opportunities and reduce capital flight.