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Iran v Israel, what it means for Nigeria 08 Jul 2025

I started writing this column for the July edition of this publication on 16 June and finished it on 18 June. So, by the time you are reading it, the direct military confrontation between Iran and Israel may have ended, the immediate crisis potentially subsumed by the next turn of the news cycle. Yet, for Nigeria to dismiss the conflict as a fleeting Middle Eastern affair would be a profound mistake. For the country, the true impact is not in the ephemeral headlines of attacks and counter-attacks, but in the dangerous new strategic era the conflict threatens to inaugurate.

What transpired was more than a simple exchange of fire; it was a high-stakes gamble, particularly on Israel's part, potentially aimed at nothing less than regime destabilisation in Tehran. However, such a strategy, regardless of its immediate success, risks a monumental backfire. By demonstrating the limits of conventional power in providing ultimate security, the conflict may paradoxically push Iran, and other countries watching intently, to accelerate their pursuit of the one weapon that promises a definitive deterrent: a nuclear bomb. While Nigeria grapples with the immediate economic and security fallout, the long-term legacy of this conflict will be a global re-evaluation of nuclear ambitions, a shift that could fundamentally challenge Nigeria's position as a regional power.

The most immediate and deceptive consequence of the hostilities is the spike in oil prices. For a country whose fiscal health is umbilically tied to the hydrocarbon market, this appears to be a welcome development. Nigeria's 2025 budget, for instance, is benchmarked against a price of $73 per barrel, a figure quickly surpassed as geopolitical "fear premiums" took hold of the market. This creates the illusion of a windfall, a potential surge in national revenue that could alleviate some of the country’s intense fiscal pressures.

However, this optimism is profoundly misplaced, masking a series of harsh realities that severely curtail Nigeria's ability to capitalise on the price hike. The first and most significant constraint is the country's chronically underperforming oil production. Despite a theoretical capacity of nearly two million barrels per day, Nigeria's actual output languishes at around 1.5 million, including condensates. Endemic issues, from pipeline sabotage and oil theft to a lack of investment, mean the nation is simply unable to ramp up production to take full advantage of a seller's market.

Furthermore, a substantial portion of Nigeria's crude oil is already committed through long-term contracts, with prices locked in at rates far below the current inflated spot prices. This significantly dilutes any potential revenue gains, ensuring that much of the theoretical windfall never reaches the national treasury. 

Historical precedent also serves as a stark warning against mistaking higher oil prices for national prosperity. In 2022, during the first year of the Ukraine crisis, when Brent crude soared to $121 per barrel, Nigeria's inflation rate nonetheless climbed to 18.6%. Similarly, in 2023, when OPEC+ production cuts drove prices to $90, the inflation rate continued rising to  26.7%. And while the recent news that headline inflation dropped to 22.97% in May 2025 offers a fragile moment of relief, this positive development is now threatened by the new inflationary pressures generated by the Israeli-Iranian conflict. A surge in energy and import costs could easily reverse the recent retreat in inflation in Nigeria, proving that temporary windfalls are a poor substitute for deep, structural reform.

The old paradox of Nigeria being a major importer of refined petroleum products has been fundamentally altered by the recent ramp-up of productions at the Dangote refinery. This has dramatically reduced the country's reliance on foreign petrol, with imports falling by over 50% in early 2025. However, this newfound energy security does not completely insulate the domestic economy from global price shocks. The price of petrol at the pump is now intrinsically linked to the global price of crude oil –  the primary feedstock for the Dangote facility. Therefore, a spike in Brent crude still translates to higher input costs for the refinery and, consequently, higher fuel prices for Nigerians. This reality means that despite achieving greater self-sufficiency, rising global oil prices continue to fuel domestic inflation by driving up costs for transport, food, and power generation, especially for an economy still adjusting to the removal of fuel subsidies.

Beyond the immediate inflationary shock, the conflict casts a long shadow over investor confidence and currency stability. Prolonged geopolitical uncertainty encourages a global flight to safety, with international investors pulling capital from what they perceive as higher-risk emerging markets. For Nigeria, which desperately needs foreign direct investment (FDI) and portfolio inflows to stimulate growth, this trend is disastrous. It can lead to the stalling of critical infrastructure projects, a slowdown in job creation, and a sharp increase in the cost of sovereign borrowing on international markets.

Navigating the geopolitical fallout requires a deft and delicate diplomatic touch. The Nigerian government's response has been one of cautious neutrality, with the Ministry of Foreign Affairs issuing a formal statement urging both Iran and Israel to "exercise utmost restraint". This carefully calibrated stance is not born of indecision but of necessity. Nigeria must balance its important security and trade relationships with Western powers against the need to avoid entanglement in a conflict that has no direct bearing on its national interests.

This diplomatic caution is also informed by sensitive internal dynamics. Iran has, over several decades, invested in cultivating a network of "soft power" within Nigeria through ideological and material support for the country's Shia communities, most notably the Islamic Movement in Nigeria (IMN). This relationship has long been a source of tension with the Nigerian state. In the context of the Iran-Israel conflict, this nexus becomes acutely sensitive, and Abuja’s refusal to take sides is partly a strategic move to prevent the distant war from being used as a pretext for proxy ideological agitation or stoking fresh sectarian friction within its own borders.

The conflict's potential security overspill poses another grave threat, particularly from the volatile Sahel region. A wider Middle East war could provide fresh ideological fuel for extremist groups like Boko Haram and ISWAP, serving as a powerful recruitment tool. Perhaps more alarmingly, a major conflagration in the Middle East would almost certainly divert the attention and resources of Western security partners away from the region. This would create a dangerous security vacuum, emboldening jihadist factions to expand their territorial control and launch attacks into Nigeria with greater impunity.

Yet, beyond these immediate economic and security tremors lies the conflict’s most profound legacy. The lesson being absorbed in capitals across the globe is that in a world of resurgent great power competition, conventional military strength may no longer be enough. For a state like Iran, and others who feel vulnerable, the ultimate conclusion may be that only a nuclear capability can truly guarantee sovereignty against a technologically superior foe.

For a continental power like Nigeria, this quiet shift in global strategic thinking carries profound long-term implications. As the pre-eminent power in West Africa, Nigeria's security calculus has been based on conventional military superiority and economic influence. But if the pursuit of nuclear capabilities becomes a more thinkable option for states seeking an ultimate security guarantee, the regional balance of power could be fundamentally and terrifyingly altered. This new reality could re-ignite dormant debates within Nigeria about its own nuclear posture. While Nigeria maintains a peaceful nuclear research programme, future leaders may face immense pressure to explore a military dimension in a world perceived to be more dangerous.

This presents a formidable dilemma. To remain non-nuclear in a potentially proliferating world could be interpreted as naivety. Yet, to pursue such a path would invite international isolation, crippling sanctions, and almost certainly trigger a destabilising arms race across Africa. The true, lasting legacy of the recent Iran-Israel war for Nigeria may, therefore, not be measured in oil revenues or inflation points, but in the difficult, generation-defining strategic questions the country will be forced to confront in a world where the shadow of the bomb has once again grown longer.

Cheta Nwanze is Lead Partner at SBM Intelligence.