Israel-Iran conflict inflates oil prices, lifts Nigeria’s budget outlook

 A dramatic escalation in conflict between Israel and Iran has triggered a sharp spike in global crude oil prices, sending Brent crude above $75 per barrel — a key threshold exceeding Nigeria’s 2025 budget benchmark of $75.

The surge comes amid the most significant escalation in years, strengthening revenue prospects for Africa’s largest oil exporter and boosting its financial outlook.

Recent data shows Brent futures for July delivery jumped over 9 percent, trading at $75.15 per barrel — the highest level since February — while West Texas Intermediate (WTI) crude futures rose to $74 per barrel, reflecting a 10 percent peak increase.

Higher Oil Prices Lift Budget Outlook

Nigeria’s 2025 federal budget is predicated on a $75 per barrel price for crude. This upward movement signals a potential closing of its budget gap after months of revenue shortfalls, when prices hovered closer to $60 per barrel.

Notably, Bonny Light — a key Nigerian export grade — was trading at about $78.60 per barrel, exceeding the government’s budget benchmark. This additional income may ease borrowing pressures and enable funding for planned expenditures without drastic cuts or additional taxes.

Naira Benefit and Currency Market Impact

Higher oil prices are also fueling cautious optimism for the naira. Oil sales account for over 90 percent of the country’s dollar inflows, and the naira has been under pressure, trading above N1,600 per dollar — much weaker than the N1,400 budgeted rate.

Analysts say improved dollar liquidity from strong oil sales could ease pressure on the naira, aid market stability, and reduce premium gaps in the exchange rate.

Caution Amid Rising Middle East Tensions

While the outlook appears positive for both the budget and the naira, economists advise caution, noting that the conflict’s trajectory is unpredictable and prices may fluctuate if tensions worsen. Historical precedent shows that political crises can undermine stability just as quickly as they produce short-lived price rallies.

Furthermore, structural weaknesses remain a concern for Nigeria — particularly its ability to raise production toward its 2.06 million barrels per day target (currently averaging about 1.6 million bpd) — alongside the ongoing need to diversify its economy and reduce dependency on oil.