Gulf Conflict Drives Oil Prices, Impacts Nigeria's Economy

The ongoing conflict in the Gulf region has resulted in a significant increase in Brent crude prices, which rose to $73 per barrel and briefly touched $119. This situation has created a classic trade shock for Nigeria, where higher oil prices could temporarily boost export earnings but also lead to inflationary pressures domestically.

The Nigerian federal budget for 2026 is based on a benchmark of $64.85 per barrel, with an assumption of 1.84 million barrels per day production. Despite the potential for increased revenue, the country has historically struggled to translate oil windfalls into sustainable economic reforms.

The Nigerian National Petroleum Company (NNPC) has seen retail prices for petrol rise, with reports indicating prices above N1,000 per liter in some areas. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) is urged to act quickly to address market power and supply issues as fuel queues re-emerge, indicating a tightening market.