Nigeria entered the US-Israeli war with Iran with an opportunity to earn more from oil. Seven months later, the country had stronger foreign-exchange reserves and a firmer naira, but households were paying more for fuel and food inflation had accelerated. The contradiction captures the uneven effects of the conflict on Africa’s largest oil producer: the external accounts improved, while the domestic economy continued to impose heavy costs on households and businesses.
Brent crude averaged $70.89 per barrel in February 2026, the month the strikes began on February 28. By September, the monthly average had climbed to $114.16, an increase of about 61 percent. For Nigeria, higher oil prices offered the prospect of increased export earnings and stronger government revenue. Yet the same shock raised the cost of energy, adding pressure to an economy in which transport, electricity and food production are already expensive.
The central question is whether Nigeria can convert a favourable oil-price shock into lasting economic gains without allowing higher energy costs to erode them.
Higher oil prices brought a domestic fuel bill
By September, petrol prices in Lagos and Abuja had reached about N1,350 per litre, up from roughly N830 before the war, according to BusinessDay market checks. Diesel prices exceeded N1,770 per litre. The International Monetary Fund had reported that petrol and diesel prices rose by 22.5 percent and 16 percent, respectively, in March compared with pre-war levels.
The increases matter well beyond motorists. Transporters pay more to move goods, farmers face higher costs for machinery and distribution, and manufacturers spend more on diesel to operate generators. Businesses can absorb some of these increases through lower margins, but others pass them on to customers. The resulting pressure can feed into the prices of food and other essential goods, while leaving households with less money for non-essential spending.
Olugbenga Olaoye, an energy economist and member of the United States Association for Energy Economics, explained why higher crude prices do not necessarily translate into greater economic benefits for Nigerians. “The country exports crude but still imports fuel, so rising prices increase both revenues and costs at the same time,” Olaoye said.
Domestic refining has not removed this exposure. Refineries can reduce dependence on imported finished products and some associated logistics costs, but locally produced petrol is not insulated from the international value of crude oil. Higher crude prices can therefore raise the cost of producing fuel even when refining takes place within Nigeria.
For an oil exporter, the outcome is complicated. Higher prices can improve export receipts, but the benefits depend on how much crude is produced and sold, the costs of production, and how much additional revenue reaches government and the wider economy. The price increase alone does not establish the size of Nigeria’s net gain.
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Food inflation exposed the limits of disinflation
The inflation figures reveal another side of the shock. Headline inflation declined from 15.06 percent in February to 14.63 percent in September. Food inflation moved in the opposite direction, rising from 12.12 percent to 19.59 percent over the same period.
The divergence matters because food absorbs a substantial share of household budgets. A slower increase in the overall consumer price index offers limited relief when the cost of food continues to rise rapidly.
The figures do not establish that the war caused food inflation to accelerate. Domestic harvests, insecurity, transport costs, exchange-rate movements and other supply constraints also influence food prices. But higher fuel costs can compound these pressures by making it more expensive to move agricultural produce and operate equipment across the food supply chain.
Faruq Quadri, an economist at SPEC-Matrix, said falling inflation does not necessarily mean households have recovered their purchasing power. “The significant decline in inflation is a positive development, but it is important to distinguish between the rate of price increase and the level of prices,” Quadri said.
In simple terms, inflation measures how quickly prices are rising, while the price level reflects how much goods and services cost. When inflation falls, prices do not automatically return to where they were before. They may simply continue rising at a slower rate.
Nigerians are therefore still dealing with the cumulative effect of earlier price increases. Unless incomes grow faster than prices, households can remain under pressure even as headline inflation moderates. The distinction helps explain why an improvement in the inflation rate may not translate immediately into relief at the market or petrol station.
Stronger reserves did not tell the whole story
Nigeria’s external financial position strengthened over the period. Gross foreign-exchange reserves stood at about $49.69 billion on February 27, according to reported Central Bank of Nigeria data, before reaching $54.61 billion by September 14. That represents an increase of nearly $4.9 billion. The naira also appreciated in the official market, moving from N1,368.50 per dollar on February 27 to around N1,329.50 on September 25, an appreciation of about 2.9 percent between the two observations.
Stronger reserves can improve a country’s capacity to meet foreign-currency obligations and withstand external shocks. A firmer exchange rate can also help moderate the cost of imported inputs, provided the improvement is sustained and passed through to businesses and consumers.
But neither movement can be attributed entirely to the war. Oil receipts are only one source of foreign exchange. Portfolio investment, international borrowing and other capital flows also influence reserves and currency movements. The figures show that Nigeria’s external position improved between the dates cited; they do not, on their own, establish how much of that improvement came from the conflict.
The IMF’s June assessment captured the competing risks. It estimated that the conflict could reduce Nigeria’s 2026 economic growth by 0.3 percentage points relative to its baseline, while higher fuel, food and fertiliser prices could push inflation above earlier expectations. These were projections of the conflict’s potential effects, not measurements of the war’s precise contribution to subsequent economic outcomes.
The real test is what Nigeria keeps
The February-to-September comparison points to an economy experiencing uneven gains. Higher oil prices offered the prospect of stronger export earnings, and reserves increased. At the same time, expensive energy and rising food inflation continued to weigh on households and businesses.
Whether the oil-price windfall produces lasting benefits depends on the revenue Nigeria actually receives and how effectively it is converted into productive capacity. Investment in electricity, transport infrastructure and agriculture could help lower production costs, improve food distribution and make businesses less vulnerable to future energy shocks. Better-targeted support could also help vulnerable households manage immediate pressures.
As Quadri noted in separate comments on Nigeria’s inflation outlook, “For households to genuinely recover purchasing power, income growth has to consistently outpace inflation.”
That is the test the stronger external figures cannot answer. Rising reserves can provide a buffer against shocks, and higher oil receipts can create fiscal space. Neither guarantees that businesses will become more productive, wages will catch up with prices or essential goods will become more affordable.
The measure of Nigeria’s gain from the war will not be how high crude prices climbed, but whether the resulting opportunity helps lower the cost of producing, moving and consuming goods at home.
Oluwatobi Ojabello, PhD, is a dynamic and multi-dimensional Assistant Editor for Economy and Markets with over two years of professional journalism experience. He delivers authoritative, data-driven coverage of fiscal policy, financial institutions and capital markets, using clear analysis to explain Nigeria’s most complex economic developments. His work focuses on macroeconomic policy, financial stability and corporate performance, turning technical issues into accessible narratives that inform both experts and everyday readers.
