Middle-East crises: Nigeria’s poor to face more hardships as experts list impacts

 •Possible gains dependent on crude production 

By Emeka Anaeto, Business Editor and Peter Egwuatu, Asst. Business Editor

Amidst escalation in the Middle-East crises, financial and economy experts have indicated that the spill-over effect will worsen economic hardship in Nigeria especially amongst the vulnerable households.

Though they noted some positive impacts of the crises on the country’s macroeconomic outlook and fiscal position, the overall outcome, they believe, would be largely negative.

The positive outlook according to them includes, higher crude export receipts, improved foreign exchange inflows, strengthening of external reserves, and increased revenue allocations to all tiers of government.

However, they also noted that even these positives are still challenged and more of probability saying revenue gains are critically dependent on production levels. Nigeria’s current crude output has fluctuated around 1.4–1.6 million barrels per day, below installed capacity and vulnerable to oil theft, pipeline vandalism, and underinvestment in upstream infrastructure.

Furthermore they explained that if the conflict escalates and dampens global growth, oil demand could weaken, leading to price corrections, concluding that the fiscal upside is inherently fragile.

They added that geopolitical instability also triggers global risk aversion noting that during periods of uncertainty, capital tends to migrate toward safe-haven assets such as U.S. Treasury securities and gold.

Consequently, emerging and less developed markets such as Nigeria frequently experience portfolio outflows in such episodes.

On the negative impact of the Middle-East crises on poor Nigerians, the analysts said the immediate domestic risk lies in inflation transmission falling out from increases in petrol and other prices, which would erode purchasing power of the low income households.

Experts’ insight

Higher inflation may be underway – Muda Yusuf

 Speaking to Saturday Vanguard on the situation, Dr. Muda Yusuf, Chief Executive Officer Centre for the Promotion of Private Enterprise (CPPE), said: “The escalating conflict involving Iran, the United States, and Israel has injected a new wave of geopolitical risk into the global economy. Energy markets are the first transmission channel.

“For Nigeria, an oil-dependent economy where crude accounts for over 85 percent of export earnings and about half of government revenue, the implications are significant. The effects will be both positive and adverse, depending on the duration of the conflict and the quality of domestic policy responses.”

Continuing, he stated: “For Nigeria, every increase in crude oil price translates into additional export earnings and fiscal revenues.

‘‘The immediate benefits include: Higher crude export receipts, improved foreign exchange inflows, strengthening of external reserves, and increased FAAC allocations to all tiers of government

“However, revenue gains are critically dependent on production levels. Nigeria’s current crude output has fluctuated around 1.4–1.6 million barrels per day, below installed capacity and vulnerable to oil theft, pipeline vandalism, and underinvestment in upstream infrastructure. Without a sustained improvement in production efficiency and security, Nigeria may not fully optimise any price windfall.

There is also a medium-term risk. If the conflict escalates and dampens global growth, oil demand could weaken, leading to price corrections. The fiscal upside is therefore inherently fragile.

Yusuf also noted that there are exchange rate implications and capital flow risks.

Higher oil prices typically strengthen Nigeria’s current account balance and improve foreign exchange liquidity. This could reduce short-term pressure on the naira and reinforce investor confidence.

In recent years, exchange rate stability has been closely tied to oil receipts and capital inflows. Improved export earnings could: Boost gross external reserves, enhance FX market liquidity, reduce speculative pressure on the currency.

“However, geopolitical instability also triggers global risk aversion. During periods of uncertainty, capital tends to migrate toward safe-haven assets such as U.S. Treasury securities and gold. Emerging markets frequently experience portfolio outflows in such episodes.

Given Nigeria’s relatively shallow capital market and sensitivity to foreign portfolio investment, volatility in global financial conditions could offset part of the FX gains from higher oil prices. The net exchange rate impact will therefore depend on the balance between stronger oil inflows and potential capital reversals.”

Yusuf listed inflation transmission and welfare pressures as part of the impact of the conflict on Nigeria.

He stated: ‘‘The most immediate domestic risk lies in inflation transmission. Nigeria operates a deregulated downstream petroleum regime. Higher international crude prices feed directly into higher petrol, diesel and aviation fuel costs.

The likely channels include: rising pump prices,  increased transportation/logistics costs, higher food distribution expenses, escalating manufacturing and logistics costs.

Energy costs have a strong multiplier effect in Nigeria’s inflation dynamics.”

