The CPPE has warned that escalating the Iran conflict could create both fiscal benefits and macroeconomic challenges for Nigeria due to increased geopolitical risk in global energy markets.
The Centre for the Promotion of Private Enterprise (CPPE), in a policy brief signed by its CEO, Muda Yusuf, emphasised the strategic importance of the Strait of Hormuz, a key maritime route for approximately 20 per cent of the world’s daily crude oil supply. The CPPE warned that any disruption to this corridor would immediately impact oil prices, shipping costs, insurance premiums, and global supply chains.
For Nigeria, where crude oil constitutes the majority of export earnings and government revenue, higher crude prices due to supply concerns could significantly boost export receipts, foreign exchange inflows, external reserves, and government allocations.
However, CPPE stressed that revenue gains remain contingent on production performance. Nigeria’s crude output has fluctuated between 1.4 million and 1.6 million barrels per day, below installed capacity and constrained by oil theft, pipeline vandalism, and underinvestment in upstream infrastructure. Without better production efficiency and security, the country may not fully optimise price windfalls.
On the external sector, higher oil prices could strengthen Nigeria’s current account position and improve foreign exchange liquidity, potentially easing short-term pressure on the naira and bolstering investor confidence. Increased export earnings may boost gross external reserves, enhance FX market liquidity, and reduce speculative currency pressures.
Nevertheless, the brief warned that heightened geopolitical uncertainty typically drives capital toward safe-haven assets such as United States Treasury securities and gold. Emerging markets often experience portfolio outflows during such episodes. Given Nigeria’s sensitivity to foreign portfolio investment and relatively shallow capital market, capital reversals could offset part of the FX gains from stronger oil inflows.
The significant volatility of Foreign Portfolio Investment (FPI) in the Nigerian Exchange Limited (NGX) underscored the CPPE comment. As of January 2026, foreign investor participation dropped by 75.08 per cent, reflecting a sharp decline in FPI inflows. This follows a previous period where FPI inflows reached N748.23 billion by September 2025.
In the capital market, sectoral impacts are expected to diverge. Oil and gas equities may benefit from stronger earnings expectations and renewed investor interest in energy-linked assets. Conversely, manufacturing, aviation, logistics, and consumer goods companies could face margin compression arising from elevated energy and input costs. Short-term volatility across equity and fixed-income markets is likely to increase.
To mitigate risks, CPPE advised strengthening oil production capacity through intensified anti-theft operations and upstream investment incentives, building fiscal buffers, accelerating domestic refining capacity, sustaining foreign exchange market reforms, deploying targeted social protection measures, and fast-tracking economic diversification across manufacturing, agro-processing, ICT, and services.
The organisation concluded that the unfolding geopolitical tensions represent a double-edged shock for Nigeria. While higher oil prices may support fiscal and external balances in the short term, inflationary pressures, welfare deterioration, capital flow volatility, and global growth risks pose significant countervailing challenges. The ultimate economic outcome, CPPE stated, will depend on the quality of domestic policy discipline and reform execution.
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