How Does the Israel-Iran War Affect Nigeria?

The escalating conflict between Israel and Iran, which intensified in June 2025, has sent shockwaves across global markets, and Nigeria is feeling the ripple effects. As a nation heavily reliant on oil exports, Nigeria stands at a crossroads where this war could bring both opportunities and challenges.

The intensifying conflict between Israel and Iran has plunged the global oil market into renewed instability. Situated at the heart of global energy supply, Middle East tensions have induced significant price volatility amid fears of disruption. Illustrating this effect, oil prices advanced by more than 2% for both major benchmarks (Brent and WTI) on Tuesday, June 17th, five days following the outbreak of renewed hostilities.

This has driven global crude oil prices upward, with prices hovering around $74 per barrel and gaining about 11% in a single week. For Nigeria, a major oil exporter, this surge could mean increased foreign exchange earnings and bolstered government revenue. More dollars flowing into the Central Bank of Nigeria’s reserves could stabilize the naira, which has been under pressure for years.

But here’s the catch: while the government might smile at the extra cash, the benefits may not trickle down to ordinary Nigerians. Historically, oil windfalls in Nigeria have been marred by mismanagement, and with the nation poised to miss out on revenue gains due to inefficiencies in its oil sector, the promised economic relief might remain elusive.

On the flip side, the same oil price surge that boosts government coffers spells trouble for consumers. Nigeria’s reliance on imported refined petroleum products, even with the Dangote Refinery in play, means that higher global crude prices translate to steeper petrol (PMS) and cooking gas (LPG) prices. Experts noted that Nigerians could pay more for fuel simply because of the Israel-Iran conflict. This could drive up transportation costs, food prices, and inflation, squeezing household budgets already stretched thin.

For example, if petrol prices rise by 20 cents per gallon globally, as some analysts predict, Nigerians could see pump prices climb significantly, especially since local refining still depends on imported crude. This hits small businesses hardest, from market traders to transport operators, who may pass on costs to consumers, fueling a vicious cycle of inflation.

The Israel-Iran conflict isn’t just about oil—it’s reshaping global trade and economic stability. Analysts warn that a severe escalation, such as a disruption in the Strait of Hormuz (a critical oil chokepoint), could choke off nearly a third of global seaborne oil trade. While markets are currently well-supplied, as noted by the International Energy Agency, any prolonged disruption could send oil prices soaring, further straining Nigeria’s import-dependent economy.

Higher energy costs could also prompt global central banks to raise interest rates to curb inflation, making borrowing more expensive for Nigerian businesses and consumers. The Centre for the Promotion of Private Enterprise has cautioned that this mixed outlook—higher revenue but rising costs—poses significant risks for Nigeria’s economic stability.

The war’s impact on global energy prices is already stoking fears of runaway inflation in Nigeria. As fuel and gas prices rise, so do the costs of goods and services. Food inflation, a persistent issue, could worsen as farmers and traders face higher transport costs. For the average Nigerian family, this means tougher choices—less food on the table, delayed school fees, or skipped medical expenses.

Small and medium enterprises (SMEs), the backbone of Nigeria’s economy, are particularly vulnerable. Higher energy costs and tighter credit conditions could stifle growth, forcing some businesses to scale back or shut down. The knock-on effect? Job losses and reduced economic activity, which could dampen the optimism around Nigeria’s tech and entrepreneurial sectors.

In the long term, Nigeria must diversify its economy to reduce dependence on oil. The current situation underscores the need for structural reforms that promote local production, enhance energy efficiency, and develop alternative energy sources. While the government has made strides in this direction, much work remains to be done.

Despite the challenges, there’s potential for Nigeria to capitalize on the situation. Increased oil revenue could fund critical infrastructure projects or social programs if managed transparently. Additionally, the global focus on energy security might attract investment into Nigeria’s oil and gas sector, provided the government creates a conducive environment.