On February 28, 2026, the US launched what it termed Operation Epic Fury, an attack in the Republic of Iran.
While the effect of the escalation is still unfolding, it is important to examine what this action means for the global economy, with special reference to Africa and Nigeria.
The US strikes on Iran are important because Iran is a major exporter of crude oil and also because it has operational control over the Straits of Hormuz, a body of water that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
This body of water controls approximately 20% of the world’s maritime shipment of petroleum liquids. Following the attacks in Iran, the straits have officially been closed.
Immediate impact
The immediate implication is that the price of transporting crude oil from the Middle East will increase, leading to a spike in energy prices.
- Energy, being a key component of core inflation in many nations including the US, means that the Consumer Price Index could rise in most major economies, especially China, which buys about 80%, or 1.38 mbpd, of Iran’s seaborne crude oil in 2025, according to Kpler.
- This translates to 13.4% of China’s total seaborne crude imports. This is a significant number. The direct implication is that this conflict could spike inflation in China and raise the cost of imports across the world.
- The other major implication of these strikes is that oil prices are likely to jump. The market had already priced in uncertainty before the strikes by raising the price of NYMEX Brent crude from $60.89 on January 5 to $73.84 on February 27, 2026. With actual war in the Middle East, the price is expected to jump further as supply may be impacted.
Impacts on Africa and Nigeria
So how will a hike in prices in China and oil markets affect the economies of Africa and Nigeria?
It is important to understand that most major economies in Africa, namely South Africa, Kenya, and Ethiopia, are net importers of energy. Nigeria also imports crude oil for the Dangote refinery as well as PMS for domestic usage.
- A hike in crude oil prices means inflationary pressures across these economies in Africa. Directly, this translates to higher logistics costs in importing food, higher costs of growing crops locally because of more expensive fertilizer, and higher export costs of raw materials.
- A rise in inflation will likely lead to a fall in demand for raw materials used in finished goods, affecting economies like Ghana and Côte d’Ivoire, which export cocoa used in making luxury items such as chocolate.
- Higher fertilizer costs will also hit inland African nations without a significant commodity export base to balance their books.
- Morocco and Tunisia, two economies building and managing assembly-for-export businesses, will also be affected as energy costs surge.
Foreign direct investment does not respond well to uncertainty, so we could see a pullback or delay in committed investment from the West as markets assess the full impact of the war. Nations like Kenya and South Africa, which have been attracting significant FDI interest, could see this risk play out.
The positives
There will, however, be some positives. Angola, for one, will see its role as one of China’s most reliable oil suppliers grow in prominence. The same applies to Libya.
- China is the largest trading partner with Africa for finished goods. Such a spike in costs can translate into imported inflation for Africa and Nigeria. That is a significant worry for many African nations already battling falling revenues.
- For Nigeria, it is a unique situation. While higher oil prices are positive in reducing budget deficits and borrowing, Nigeria has committed significant volumes of its future crude oil production to forward sale agreements with various entities.
Since 2018, the NNPC has executed multiple crude sale agreements totalling $21.56 billion in 11 deals, including Project Leopard and Project Gazelle II. While these projects brought instant liquidity to Nigeria, they committed future production to be supplied to lenders.
- As a result, the Domestic Crude Supply Obligation agreement cannot be fully implemented for Nigerian refiners like Dangote. The implication is that the NNPC will have to deliver crude at higher prices to other entities rather than prioritising local refiners.
This means Dangote and other importers of PMS will have to import higher-cost crude oil and PMS for local use. With no PMS subsidy in place, this may not directly affect the budget deficit, but it will be inflationary. A higher cost of energy will also dampen consumption.
