…Oil price seen climbing to $90-$100p/b
…Revenue to rise in boost for budget
The United States airstrikes on Iran’s nuclear facilities are expected to trigger a global oil price rally, offering short-term support for the naira, amid mounting risks for inflation, trade disruptions and global market volatility.
Brent crude is expected to climb more than $90 a barrel after President Donald Trump launched coordinated attacks on three of Iran’s nuclear sites over the weekend.
Brent stood at $77.01 per barrel on Sunday at 5.28pm Nigerian time, with WTI Crude selling at $73.84 per barrel. The price of Nigeria’s flagship crude oil grade, Bonny Light, was $78.62 per barrel at the same time.
Read also: Oil prices may hit $85 amid rising Middle East tensions – Morgan Stanley
The escalation has revived concerns about potential supply disruptions from the Middle East, particularly through the Strait of Hormuz, which handles roughly 20 percent of global oil flows.
For Nigeria, Africa’s top oil producer, the further rally in crude offers a welcome lift for foreign exchange (FX) inflows and fiscal revenues. Analysts say this could help ease near-term pressure on the naira, which has shed some of its value recently, despite a more flexible exchange rate regime introduced earlier this year.
“For us, escalation means that oil prices will now flirt at $100 a barrel,” said Ikemesit Effiong, partner at SBM Intelligence.
“The naira will strengthen a little bit against major currencies largely because those currencies will soften as the uncertainty of an Iranian reaction against US assets heightens.”
According to Samuel Sule, chief executive officer of Renaissance Capital Africa, the implications of the US assault on Tehran will be determined by the reactions of all parties involved.
“In the short term, it points to a higher oil price resulting from lower global supply. This is potentially positive for the naira. Global trade will continue to be impacted by foreign trade policy.”
The naira gained N2 on Friday at the official market, appreciating from 1,549.41 on Thursday to 1,547.36, supported by increased supply from foreign portfolio investors looking to participate in the open market operations (OMO) auction amid the Central Bank of Nigeria (CBN)’s $61 million intervention for banks.
But the local currency has faced renewed volatility in parallel markets, as demand for dollars outpaces supply.
Higher oil prices will boost Nigeria’s external revenues but it will also raise costs, particularly for local petroleum products.
“The fiscal side may benefit from the crude rally but the inflationary side could be problematic,” said Temi Adebayo, a Lagos-based economist.
Analysts at Lagos-based consultancy firm SBM Intelligence referred to the continued price hike in global oil as ‘volatile windfall,’ stressing that “Nigeria’s ability to capitalise on this is severely limited by its soft oil production.”
Read also: Naira gains, external reserve decline despite oil pricerally
Recent figures from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) show that oil production remains below its Organisation of Petroleum Exporting Countries (OPEC) quota.
In May, Nigeria produced 1.45 million barrels per day (bpd), about 97 percent of its 1.5 million bpd quota set by OPEC.
The shortfall, driven by persistent issues such as oil theft, pipeline vandalism and underinvestment in infrastructure, could limit Nigeria’s ability to fully benefit from the rising prices.
Trends show spiraling inflation on rising oil prices
A check on historical data shows that each period of global oil price surge comes with high inflation, with the country often unable to cash in on the windfall.
Data obtained from SBM Intelligence indicate that during the early days of Russia invasion of Ukraine (2022), oil prices surged to $121, yet Nigeria’s inflation still soared to 18.6 percent.
Again, when OPEC+ cuts pushed prices to $90 in 2023, inflation hit 26.7 percent in Africa’s most populous nation, suggesting that higher oil revenues alone do not solve underlying structural weaknesses.
However, the nation’s current escape route is Dangote Refinery, which has ramped up local crude refining and reduced petrol imports, thereby reducing the tendency for imported inflation.
Rising oil prices are double-edged sword
Nigeria, Africa’s largest oil producer, stands to benefit from higher crude prices, which could bolster dollar inflows and boost government revenue.
But the macroeconomic trade-offs are complicated by the country’s sky-high inflation, currently at 22.97 percent as of May 2025.
“Petrol prices have already started to adjust upwards,” Sule, quoted earlier, said. “The sovereign gets the benefit of higher revenues. There might be some pressures from higher petrol prices.”
Read also: Stronger naira seen as oil prices up on Middle-East tensions
Recent data from the Foreign Trade in Goods Statistics revealed that crude oil was the third largest import for the first quarter (Q1) of 2025, valued at N1.19 trillion.
This could potentially translate into higher pump prices and stoke inflationary pressures for a country grappling with its worst cost-of-living crisis in a generation.
“These increases ripple through the economy, pushing up transport, food, and power costs, which could trigger further inflationary surges in a country already under considerable economic strain following the removal of fuel subsidies,” SBM Intelligence wrote in a note recently.