It will reduce purchasing power of the poor – CIS President

 Commenting, Oluropo Dada President, Chartered Institute of Stockbrokers, CIS said: “The biggest impact will come through higher fuel, transport, and food prices. If the conflict keeps crude oil around $95–$105 per barrel (from about $70–$75 earlier in the year), petrol prices in Nigeria could rise from around N800 per litre to N1,200–N1,500 per litre due to higher landing cost. Transportation fares could increase by 20–40%, which will immediately affect food prices. ‘‘Since low-income households spend about 60–70% of their income on food and transport, even a 10–15% rise in prices significantly reduces their purchasing power. Food inflation could reverse its downwards trend and rise by another 5–8 percentage points, worsening hardship for the poor.

‘‘Although higher oil prices may increase revenue, the overall impact could still be negative. Nigeria’s budget benchmark is about $64–$65 per barrel, so prices near $100 per barrel could add roughly $25–$35 extra per barrel, translating to billions of naira in additional monthly revenue.

‘‘However, higher global energy prices will also increase import costs, and Nigeria still imports a large share of refined fuel.

‘‘Inflation could rise by 3–6%, forcing interest rates to stay high, which slows business activity and borrowing.

‘‘Foreign investors may also move funds to safer markets during war, leading to pressure on the naira and weaker capital inflows.

‘‘In the long run, uncertainty in global markets can reduce investment, slow GDP growth below the current 4% range, and delay economic recovery.”

Higher prices to directly squeeze low income Nigerians – Egbomeade

 Commenting as well, Clifford Egbomeade, Economy and Communications Analyst, said: “Before the Iran–Israel conflict escalated, Brent crude traded around $65–$70 per barrel. As tensions intensified, prices spiked above $100 per barrel, at times reaching an intra day high near $116 per barrel, before moderate pullbacks.

‘‘That jump of nearly 50 percent in global crude oil price matters for millions of Nigerians because the domestic fuel market still responds closely to international benchmarks.

“For low income households, the immediate transmission mechanism is fuel price inflation. When crude prices rally, the cost of refined products tends to follow.

‘‘Although Nigeria now has significant local refining capacity, refineries still source a meaningful share of crude at prices linked to global markets. This raises the landing cost of petrol and diesel, and businesses pass those costs to consumers.

‘‘Already in recent days, the gantry price of petrol increased from about N995 per litre to N1,175 or more, and industry groups warn it could approach N2,000 per litre if the crisis persists.

‘‘Diesel has seen similar upward pressure, moving toward N3,000 per litre in some projections.

‘‘Higher fuel prices directly squeeze low income Nigerians. Transport costs are among the first to rise because commercial drivers and riders must cover more expensive petrol or diesel.

‘‘When fares increase, workers who depend on daily commuting must spend a larger share of their limited income on transport. For a market trader or wage earner, that often means cutting back on household essentials.

‘‘Fuel price inflation also ripples into the food chain. Nigerian agriculture relies heavily on road transport and diesel powered equipment to move produce from farms to urban markets.

‘‘A litre of petrol rising from roughly N850 before the crisis to over N1,000 now can push up the prices of basic foodstuffs. Traders and farmers pass increased logistics costs onto consumers, contributing to higher market prices for staples. For example, prices of pepper and tomatoes in some urban markets have recently doubled or tripled.

“Ultimately, although higher global oil prices can increase national export revenues, the lived experience for low income Nigerians is more acute inflation in transport, food, and everyday goods, worsening financial strain for households that already spend most of their income on basic needs.”

It will constrict consumers’ disposable income, exacerbate suffering – Adonri

Commenting also, David Adonri, Analyst and Executive Vice Chairman at High Cap Securities Limited, said: “The low income class in Nigeria has been suffering economic hardship before and after the recent market reforms. Inflation has been the main culprit.

‘‘The global trade disruption arising from the Iran War has started pushing inflation to dangerous levels. Price of petrol has surged and it could reverse the current trend of moderation in inflation.

‘‘This can constrict consumers’ disposable income and exacerbate suffering.

“While FGN benefits from the rising Crude Oil price, the attendant inflation that will arise can be injurious to the economy.”

Investors are pulling out already – Tumba

 In his own reaction over the war, Simon Tumba, a Lagos based Business Executive over the, said: “ In almost everything; transportation, food, medications and provisions, everything will go up. Sadly there’s no end in sight concerning this war. It’s tough already.

“On the setbacks to the economy, investors are pulling out already. Although the government will earn more revenue from oil receipts, we are not confident they’d manage the funds well considering the elections coming next year and the experiences of the last few years where revenue targets were not met adding to more loans, yet capital budget execution has been almost zero.

Therefore foreign direct investment will suffer, while living expenses will escalate. Inflation may hit the 20s again.”

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