Israel-Iran Conflict Threatens Nigerian Economy with Investment Risks and Rising Interest Rates – CPPE

The Centre for the Promotion of Private Enterprise (CPPE) has warned that the escalating conflict between Israel and Iran poses serious threats to Nigeria’s economic stability. Dr. Muda Yusuf, CEO of CPPE, stated that the geopolitical turmoil could disrupt global markets, potentially driving up oil prices and inflation. These developments would complicate monetary policy decisions and reduce business profitability, especially for non-oil sector investors in Nigeria.

Yusuf emphasized that Nigerian companies with significant trade or supply chain links to the Middle East are particularly exposed. Disruptions caused by the instability could lead to costlier imports and a harsher business environment. As inflation worsens, financial authorities might respond with tighter monetary policies, leading to higher interest rates and reduced lending to businesses.

Additionally, CPPE noted that rising global interest rates could negatively affect Nigeria’s portfolio investments and foreign reserves. The tightening of monetary policies across major economies may deter capital inflows, which are crucial to stabilizing the naira and maintaining economic balance. These factors combined may lead to reduced investor confidence in the Nigerian market.

Despite these risks, CPPE acknowledged a potential silver lining: the conflict could lead to a surge in global oil prices, which may increase Nigeria’s oil revenues. Since oil accounts for about 50% of the nation’s income, higher prices could help reduce fiscal deficits and support budgetary goals. Increased returns on oil and gas investments might also attract new funding into the sector.

Meanwhile, Nigeria’s government has called for an immediate ceasefire, following Israel’s June 12 strikes on Iranian nuclear facilities and Iran’s retaliatory drone attacks. The Federal Government urged both nations to show restraint, highlighting the broader risks their conflict poses to regional and global peace, as well as to economies like Nigeria’s.

Source: Nairametrics