The Nigerian Economic Summit Group (NESG) has projected that escalating geopolitical tensions in the Middle East could deliver a massive oil revenue windfall to Nigeria, potentially reaching as high as N30.2 trillion if the conflict between Iran and Israel becomes prolonged.
This was disclosed in a report titled “Boom Not Gloom: Nigeria’s Optimal Policy Response to the US/Israel-Iran War,” released on Thursday by the policy think tank.
The report assesses the potential economic impact of rising geopolitical tensions involving the United States, Israel, and Iran on oil-producing economies such as Nigeria, noting that higher global crude prices could significantly boost Nigeria’s export earnings.
What NESG is saying
The NESG stated that the ongoing conflict presents Nigeria with a rare but time-sensitive opportunity to strengthen its macroeconomic position by leveraging rising oil prices.
- “The US/Israel–Iran conflict presents Nigeria with a time-limited opportunity to turn an external shock into a consolidation of hard-won macroeconomic stability.”
- “The CBN should avoid reactive tightening to transitory supply shocks, sterilise excess liquidity, and allow the naira to adjust to market fundamentals.”
- “Credible, scenario-based forward guidance from both fiscal and monetary authorities is critical to anchor expectations and reduce self-fulfilling market disturbances.”
The group stressed that the benefits of higher oil prices could be substantial but would depend largely on how policymakers respond to the evolving global situation.
More insights
The NESG estimated that the fiscal windfall Nigeria could earn from higher oil prices would depend on the duration and intensity of the conflict.
- In the event of a short-lived conflict that temporarily lifts crude prices, Nigeria could record an additional N2.3 trillion in oil revenue.
- If hostilities persist and significantly disrupt global energy markets, additional earnings could rise to as much as N30.2 trillion.
- Higher oil export revenues could also strengthen Nigeria’s external reserves and support stability in the naira through improved foreign exchange inflows.
However, rising global energy prices could push Nigeria’s headline inflation higher by between 1.3 and 5.2 percentage points.
Despite the inflationary risks, the report maintains that the overall macroeconomic impact could remain positive if the government manages the windfall prudently.
- The NESG warned that higher global oil prices may also introduce short-term macroeconomic pressures for Nigeria.
- Rising fuel and transportation costs could increase domestic inflation and put pressure on supply chains.
- Policymakers may face challenges in balancing inflation control with economic stability.
There is also a risk of policy missteps if authorities react too aggressively to temporary price shocks.
The think tank advised policymakers to save excess oil revenues and ring-fence windfall gains to strengthen fiscal buffers.
The report also warned that the run-up to the January 2027 election cycle could test the government’s commitment to fiscal discipline.
Past oil booms in Nigeria have often triggered pro-cyclical spending that weakened long-term fiscal sustainability.
What you should know
Nairametrics reports that oil prices surged on Thursday as Iran intensified attacks on oil and transport facilities across the Middle East.
Brent crude futures rose $4.47, or 4.86%, to $96.45 per barrel by 07:33 GMT, after briefly touching $100 earlier in trading.
To help stabilise oil markets, the International Energy Agency (IEA) has agreed to release a record 400 million barrels from strategic reserves.
