While the conflict between Iran and Israel has rattled global energy markets and heightened geopolitical uncertainty, Nigeria may emerge as an unlikely beneficiary, but only to a point, analysts at Standard Chartered Bank in London have said,
According to the report by Standard Chartered Bank, the country’s improving oil production, expanding refining capacity and ongoing economic reforms could cushion the impact of the Middle East crisis, even as high inflation and slower monetary easing temper the outlook.
In their latest Global Focus report titled “Nigeria – Mixed implications of Iran war,” analysts at the bank led by Razia Khan, head of research, chief economist, and managing director for Africa, project Nigeria’s economy will expand by 4.0 per cent in 2026, rising further to 4.2 per cent in 2027 and 4.6 per cent in 2028, supported by gradual monetary easing, stronger bank lending, increased oil output and fiscal stimulus ahead of the 2027 general elections.
“We expect growth of 4.0% in 2026, rising incrementally in 2027-28 in line with gradual monetary easing (cash reserve ratio normalisation) and steadily increasing oil production,” the report said, adding that “a more expansionary budget ahead of the January 2027 elections and recently raised capital requirements for banks should boost activity momentum,” they wrote.
The report argues that Nigeria remains relatively insulated from the direct fallout of the Middle East conflict because of its status as an oil producer and its growing refining capacity. However, it cautions that the country’s ability to benefit from elevated crude prices remains constrained by only modest increases in oil production.
Standard Chartered forecasts crude output will rise from about 1.64 million barrels per day (mb/d) in 2025 to 1.71 mb/d in 2026, 1.75 mb/d in 2027 and 2.0 mb/d by 2029, noting that oil prices, rather than production volumes, will remain the dominant driver of export earnings and government revenue.
Although oil now contributes only around six per cent of rebased GDP, it still accounts for approximately 80 per cent of export receipts and more than one-third of government revenue, underscoring the economy’s continued exposure to global oil price movements.
The report notes that the timing of the Iran conflict coincided with Nigeria’s emergence as a net exporter of refined petroleum products following the ramp-up of the Dangote Refinery to its nameplate capacity of 650,000 barrels per day.
Standard Chartered said the refinery’s planned expansion, expected to gather pace from late 2028, could significantly strengthen Nigeria’s external position by increasing refined fuel exports and reducing dependence on imported petroleum products.
Currently, about 30 per cent of the refinery’s crude supply comes from the Nigerian National Petroleum Company (NNPC) under the Naira-for-Crude initiative, while the balance is sourced from domestic producers and imported crude purchased in US dollars.
The bank expects Nigeria’s current account surplus to remain positive throughout 2026-2028, although it is likely to narrow gradually as refinery expansion and higher capital imports increase foreign exchange demand.
It also observed that recent improvements in Nigeria’s external balances have been supported by the delayed effects of foreign exchange liberalisation, which curbed discretionary imports, alongside higher oil production and growing fuel exports.
As a result, net international reserves increased to $35 billion at the end of 2025 from $23 billion a year earlier, strengthening the country’s external buffers.
On fiscal policy, Standard Chartered expects the federal government to maintain an expansionary stance ahead of the January 2027 elections, supported by the record N68.3 trillion budget.
While the budget assumes oil production of 1.84 mb/d, the bank considers that projection optimistic and expects actual output to remain lower. It nevertheless believes that historically weak execution of capital expenditure plans will keep the fiscal deficit closer to five per cent of GDP, rather than the budgeted level exceeding six per cent.
The report also points to a series of fiscal reforms aimed at improving transparency and revenue mobilisation, including Executive Order 9, which requires oil and gas revenues to flow directly into the Federation Account Allocation Committee (FAAC), and four new tax laws expected to broaden government revenues over the medium term.
On monetary policy, Standard Chartered expects the Central Bank of Nigeria (CBN) to proceed more cautiously with interest-rate cuts than previously anticipated as inflationary pressures remain elevated.
Although higher global oil prices initially pushed up transport costs following the removal of fuel subsidies, the bank expects transport inflation to moderate as crude prices stabilise. However, food inflation is likely to remain a major policy challenge despite government plans to waive import duties on selected food items.
The bank has consequently revised its inflation forecast upward to an average of 15.5 per cent in 2026, from an earlier projection of 12 per cent, while 2027 inflation is now expected to average 14.7 per cent.
It expects the CBN to cut the Monetary Policy Rate by only 150 basis points this year, leaving the benchmark rate at 25 per cent by year-end, before accelerating monetary easing after the 2027 elections.
The report also anticipates a gradual reduction in the Cash Reserve Ratio from its current 45 per cent over 2027 and 2028, a move expected to improve banking sector liquidity and support stronger credit growth following the industry’s ongoing recapitalisation.
Overall, Standard Chartered believes Nigeria’s medium-term outlook remains constructive, but says the benefits of higher oil prices, refinery expansion and economic reforms will depend on continued exchange-rate stability, prudent macroeconomic management and successful implementation of fiscal and monetary reforms.
