Nigeria’s recent disinflation trend is facing a fresh threat as escalating tensions in the Middle East send global oil prices sharply higher, raising concerns that rising fuel and logistics costs could reignite inflationary pressures across Africa’s most populous nation.
In a research note released over the weekend, Lagos-based investment firm Afrinvest warned that while the geopolitical shock could bolster Nigeria’s oil revenues and export earnings, the broader economic impact may prove more complex as higher energy prices feed through to domestic inflation.
“Like many non-combatant economies, Nigeria is likely to experience significant indirect effects if the conflict persists or escalates,” the firm said.
Global conflict rattles energy markets
The global economy awoke on Saturday, February 28 2026, to reports of a joint military operation by the US and Israel targeting Tehran, the capital of Iran.
The strike reportedly caused significant casualties among Iran’s political leadership, including the country’s Supreme Leader, Ali Khamenei, according to early reports.
Washington framed the operation as a response to Tehran’s alleged nuclear ambitions, human rights violations, and prior regional hostilities.
In retaliation, Iran launched missile strikes on neighbouring states — including Saudi Arabia, Qatar, the UAE, Bahrain, Kuwait, and Jordan — as well as a British base in Cyprus, citing indirect support for the strikes.
Iran is also reportedly restricting maritime movement through the Strait of Hormuz, a critical conduit for roughly 20% of global oil and container shipments, representing trade flows valued at about $600 billion annually, according to estimates from the International Energy Agency and the World Trade Organization.
Disinflation progress under threat
For Nigeria, the biggest immediate economic risk lies in the inflationary consequences of rising energy prices.
The lagged effects of tight monetary policy by the Central Bank of Nigeria and a less volatile naira helped moderate inflation through 2025, supporting to an 11-month disinflation streak that began in April.
Even after the methodology used to calculate inflation was revised earlier this year, the data still shows a clear downward trend. Under the new framework, headline inflation fell from 27.6% in January 2025 to 15.1% in January 2026, reinforcing what analysts say is a genuine disinflationary process.
However, Afrinvest warned that rising global energy prices could disrupt that progress.
“Despite limited direct trade exposure between Nigeria and the Middle East, the secondary effects of higher global energy prices pose a downside risk to Nigeria’s inflation outlook,” the firm said.
Higher crude prices typically translate into more expensive imports, particularly for raw materials, intermediate goods and machinery, as well as higher freight and insurance costs during periods of geopolitical tension.
“This cost pressure would likely transmit into broader domestic price levels,” the note read.
Oil prices surge past $100
The geopolitical shock has already triggered a sharp response in energy markets.
Global oil surged above $100 per barrel on Sunday from $92.4% last Friday, after output curbs by major producers and the closure of the Strait of Hormuz intensified supply constraints, according to Bloomberg data.
In Nigeria — where fuel costs play a central role in inflation dynamics — the impact is already being felt.
The Dangote Petroleum Refinery, which accounted for nearly 65% of domestic petroleum product supply in January, has raised the ex-gantry petrol price to ₦995 per litre, effective March 6, marking the second major adjustment by the facility within a week.
Ex-gantry pricing refers to the cost at which fuel is sold from the refinery to marketers before transport and retail margins. The new rate marks a ₦121 jump from the ₦874 price set five days earlier, following a prior ₦100 increase from the ₦774 baseline rate.
Pump prices now range from ₦1,050 to ₦1,200 nationwide, heightening cost pressures for households and firms.
Energy dependence amplifies inflation risk
Nigeria’s chronic electricity shortfall compounds the inflationary threat.
According to World Bank data, the country has the highest number of people living without electricity globally, forcing households and businesses to rely heavily on petrol and diesel generators.
In recent weeks, residents across several parts of the country have complained about receiving fewer than 10 hours of electricity daily despite belonging to tariff bands that attract the highest charges under the country’s new power pricing structure.
As a result, many businesses and households must depend even more heavily on fuel-powered generators — a development that could magnify the economic impact of rising energy prices.
Given that fuel and diesel serve as key inputs across sectors including transport, manufacturing and services, sustained increases in energy costs could trigger second-round inflation effects.
“If the shock persists beyond the short term, it could reverse Nigeria’s eleven-month disinflation trend recorded to date,” Afrinvest said.
Oil windfall may offset some strain
While the crisis threatens domestic price stability, higher crude prices could bolster Nigeria’s external position.
The Middle East produces roughly 27%–30% of global oil, and any prolonged disruption could drive global prices further upward.
For a country that relies heavily on oil exports for foreign exchange and government revenues, this could provide a welcome fiscal boost.
Afrinvest noted that Nigeria’s 2026 budget is based on an oil price benchmark of $64.85 per barrel, significantly below the $80–$90 range projected under a disruption scenario. As such, higher prices could strengthen export earnings and fiscal revenues.
Trade diversion could also deepen gains.
According to foreign trade statistics from the National Bureau of Statistics, India — Nigeria’s largest crude oil buyer — imported about $1.5 billion worth of Nigerian crude in Q3 2025.
Because roughly half of India’s crude supply typically comes from the Middle East, disruptions in that region could encourage refiners to increase purchases from alternative producers such as Nigeria.
“This could increase demand for Nigerian crude, potentially expanding Nigeria’s export volumes and market share,” Afrinvest said.
Balancing opportunity and risk
Analysts say the conflict presents Nigeria with a delicate balancing act.
While higher oil prices could improve the country’s fiscal position and strengthen external earnings, the inflationary consequences of rising fuel and logistics costs may offset those gains domestically.
For households and businesses already grappling with high living costs and unreliable electricity supply, the immediate effect may be further pressure on spending power and operating margins.
The longer the conflict persists, the more pronounced those pressures could become — testing Nigeria’s hard-won progress in bringing inflation under control.
