IMF: Higher Oil Prices Could Strengthen Nigeria, Others’ Fiscal and External Positions amid Middle East Conflict

Nume Ekeghe

The International Monetary Fund (IMF) has stated that Nigeria and other oil-exporting countries in Africa, the Middle East, and Latin America could see stronger fiscal and external positions amid higher oil prices, despite the ongoing war in the Middle East. 

In a blog post titled “How the War in the Middle East Is Affecting Energy, Trade, and Finance,” the IMF noted that producers able to get their barrels to market stand to benefit, while those facing export constraints including some Gulf Cooperation Council members may see much less upside. The Fund warned that even when oil transit resumes, heightened risk premia and uncertainty could limit investment and growth.

It stated: “By contrast, oil‑exporting countries in the Middle East, parts of Africa, and Latin America that can still get their barrels to market have a prospect of stronger fiscal and external positions from higher prices. Producers whose exports are constrained or curtailed including several Gulf Cooperation Council members—can expect much less upside. Even after transit resumes, higher risk premia and uncertainty may curb investment and growth.

“The world faces yet another shock. The war in the Middle East is upending lives and livelihoods in the region and beyond. It is also dimming the outlook for many economies that had only just shown signs of a sustained recovery from previous crises.”

The IMF stressed that the shock is global, yet asymmetric adding that, “Energy importers are more exposed than exporters, poorer countries more than richer ones, and those with meager buffers more than those with ample reserves.

“Beyond its painful human toll, the war has caused serious disruption to the economies of the most directly affected countries, including damage to their infrastructure and industries that could become long-lasting. Although these countries are resilient, their short-term growth prospects will be negatively affected.”

Furthermore, it added that the multi-regional impact is apparent. Energy‑importing economies in Africa, the Middle East and Latin America are feeling the strain from higher import bills on top of already limited fiscal space and external buffers.

IMF added, “In Asia’s large manufacturing economies, higher fuel and power bills are raising production costs and squeezing people’s purchasing power; in some, balance‑of‑payments pressures are already weighing on currencies. In Europe, the shock is reviving the specter of the 2021–22 gas crisis, with countries such as Italy and the United Kingdom especially exposed by their reliance on gas‑fired power, while France and Spain are relatively protected by their greater nuclear and renewables capacity.”