How Escalating Middle East Conflict Could Affect Nigeria, By CPPE
The Centre for the Promotion of Private Enterprise (CPPE) has warned that the escalating conflict involving Iran, the United States and Israel could deliver a “double-edged shock” to the Nigerian economy, boosting government revenues while worsening inflation and poverty.
In a policy brief released on Sunday, the CPPE analysed the economic ripple effects of the conflict, particularly regarding the strategic Strait of Hormuz, a corridor responsible for moving 20 percent of the world’s crude oil supply.
Muda Yusuf, Chief Executive Officer of the CPPE, said while the conflict injects significant geopolitical risk into the global economy, its impact on Nigeria—an oil-dependent nation—is nuanced.
The revenue opportunity
The report highlights that geopolitical tension typically triggers a spike in crude oil prices. For Nigeria, where oil accounts for over 85 percent of export earnings and half of government revenue, this could mean an immediate influx of foreign exchange.
“Every increase in crude oil price translates into additional export earnings and fiscal revenues,” Yusuf noted. “The immediate benefits include improved foreign exchange inflows, strengthening of external reserves, and increased FAAC allocations to all tiers of government.”
However, the CPPE warned that these gains are not guaranteed. Nigeria’s current crude output fluctuates between 1.4 and 1.6 million barrels per day—well below capacity—due to persistent theft and vandalism. Without fixing these production bottlenecks, the country may miss out on the windfall.
The inflationary threat
While the government’s account balance might look healthier, the CPPE warns that the average Nigerian household could face harder times. Because Nigeria operates a deregulated downstream petroleum regime, higher global oil prices will likely lead to an immediate rise in the cost of petrol, diesel, and aviation fuel.
“Energy costs have a strong multiplier effect in Nigeria’s inflation dynamics,” Yusuf said. “Rising pump prices and transportation costs will feed directly into higher food distribution expenses. With purchasing power already fragile, sustained increases in fuel prices could intensify cost-of-living pressures and deepen poverty levels.”
The brief suggests a troubling scenario where fiscal gains for the state diverge sharply from deteriorating social outcomes for the people.
Capital flight and market volatility
The conflict also poses risks to Nigeria’s financial stability. While higher oil receipts could theoretically stabilize the Naira, the CPPE cautioned that global uncertainty often drives investors toward “safe-haven” assets like U.S. Treasury securities and gold. This could trigger capital flight from emerging markets like Nigeria, offsetting the benefits of increased oil revenue.
On the Nigerian stock market, the impact is expected to be mixed. Oil and gas stocks may rally, but manufacturing and consumer goods companies could suffer from “margin compression” due to rising energy costs.
Call for discipline and diversification
The CPPE urged the federal government to use this potential windfall wisely, advising against the historical trend of expanding expenditure during oil booms only to face crisis when prices normalize.
Yusuf recommended a strategy of fiscal consolidation, including saving excess revenues, reducing deficits, and prioritizing capital expenditure.
“The ultimate impact will depend less on external events and more on domestic policy discipline,” he said. “Strategic savings, production efficiency, and structural diversification will determine whether Nigeria converts geopolitical turbulence into macroeconomic resilience.”
Among its key recommendations, the CPPE called for intensified anti-theft operations in the Niger Delta, the acceleration of domestic refining capacity to reduce reliance on imported fuel, and the deployment of targeted social protection measures to shield vulnerable households from energy-driven inflation.
