The Centre for the Promotion Of Private Enterprise [CPPE] has warned that the ongoing tension between Israel and Iran could trigger rising energy costs, drive up inflation, amongst many other risks.
This warning was contained in a statement by the economic think-tank in a statement on Sunday, June 15, 2025.
According to Dr Muda Yusuf, Director/Chief Executive Officer, CPPE, the outbreak of war between Israel and Iran has added a troubling dimension to the challenges of an already floundering global economy.
It warned that economies around the world are currently grappling with elevated geopolitical tension triggered by the Russian Ukraine war and the Israel-Hamas conflict, while there is also the profound uncertainty created by the unprecedented tariff disruptions by the trump administration.
“For the Nigerian economy, the implications are mixed. The development portends a combination of risks and upsides for the economy” he started.
Speaking on the risks, Yusuf said, “A major driver of energy prices in Nigeria is the global crude oil price. With the outbreak of the Israeli-Iranian war, crude oil prices had surged to $75 per barrel from $65 per barrel a week before.
“This is a 15% jump within days. This has obvious implications for petroleum product prices globally. Economies around the world [Nigeria inclusive] would witness a surge in the price of petrol, diesel, jet fuel, gas and related products in the near term. This would have far-reaching implications for many economies and businesses,” he began.
On inflation, the former Director General of the Lagos Chamber of Commerce and Industry noted that energy cost is a major factor in the Nigerian inflation equation.
“It (inflation) impacts production cost, logistics cost, transportation costs, and the cost of power generation. This presents an inflationary scenario. These additional costs would be passed on to final consumers, depending on the degree of consumer resistance.
“There is also a global inflation dimension. Energy prices have global inflationary implications. Therefore, there is also an expectation of imported inflation in the unfolding geopolitical scenario” he added.
Yusuf further noted that the crisis also portends interest rate implication.
“High inflation drives interest rates as monetary authorities respond to the inflation outcomes of current geopolitical headwinds. A tighter monetary policy regime is expected in Nigeria and other monetary jurisdictions.
“The expectation is that economies around the world may experience renewed pressures on interest rate. Higher global interests could adversely impact portfolio flows with implications for foreign reserves.
Yusuf further noted that despite the risks, the situation still holds some upsides.
“If the current conflict persists and escalates, the Nigerian economy may record upsides in a number of areas: The surge in crude oil price would impact on foreign exchange earnings, oil being the biggest forex earner for the country. This would even be more impactful if output performance improves.
“Crude oil price has surged to $75 per which is about 15% higher than before the outbreak of the Israeli–Iran conflict. This development would also positively impact the country’s foreign reserves, ensure better forex liquidity and ultimately the stability of the naira exchange rate” he disclosed.
He also noted that the government’s revenue will increase as the oil sector currently accounts for about 50% of government revenue.
“An improvement in crude oil price would therefore have a significant impact on government revenue. An improvement in revenue would positively impact fiscal consolidation and hopefully moderate the growth of the fiscal deficit.
He added that investments in the oil and gas sector would post better returns if the conflict persists. High oil prices are good news for upstream oil and gas investors.
By: Babajide Okeowo
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