Middle East crisis could hand Nigeria up to N30trn in oil windfall

Nigeria could reap as much as N30 trillion in additional oil revenue if Middle East tensions push crude toward $130 a barrel, handing President Bola Tinubu’s government its largest fiscal windfall and its sternest political test ahead of the 2027 elections.

In a policy brief titled Boom, Not Gloom, the Nigerian Economic Summit Group (NESG) said the escalation between the U.S., Israel, and Iran presents a “time-limited opportunity” for Africa’s biggest crude producer to strengthen its finances, provided it avoids the spending excesses that have defined past oil rallies.

“Fiscal windfalls could range from N2.3 trillion under a short-lived crisis to N30.2 trillion under a protracted scenario,” the group said on Friday.

The price of Brent crude oil currently settles at $99.80 per barrel, far ahead of the budgeted estimate of $64.9. That presents a significant fiscal windfall, which could be used in financing the country’s over N25 trillion deficit.

The estimates assume three price paths – crude averaging about $90 a barrel in a contained disruption, $110 if the conflict spreads across the Gulf, and $130 in a prolonged global shock. Under the most extreme case, the federal government’s share alone could be enough to cover annual debt-service obligations or roughly 60 percent of the capital budget.

For a country where interest payments consume nearly half of federal revenue, that scale of relief would be transformative.

But the group cautioned that the upside is far from automatic. Oil output has averaged about 1.48 million barrels a day this year, well below the 1.84 million assumed in the budget, potentially trimming projected gains by about 20 percent if production does not recover.

The larger danger, it said, is political. “The January 2027 election cycle is the key domestic risk,” the report noted, warning that pressure to ramp up spending or revive fuel subsidies could undo recent reforms.

Nigeria scrapped its decades-old petrol subsidy regime some three years ago, a move that freed public finances that gulped $10 billion in 2022 alone. It also exposed consumers to global price swings and spiralling inflation.

The think-tank urged authorities to “firmly resist any pressure to reintroduce fuel subsidies,” arguing that doing so during an oil rally would recreate distortions that previously erased much of the benefit from high crude prices.

Higher oil prices would still feed into domestic costs. The group estimates the shock could add between 1.3 and 5.2 percentage points to inflation over the coming quarters, depending on how long crude remains elevated.

That would bring another round of inflationary pressures after several months of sustained disinflation, which saw prices cool to 15.1 percent in January 2026 from about 30 percent a year earlier.

But some offsets did not exist in prior booms. Domestic refining, led by the 650,000-barrels-per-day Dangote Refinery, has begun supplying most of the country’s petrol needs, reducing exposure to imported refined products.

Without that buffer, the inflation hit would have been significantly larger, the group said.

On the currency front, stronger export receipts could bolster the naira and lift reserves above $57 billion under a prolonged crisis, according to the brief.

A firmer exchange rate would help dampen imported inflation and reinforce the central bank’s efforts to steady prices.

The group, however, urges authorities to “Save the windfall. Hold the monetary line. Communicate proactively.”

That means channeling revenue above the budget benchmark into savings or debt reduction, sterilising excess liquidity, and allowing the currency to adjust rather than defending an artificial level.

“The overarching policy objective should therefore be to convert the crisis into an opportunity while consolidating hard-won reform gains,” the group said.(BusinessDay)