Nigeria’s economy faces a mix of gains and pressures from the ongoing conflict between the United States, Israel and Iran, with higher global energy prices expected to strengthen government finances even as inflation risks intensify.
In a report released on Thursday, March 5, CardinalStone Research said the war, which began on February 28, 2026, has already triggered sharp movements in global energy markets and disrupted key supply chains, creating both opportunities and risks for Africa’s largest oil producer.
“While the net impact of higher oil prices is positive for Nigeria’s fiscal and external accounts, it is also accompanied by inflation risk, which may further add to the current cautiousness of the CBN, possibly leading to a higher-for-longer interest rate environment,” it stated.
Risks: Rising Inflation, higher interest rates and cost pressures
CardinalStone warned that the most immediate risk to Nigeria’s economy is renewed inflationary pressure driven by higher energy prices.
Rising crude prices typically translate into higher costs for imported refined petroleum products. Even domestic supply has begun to reflect the global trend, with the Dangote Refinery—currently supplying about 62 per cent of Nigeria’s petrol demand—raising its ex-depot price from ₦774 per litre to ₦874 per litre.
It noted that the development could slow the recent moderation in inflation, which is currently at 15.1 per cent, stressing that the inflation outlook may also influence monetary policy.
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It said persistent price pressures could force the Central Bank of Nigeria to remain cautious, potentially keeping interest rates elevated for longer than expected.
Beyond macroeconomic pressures, several sectors are expected to face rising production costs.
The report shows that cement and fast-moving consumer goods manufacturers could see higher expenses for thermal energy, fuel and transportation, while freight charges and insurance premiums for imported inputs such as wheat and sugar may also increase.
It added that oil palm producers may face additional strain as the price of nitrogen-based fertilisers rises, given that their production is closely tied to natural gas prices.
Opportunities: stronger oil revenue, gas export gains and banking sector liquidity
Despite these risks, the conflict presents notable upside for Nigeria’s fiscal and external positions.
Higher global crude prices could significantly boost oil revenue and strengthen the country’s external accounts.
CardinalStone estimates that if oil prices rise well above current assumptions, Nigeria’s external reserves could climb substantially beyond the base-case outlook of $65 billion. The reserves are currently above $50 billion, according to the CBN.
It said Nigeria’s growing gas production capacity also places it in a favourable position to benefit from higher global gas prices and stronger demand from Europe.
According to the research firm, this outlook is supported by expanding domestic supply, including output from the ANOH gas plant, which began production in January 2026.
The report indicates that improved oil earnings could also narrow Nigeria’s fiscal deficit. With oil prices already trending above the 2026 budget benchmark of $64.85 per barrel, it said, the deficit could decline sharply, potentially dropping to around 1.0 per cent of GDP if crude prices approach $120 per barrel.
It also pointed out that higher oil receipts, combined with a stronger exchange rate environment, would also ease pressure on external debt servicing.
It explained further that the banking sector may also benefit from the improved energy market outlook.
Stronger foreign exchange inflows from oil exports are expected to boost system liquidity, particularly for banks with significant exposure to upstream oil and gas operations and those with large pools of low-cost deposits, the firm explained.
The conflict has already triggered significant shifts in global energy markets.
Since military actions began, Brent crude prices have climbed about 14.1 per cent to $82.70 per barrel, while European natural gas futures have surged by more than 50 per cent.
Energy supply disruptions have also intensified after key infrastructure in the Middle East was taken offline, including Saudi Arabia’s Ras Tanura refinery and Qatar’s Ras Laffan liquefied natural gas plant, which accounts for more than 20 per cent of global LNG exports.
Tensions around the Strait of Hormuz—through which roughly 20 per cent of the world’s oil supply passes—have further tightened the market, with more than 200 crude and LNG vessels reportedly stranded as security risks escalate.
CardinalStone stressed that alternative export routes remain insufficient to fully offset the disruption, as their combined capacity can only move about half of the volume that typically flows through the strategic waterway.
The firm added that while the geopolitical crisis is likely to keep global energy prices elevated in the near term, the overall impact on Nigeria will depend on how effectively policymakers manage inflationary pressures while leveraging the fiscal windfall from higher oil prices.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
