Report: Nigeria Poised for Oil Windfall, But Faces Growth Slowdown, Inflation Shock

• Dangote Refinery export push offers rare upside 

•Oil price surge deepens pressure on 29 African currencies 

•Troubled region accounts for 15.8% of Africa’s imports

Emmanuel Addeh in Abuja

Nigeria may emerge as one of the few short-term beneficiaries of the escalating Middle East conflict, but the broader outlook for the country and Africa remains grim, with rising oil prices, currency pressures, and food insecurity threatening to derail fragile economic recovery across the continent, a report said yesterday.

A joint policy brief released by leading continental and multilateral institutions warned that while higher crude prices could bolster Nigeria’s revenues and support export expansion from the Dangote Refinery, these gains were likely to be overshadowed by widespread macroeconomic shocks hitting most African economies.

The policy brief was prepared by a joint Task Force led by the African Development Bank Group (AfDB), the African Union (AU), the United Nations Development Programme – Regional Bureau for Africa (UNDP) and the United Nations Economic Commission for Africa (UNECA).

The report projected that if the conflict persists beyond six months, Africa could lose at least 0.2 percentage points in GDP growth in 2026, compounding already sluggish post-COVID recovery rates. The shock, it said, is already transmitting through energy markets, with oil prices rising by about 50 per cent as of late March, intensifying inflationary pressures across the continent.

For Nigeria, Africa’s largest oil producer, the surge in crude prices, it explained, presents a dual-edged dynamic. On one hand, it strengthens government revenues and improves foreign exchange inflows. On the other, it risks worsening domestic inflation, particularly through higher fuel and transport costs, at a time when the country is still grappling with the aftershocks of subsidy removal and currency depreciation.

The policy brief highlighted that Nigeria’s strategic position is further enhanced by the operational scale-up of the Dangote Refinery, which could increase refined product exports and reduce dependence on imports. This positions the country to partially cushion supply disruptions linked to instability in the Middle East.

“While the conflict is generating broad economic risks for Africa, a few countries may see short-term gains through higher commodity prices, trade diversion, and rerouted logistics. Nigeria stands to benefit from higher oil prices and the export expansion of the Dangote Refinery,” it stressed.

However, beyond Nigeria and a handful of commodity exporters, the outlook darkened considerably across Africa.

Currencies in at least 29 African countries have already depreciated, raising the cost of servicing external debt and making imports more expensive. Countries with high fuel and food import dependence, including Senegal, Sudan, Cabo Verde, South Sudan, and The Gambia, face acute fiscal strain as rising global prices feed directly into domestic economies.

More critically, the report underscored that the fertiliser channel may prove even more damaging than oil. Disruptions to Gulf-based liquefied natural gas supply are expected to affect ammonia and urea production, driving up fertiliser costs just as Africa enters its key March-to-May planting season. This could sharply reduce agricultural output, push food prices higher, and deepen food insecurity, particularly among vulnerable populations.

The Middle East currently accounts for 15.8 per cent of Africa’s imports and 10.9 per cent of its exports, underscoring the continent’s exposure to disruptions in the region. The Strait of Hormuz alone handles about 20 per cent of global oil exports, making any escalation a major risk to global supply chains.

Beyond commodities, the conflict is also reshaping trade and logistics patterns, the report added. Shipping routes are increasingly being diverted around the Cape of Good Hope to avoid Red Sea risks, creating pockets of opportunity for some African economies. Ports in Southern Africa, along with logistics hubs in East Africa, are experiencing increased activity, while air transport networks are also benefiting from rerouted global traffic.

Yet, the report cautioned that these gains remain uneven and insufficient to offset the broader economic fallout.

Geopolitically, the crisis is expected to intensify competition for influence in Africa among global powers, including the United States, China, Russia, Gulf states, Iran, and Türkiye, the report explained. Fragile regions such as Sudan, Somalia, and Libya could see heightened instability as external actors deepen their involvement through arms flows and strategic positioning around ports and critical resources.

At the same time, humanitarian operations across Africa may face rising costs, particularly in the Horn of Africa, as donor priorities shift toward security spending closer to the conflict zone.

To mitigate the impact, the report called for urgent and coordinated policy responses across three time horizons. In the short term, African countries were advised to deploy targeted social protection measures, secure emergency financing for fuel and food imports, and stabilise foreign exchange markets.

“Policy responses should be sequenced across three horizons: immediate shock absorption, medium-term resilience support from development institutions, and long-term structural action by African governments and development partners. Early planning and fast response before fuel and financing shocks feed into inflation, debt distress, and social pressures will help to  facilitate quick recovery and lower the costs to the economies,” the report recommended.