By Seun Ibiyemi
The Centre for the Promotion of Private Enterprise (CPPE) has warned that while the escalating Iran–U.S.–Israel conflict may deliver short-term revenue gains to Nigeria through higher crude oil prices, it also poses significant inflationary and macroeconomic risks that could worsen living conditions for citizens.
In a policy brief titled “Implications of the Iran–U.S.–Israel Conflict on the Nigerian Economy,” the Chief Executive Officer of CPPE, Muda Yusuf, described the crisis as a “double-edged shock” with both fiscal opportunities and serious economic threats.
The think tank noted that rising geopolitical tensions in the Middle East particularly around the strategically vital Strait of Hormuz, through which about 20 per cent of global crude supply passes daily have historically triggered oil price volatility. Any disruption in the corridor could significantly drive up global crude prices, shipping costs, and insurance premiums.
For Nigeria, where crude oil accounts for over 85 per cent of export earnings and about half of government revenue, higher oil prices could translate into increased export receipts, improved foreign exchange inflows, stronger external reserves and higher FAAC allocations to the three tiers of government.
However, CPPE cautioned that Nigeria’s ability to fully benefit from any oil windfall remains constrained by production challenges.
The country’s crude output, currently fluctuating between 1.4 and 1.6 million barrels per day, remains below installed capacity due to oil theft, pipeline vandalism and underinvestment in upstream infrastructure.
“Without sustained improvement in production efficiency and security, Nigeria may not optimise the revenue gains from rising crude prices,” the brief stated.
Beyond fiscal implications, the group highlighted serious inflationary risks.
With Nigeria operating a deregulated downstream petroleum regime, increases in international crude prices are expected to feed directly into higher domestic fuel prices.
According to CPPE, higher petrol, diesel and aviation fuel costs could trigger a cascade of price increases across transportation, food distribution, manufacturing and logistics, thereby intensifying cost-of-living pressures.
“While government revenues may rise, household welfare could deteriorate,” Yusuf warned, noting that energy costs have a strong multiplier effect on inflation in Nigeria, where food and transportation constitute a large share of consumer expenditure.
On the foreign exchange front, the think tank said stronger oil receipts could temporarily ease pressure on the naira and improve FX liquidity.
However, it warned that heightened global uncertainty could trigger capital flight from emerging markets as investors shift to safe-haven assets such as U.S. Treasury securities and gold.
Given Nigeria’s vulnerability to foreign portfolio investment volatility, CPPE said exchange rate stability would depend on the balance between improved oil earnings and potential capital reversals.
The group also projected mixed impacts on the capital market. Oil and gas stocks may benefit from stronger earnings expectations, while manufacturing, aviation, logistics and consumer goods firms could face margin pressures due to rising energy and input costs.
CPPE urged the Federal Government to avoid the historical pattern of pro-cyclical spending during oil booms, stressing the need for fiscal prudence.
It recommended saving part of any oil windfall in stabilisation funds, reducing fiscal deficits, moderating debt accumulation and prioritising capital expenditure over recurrent spending.
The organisation also called for intensified anti-theft measures to boost crude production, accelerated domestic refining capacity to reduce dependence on imported refined products, sustained foreign exchange market reforms, expanded social protection for vulnerable households and fast-tracked economic diversification.
“The ultimate impact of the conflict on Nigeria will depend less on external events and more on domestic policy discipline,” Yusuf stated.
He emphasised that strategic savings, macroeconomic prudence and structural reforms would determine whether Nigeria converts geopolitical turbulence into long-term economic resilience.
