Iran-Israel Conflict Poses New Threats and Opportunities for Nigeria’s Fragile Economy
The escalating conflict between Israel and Iran is reshaping global economic dynamics, with ripple effects reaching even distant economies like Nigeria’s. As the world’s geopolitical landscape becomes increasingly unstable, Nigeria—Africa’s largest oil producer—is being pulled into the economic crosscurrents. The International Monetary Fund (IMF) projects that Nigeria’s inflation will rise to 37% by 2026, while GDP growth forecasts have been revised downward due to weakening oil prices and fiscal instability. Economists are divided on the severity of these projections, but the prevailing view is that external shocks will continue to test Nigeria’s economic resilience.
One of the most immediate impacts of the Israel-Iran conflict is the spike in global oil prices. Brent crude and Nigeria’s major crude grades like Bonny Light and Qua Iboe have risen significantly, crossing the $77 per barrel mark. While this surge may seem beneficial for Nigeria, the country’s underwhelming oil production and binding long-term contracts limit its ability to fully reap the rewards. With current production far below capacity, Nigeria cannot capitalize on the temporary boost in oil revenues, reflecting a familiar pattern of missed opportunities during previous global crises like the 2022 Russia-Ukraine war.
The rise in crude oil prices could exacerbate Nigeria’s inflation crisis, especially in a post-subsidy economy. Higher fuel prices are increasing transportation, food, and energy costs across the country. As Nigeria imports most of its refined petroleum, the country is highly susceptible to imported inflation. Experts warn that this inflationary spiral will reduce consumer purchasing power and prompt tighter monetary policy, potentially leading to higher interest rates and a further squeeze on businesses already grappling with high energy costs and reduced profitability.
Beyond economics, the Israel-Iran conflict also heightens geopolitical and security concerns for Nigeria. The country’s neutral diplomatic stance reflects the complex web of relationships it maintains with both Western powers and Middle Eastern partners. Analysts warn that the conflict could embolden extremist groups like Boko Haram and ISWAP, especially if framed as a broader anti-Western struggle. A potential withdrawal of Western security assistance could leave West Africa more vulnerable to jihadist resurgence, further threatening regional stability.
Though there are some short-term economic gains from rising oil prices, Nigeria remains exposed to significant external risks. Experts urge the government to focus on structural reforms, improve oil production efficiency, and diversify the economy to buffer against future shocks. While the IMF acknowledges Nigeria’s recent policy reforms and macroeconomic improvements, it warns that continued reliance on volatile commodity exports leaves the country vulnerable to global disruptions. Nigeria’s future economic trajectory will depend on how effectively it manages these short-term pressures while investing in long-term resilience.
Source: Punch