Nigeria's Economy Threatened by Middle East Conflict

The Centre for the Promotion of Private Enterprise (CPPE) has highlighted that Nigeria is experiencing a double-edged impact from the ongoing conflict in the Middle East, particularly due to rising oil prices and foreign exchange (FX) volatility. The report indicates that the conflict involving Iran, the United States, and Israel has heightened fears of disruptions in the Strait of Hormuz, a vital corridor for nearly 20% of global crude supply.

Nigeria's economy, which relies heavily on oil—accounting for 85% of export earnings and half of government revenue—faces significant implications from these geopolitical shocks. The CPPE notes that higher oil receipts typically exert pressure on the naira, potentially boosting FX liquidity.

However, global risk aversion may drive investors toward safe-haven assets, leading to capital outflows from emerging markets like Nigeria. The report emphasizes the need for fiscal prudence and warns against historical cycles of spending booms followed by fiscal stress, recommending that part of any oil windfall be saved and that refining capacity be accelerated to support social protection.