Global Tensions Push Oil Prices Higher
The U.S. military’s recent attacks on Iran have deepened tensions in the Middle East, putting global oil markets on edge. Brent crude has already surged 20% in the last month.
JP Morgan warns that oil could hit $130 per barrel if the crisis worsens. This scenario could have a major impact on Nigeria’s economy largely in a positive way.
Last weekend, the U.S. bombed three nuclear facilities in Iran. President Donald Trump called the strikes a spectacular military success. But for oil markets, they signaled growing instability. Brent futures jumped over 9%, reaching $78 per barrel. West Texas Intermediate (WTI) also climbed to $75. Brent later crossed the $79 mark, its highest in months.
Nigeria Gains from Oil Price Surge
If oil hits $100 per barrel, Nigeria will earn about 33% more than its 2024 budget benchmark of $75. This means more dollars for the Central Bank of Nigeria (CBN), stronger external reserves, and a firmer grip on the naira. It also boosts Nigeria’s image among investors.
The country is already feeling the benefits. Crude oil now trades above the government’s benchmark. Reforms made over the last two years—such as fuel subsidy removal and FX market liberalisation—have reduced leakages and increased fiscal space.
Naira Shows Stability in Both Markets
Despite past volatility, the naira has been stable in 2024. Officially, it trades at about ₦1550 per dollar. On the black market, the rate hovers between ₦1580 and ₦1600 with a spread of less than 3%. This tight spread limits round-tripping and helps build investor confidence.
Foreign capital is returning. Capital imports rose by 200% in Q1 2024, hitting $3.4 billion. The capital market also saw stronger foreign inflows last year up 137% to ₦400 billion — and the trend is continuing in 2025.
Higher Prices, But Risk Remains
Even with the good news, analysts warn of risks. The global shift to safe-haven assets during times of conflict could trigger capital flight from emerging markets like Nigeria. If global interest rates stay high due to inflation fears, money could move out of Africa and back to the U.S. or Europe.
Can Nigeria’s rising oil earnings offset this possible capital outflow? Many experts think so especially with the country’s improving credit ratings.
Global Institutions Show Confidence
In April, Fitch Ratings upgraded Nigeria’s foreign-currency credit rating from ‘B-’ to ‘B’, citing better policy direction and economic reforms. The World Bank also raised its 2025 growth forecast for Nigeria to 3.6%, above the global average. These upgrades reflect optimism about Nigeria’s progress.
Moody’s had raised concerns about declining oil prices and high inflation. But the recent oil rally has eased those fears, especially with inflation also showing signs of slowing down.
FX Reforms Drive Inflows
Beyond oil, Nigeria’s FX market reforms are making a difference. The CBN is working with international money transfer operators (IMTOs) to boost remittances. It is also pushing local manufacturers to add value to exports and reduce reliance on imports.
CBN Governor Yemi Cardoso recently said Nigeria could learn from China by focusing on export-led growth. He urged businesses to explore global markets in sectors like agriculture, manufacturing, and the creative industry.
Cardoso noted the creative sector alone could bring in $25 billion annually. Music, film, crafts, and digital exports all have potential to earn Nigeria more dollars.
Focus Turns to Telecom Sector
Nigeria is also targeting the telecom sector to reduce dollar outflows. The CBN is encouraging telecoms to start local production of hardware like SIM cards, cables, and towers. Last week, Airtel’s CEO met with CBN officials and asked for support to produce essential parts in Nigeria.
Reducing telecom imports could save significant FX and create local jobs.
Analysts Remain Optimistic
Dr. Muda Yusuf, head of the Centre for the Promotion of Private Enterprise (CPPE), says the oil rally will boost Nigeria’s stock market and overall economic outlook. He noted that crude remains Nigeria’s largest FX earner and accounts for a large share of government revenue.
He said:
“Rising oil prices will improve Nigeria’s fiscal balance. It will help reduce the budget deficit and attract more investment in the oil and gas sector.”
Budget Goals Within Reach, But Production Is Key
With oil prices rising, the Federal Government’s target of ₦19.5 trillion in oil revenue for 2025 looks more achievable. But one challenge remains production.
Nigeria currently produces about 1.5 million barrels per day (mbpd). Experts say boosting output is the next big hurdle. To succeed, the government must address oil theft and insecurity in the Niger Delta.
