Crisis and opportunity: How Iran’s war shapes Nigeria’s economy

The Nigerian economy has long been tied to the fortunes of oil. With crude oil revenue accounting for more than 70% of export earnings, it remains the backbone of government revenue and a key driver of foreign reserves. Oil windfalls have historically shielded Nigeria from external shocks.

During the 2008 global financial crisis, for example, strong reserves and a surplus trade balance helped stabilise the naira and sustain imports despite falling oil prices. The preceding oil boom years provided a platform to build buffers that shielded the economy from shocks for a period.

In the years that followed, growth rebounded impressively. GDP expanded by 6.9% in 2009 and peaked at 8% in 2010, buoyed by rising oil prices, which climbed from $69 per barrel in 2009 to $108 per barrel in 2014. Yet the 2014–2016 commodity crash exposed Nigeria’s vulnerability. Oil prices plunged to $20 per barrel, reserves fell to $26 billion, debt nearly doubled, and the economy contracted by -1.6% in 2016, the first economic recession in 17 years of uninterrupted democratic rule, pushing 5 million Nigerians below the poverty line. The subsisting fuel subsidy regime capped the pump price of premium motor spirit, thereby cushioning households from direct energy shocks while the economy remained exposed to global volatility.

On 28 February 2026, a new crisis erupted in the Middle East. Following U.S. and Israeli strikes on Iran, the closure of the Strait of Hormuz caused the largest supply shock in history. In 2025, the strait transported 15 million barrels of crude per day, equivalent to 15% of global supply, and 4 million barrels of refined products per day. Its closure drove Brent crude prices from $73 before the crisis to $115 per barrel. Analysts warn that prices could surge to $150–$200 if the disruption persists.

For Nigeria, the crisis presents a paradox. On one hand, soaring oil prices promise a fiscal windfall. The 2026 budget was based on $64.85 per barrel, with a production target of 1.84–2.06 mbpd. With prices now above $100 per barrel, revenues could surpass projections by ₦2.3–₦30 trillion, according to the Nigerian Economic Summit Group. On the other hand, for the first time, rising energy costs have been passed directly onto citizens. Petrol prices increased from ₦840 per litre before the crisis to ₦1,300 per litre, driving up transport and food prices and threatening the fragile disinflation achieved in recent months.

The crisis, therefore, offers both opportunities and risks. Nigeria now has the fiscal space to rebuild buffers, strengthen its absorptive capacity, and attract investment. The IMF forecasts that in 2026, Africa’s economic growth will outpace Asia’s, a rare occurrence in global development trends. Of the 15 fastest-growing economies worldwide, 11 are expected to be African nations. With the expansion of local refining capacity and the momentum of ongoing oil sector reforms, Nigeria is well-positioned to lead this growth wave, turning external shocks into a platform for resilience and laying the foundation for a more sustainable, robust economy.

Yet beneath the bright macroeconomic outlook, social strain is evident. Households are stretched to their limits by rising costs. To convert short-term gains into long-term resilience, a portion of the oil windfall must be directed towards cushioning citizens through targeted subsidies, social safety nets, or investments that ease inflationary pressures. Only then can Nigeria truly benefit from its resources, turning external turmoil into domestic stability.

Ultimately, higher oil prices present an opportunity for Nigeria to rebuild its dwindling foreign reserves. Strengthening external buffers would, in turn, support the naira and enhance currency stability. A stronger naira could ease pressure on petrol prices, making fuel more affordable for Nigerians.