{"id":14893,"date":"2025-06-16T11:49:48","date_gmt":"2025-06-16T11:49:48","guid":{"rendered":"https:\/\/thenewsnow.org\/?p=14893"},"modified":"2025-06-16T11:52:24","modified_gmt":"2025-06-16T11:52:24","slug":"israeli-iran-war-risks-and-upsides-for-the-nigerian-economy","status":"publish","type":"post","link":"https:\/\/thenewsnow.org\/index.php\/2025\/06\/16\/israeli-iran-war-risks-and-upsides-for-the-nigerian-economy\/","title":{"rendered":"ISRAELI-IRAN WAR: RISKS AND UPSIDES FOR THE NIGERIAN ECONOMY"},"content":{"rendered":"

The outbreak of war between <\/span><\/span>Israel<\/span><\/span> and <\/span><\/span>Iran<\/span><\/span> has added a troubling <\/span><\/span>dimension<\/span><\/span> to the <\/span><\/span>challenges of an <\/span><\/span>already floundering global economy. <\/span><\/span>Economies around the world <\/span><\/span>are currently grappling with elevated geopolitical tension triggered by the Russian <\/span><\/span>Ukraine<\/span><\/span>war and the <\/span><\/span>Israel-Hamas<\/span><\/span> conflict<\/span><\/span>. \u00a0There is also the profound uncertainty <\/span><\/span>created<\/span><\/span> by the unprecedented tariff disruptions by the trump administration.<\/span><\/span><\/p>\n

For the Nigerian economy, the<\/span><\/span> implications are mixed. <\/span><\/span>The development <\/span><\/span>portends a <\/span><\/span>combination of <\/span><\/span>risks <\/span><\/span>and<\/span><\/span>upsides<\/span><\/span> for the economy<\/span><\/span>.<\/span><\/span><\/p>\n

RISKS<\/span><\/span> TO THE ECONOMY<\/span><\/span><\/b><\/p>\n

Energy <\/span><\/span>Cost Escalation<\/span><\/span><\/b><\/p>\n

A major driver of energy <\/span><\/span>prices<\/span><\/span> in Nigeria is the global crude oil price. \u00a0With the <\/span><\/span>outbreak<\/span><\/span> of the <\/span><\/span>Israeli-Iranian<\/span><\/span>war, crude oil <\/span><\/span>prices<\/span><\/span> had surged to<\/span><\/span> $7<\/span><\/span>5<\/span><\/span> per <\/span><\/span>barrel<\/span><\/span> from $65 per <\/span><\/span>barrel<\/span><\/span> a week before<\/span><\/span>. This is a 15% jump within days. \u00a0This has obvious implications for petroleum product prices<\/span><\/span> globally<\/span><\/span>. \u00a0<\/span><\/span>E<\/span><\/span>conomies around the world [Nigeria inclusive] <\/span><\/span>would<\/span><\/span> witness<\/span><\/span> a surge in <\/span><\/span>the price of petrol, diesel, jet fuel, gas and related products in the near term. <\/span><\/span>This would have far reaching implications for many economies and businesses<\/span><\/span>. <\/span><\/span><\/p>\n

Implications For Inflation<\/b><\/span><\/span><\/p>\n

Energy cost is a major factor in the Nigerian inflation equation. \u00a0 \u00a0It impacts production cost, logistics cost, transportation costs, <\/span><\/span>and <\/span><\/span>the <\/span><\/span>cost of power generation. <\/span><\/span>This presents an inflationary scenario. These additional costs would be passed on to final consumers, depending on the degree of consumer <\/span><\/span>resistance<\/span><\/span>. <\/span><\/span>\u00a0<\/span><\/span><\/p>\n

There is also <\/span><\/span>a global<\/span><\/span> inflation dimension. \u00a0Energy prices <\/span><\/span>have<\/span><\/span> global inflationary implication. \u00a0<\/span><\/span>Therefore,<\/span><\/span>there is also an expectation of imported inflation in the unfolding geopolitical scenario.<\/span><\/span><\/p>\n

Interest <\/span><\/span>Rate Implication<\/span><\/span><\/b><\/p>\n

High inflation drives interest <\/span><\/span>rates<\/span><\/span> as \u00a0<\/span><\/span>monetary authorities respond to the inflation outcomes of current geopolitical headwinds. \u00a0<\/span><\/span>A tighter<\/span><\/span> monetary policy regime is expected in Nigeria and other monetary jurisdictions. \u00a0The expectation is that economies around the world may experience renewed pressures on interest rate. Higher global <\/span><\/span>interests could <\/span><\/span>adversely impact<\/span><\/span> portfolio flows with implications for foreign reserves.<\/span><\/span><\/p>\n

Profit <\/span><\/span>Margins<\/span><\/span><\/b><\/p>\n

High energy cost, elevated inflationary pressures<\/span><\/span> and a <\/span><\/span>spike in interest rates are all headwinds that could undermine <\/span><\/span>the <\/span><\/span>profitability of <\/span><\/span>businesses<\/span><\/span> in the economy<\/span><\/span>.<\/span><\/span> \u00a0Investors in the <\/span><\/span>non-oil<\/span><\/span> sector are likely to be more vulnerable in the prese<\/span><\/span>nt situation.<\/span><\/span> \u00a0<\/span><\/span><\/p>\n

