The Centre for the Promotion of Private Enterprise (CPPE) has warned that the escalating conflict involving Iran, the United States and Israel could have far-reaching consequences for Nigeria’s economy, presenting both revenue opportunities and significant macroeconomic risks.
In a policy brief released on March 1, 2026, CPPE Chief Executive Officer, Dr. Muda Yusuf, said the geopolitical tensions have injected fresh uncertainty into the global economy, with energy markets serving as the primary transmission channel.
According to the think tank, particular attention is focused on the Strait of Hormuz, a strategic oil transit corridor through which about 20 per cent of global crude supply passes daily. Any disruption to this route, CPPE noted, could trigger immediate spikes in oil prices, shipping costs, insurance premiums and supply chain disruptions.
Oil Price Gains Face Production Constraints
For Nigeria, where crude oil accounts for over 85 per cent of export earnings and roughly half of government revenue, rising oil prices could boost export receipts, strengthen foreign exchange inflows, improve external reserves and increase allocations from the Federation Account Allocation Committee (FAAC).
However, CPPE cautioned that the extent of these gains would depend heavily on Nigeria’s production levels. Current output, estimated at 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 improvements in production efficiency and security, Nigeria may not fully optimise any price windfall,” the report stated.
The organisation also warned that if the conflict dampens global growth, oil demand could weaken, potentially reversing price gains and eroding fiscal benefits.
Exchange Rate and Capital Flow Pressures
Higher oil prices could improve Nigeria’s current account position and ease pressure on the naira by boosting foreign exchange liquidity and investor confidence.
But CPPE noted that geopolitical instability often triggers global risk aversion, prompting capital flight to safe-haven assets such as U.S. Treasury securities and gold. As a result, emerging markets like Nigeria could experience portfolio outflows that offset gains from improved oil earnings.
The net impact on the exchange rate, the report said, would depend on the balance between stronger oil inflows and possible capital reversals.
Inflation and Cost-of-Living Concerns
CPPE identified inflation as the most immediate domestic risk. With Nigeria operating a deregulated downstream petroleum regime, higher international crude prices are likely to feed directly into increased pump prices for petrol, diesel and aviation fuel.
The ripple effects could include rising transportation and logistics costs, higher food distribution expenses, and increased manufacturing input costs – all of which may intensify cost-of-living pressures.
While government revenues may rise, the report warned that household welfare could deteriorate, widening the gap between fiscal gains and social outcomes.
Capital Market Volatility Expected
The Nigerian capital market is expected to witness mixed impacts. Oil and gas stocks may benefit from improved earnings expectations, while manufacturing, aviation, logistics and consumer goods companies could face margin pressures from higher energy costs.
Increased global financial tightening may also weaken foreign portfolio flows, raising short-term volatility in equity and fixed-income markets.
Call for Fiscal Discipline
CPPE urged the government to avoid the historical pattern of expanding expenditure during oil price booms, only to face fiscal stress when prices decline.
It recommended saving part of any oil windfall in stabilization mechanisms, reducing fiscal deficits, moderating public debt accumulation, and prioritising capital expenditure over recurrent spending.
The group also called for intensified efforts to curb oil theft, incentivise upstream investment, accelerate domestic refining capacity, deepen foreign exchange market reforms, deploy targeted social protection measures, and fast-track economic diversification.
Diversification Remains Critical
Beyond oil, CPPE warned that a prolonged or expanded conflict could disrupt global supply chains, raise shipping insurance costs and moderate global growth — risks that underscore Nigeria’s vulnerability as a mono-product exporter.
The organisation stressed the urgency of expanding non-oil exports, manufacturing, agro-processing, ICT and services to reduce exposure to external shocks.
“The ultimate impact will depend less on external events and more on domestic policy discipline,” the report concluded, noting that strategic savings, production efficiency and structural diversification would determine whether Nigeria converts geopolitical turbulence into long-term macroeconomic resilience.
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