Nigerian firms with strong <\/span><\/span>business links in the <\/span><\/span>Middle East<\/span><\/span> and those with strong supply chain linkages in the region <\/span><\/span>would be vulnerable at this time because of the current instability in the region.<\/span><\/span><\/p>\n

Risk Of Money Supply Growth<\/b><\/span><\/span><\/p>\n

T<\/span><\/span>here<\/span><\/span> is a risk of high monetary growth with <\/span><\/span>an <\/span><\/span>increase in revenue from the oil sector. \u00a0<\/span><\/span>M<\/span><\/span>oney supply increases in the <\/span><\/span>Nigerian<\/span><\/span> economy as oil revenue increases because of the monetization <\/span><\/span>of oil receipts. \u00a0This could pose <\/span><\/span>additional <\/span><\/span>inflation<\/span><\/span> risk<\/span><\/span> and exchange rate depreciation <\/span><\/span>risk<\/span><\/span>. \u00a0<\/span><\/span>This <\/span><\/span>may<\/span><\/span> provoke<\/span><\/span> a <\/span><\/span>tighter monetary policy stance<\/span><\/span>,<\/span><\/span> which could result in <\/span><\/span>difficult <\/span><\/span>credit conditions<\/span><\/span> for <\/span><\/span>businesses<\/span><\/span> in the economy. <\/span><\/span><\/p>\n

Implications<\/span><\/span> For Global Growth Outlook.<\/span><\/span><\/b><\/p>\n

The already floundering global economy would be adversely impacted by this new geopolitical crisis. Global stock markets are reflecting this ominous outlook \u2013 the Dow Jones, S & P, and Nasdaq are trending downwards. There is a flight by investors towards \u2018safe haven assets\u2019 as <\/span><\/span>global uncertainty heightens. However, in Nigeria, there is historically a positive correlation between crude oil prices, GDP growth, and stock market performance. The outlook for the Nigerian stock market is therefore likely to be positive in the current context.<\/span><\/span><\/p>\n

UPSIDES FOR THE NIGERIA ECONOMY<\/b><\/span><\/span><\/p>\n

If the current <\/span><\/span>conflict<\/span><\/span> persists<\/span><\/span> and <\/span><\/span>escalates<\/span><\/span>, the <\/span><\/span>Nigerian<\/span><\/span> economy may record upsides in a number of areas:<\/span><\/span><\/p>\n

Forex <\/span><\/span>Inflows<\/span><\/span><\/b><\/p>\n

The surge in crude oil price would <\/span><\/span>impact on foreign exchange <\/span><\/span>earnings<\/span><\/span>, oil being the biggest forex earner for the country.<\/span><\/span> \u00a0<\/span><\/span>T<\/span><\/span>his would even<\/span><\/span> be<\/span><\/span> more impactful if output performance improves<\/span><\/span>. \u00a0<\/span><\/span>Crude oil price has surged to <\/span><\/span>$75 per <\/span><\/span>which is about <\/span><\/span>15<\/span><\/span>% <\/span><\/span>higher than before the outbreak of <\/span><\/span>the<\/span><\/span> Israeli\u2013Iran<\/span><\/span> conflict. <\/span><\/span>This development would also <\/span><\/span>positively impact<\/span><\/span> the country\u2019s <\/span><\/span>foreign re<\/span><\/span>serves<\/span><\/span>, e<\/span><\/span>nsure better <\/span><\/span>forex <\/span><\/span>liquidity and <\/span><\/span>ultimately the <\/span><\/span>stability of the <\/span><\/span>naira <\/span><\/span>exchange rate<\/span><\/span>.<\/span><\/span><\/p>\n

Revenue <\/span><\/span>Effect.<\/span><\/span><\/b><\/p>\n

The oil sector currently accounts for about 50% of government revenue. \u00a0An improvement in crude oil price would therefore have a <\/span><\/span>significant impact on government revenue. An improvement in <\/span><\/span>revenue<\/span><\/span>would <\/span><\/span>positively <\/span><\/span>impact fiscal consolidation and hopefully moderate the growth of <\/span><\/span>the <\/span><\/span>fiscal deficit.<\/span><\/span><\/p>\n

Oil <\/span><\/span>And Gas Investment<\/span><\/span> Effect<\/span><\/span><\/b><\/p>\n

Investments in the oil and gas sector <\/span><\/span>would<\/span><\/span> post better returns if the conflict persis<\/span><\/span>ts. \u00a0High oil price <\/span><\/span>is<\/span><\/span> good news for <\/span><\/span>upstream oil and gas investors<\/span><\/span>.<\/span><\/span><\/p>\n

Dr <\/span><\/span>Muda Yusuf<\/span><\/span><\/p>\n

Director\/<\/span><\/span>Chief Executive <\/span><\/span>Officer<\/span><\/span><\/p>\n

Centre for the Promotion of Private Enterprise <\/span><\/span>[CPPE]<\/span><\/span><\/p>\n

15<\/span><\/span>th<\/span><\/span> June 2025<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The outbreak of war between Israel and Iran has added a troubling dimension to the challenges of an already floundering<\/p>\n","protected":false},"author":1,"featured_media":14895,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-14893","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts\/14893","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/comments?post=14893"}],"version-history":[{"count":3,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts\/14893\/revisions"}],"predecessor-version":[{"id":14898,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts\/14893\/revisions\/14898"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/media\/14895"}],"wp:attachment":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/media?parent=14893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/categories?post=14893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/tags?post=14893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}