Overview of Nigeria’s Vulnerability to the US-Israel-Iran Conflict
The ongoing geopolitical tensions between the United States, Israel, and Iran have significant macroeconomic implications for Nigeria. This analysis explores the potential risks that Nigeria faces due to its exposure to various strategic commodities such as crude oil, refined petroleum, wheat, and urea fertiliser. These products are crucial for maintaining macroeconomic stability, controlling inflation, and ensuring household welfare in the country.
Nigeria’s vulnerability is highlighted by a composite risk indicator of 0.816, which reflects high exposure to these key commodities. The conflict could lead to serious challenges, particularly in terms of upside risks to headline inflation, which was recorded at 15.06 per cent in February 2026. The 12-month average headline rate remained at 21.03 per cent, indicating an already fragile price environment. Any external shock to fuel, food, or fertiliser markets would likely hit the economy hard, especially given the weakened welfare position of the country.
Crude Oil Exposure and Economic Implications
Nigeria’s crude oil exposure is one of the most critical factors in its economic vulnerability. The simulation results show that Nigeria has a high exposure strength of 30,780,811.7, with a dependency on the United States of 0.465 and a betweenness score of 0.216. This indicates that the risk associated with crude oil is primarily driven by its concentration on the United States-linked trade channel rather than direct trade with Iran.
While the Strait of Hormuz scenario does not significantly reduce Nigeria’s weighted indegree or total trade, the volatility of global oil prices and uncertainty in oil revenue can still impact the naira and increase domestic import costs. This could amplify inflation in other sectors of the economy, despite the limited direct effect on household consumption.
Refined Petroleum and Inflation Dynamics
Refined petroleum exposure is another major channel through which the geopolitical crisis could affect domestic prices in Nigeria. Nigeria’s exposure strength in this area is 3,701,370.6, with a dependency on the United States of 0.598 and a betweenness score of 0.325. The loss simulation shows that removing the United States from the trade network would result in a loss of 2,212,644.23, while removing Iran would have no impact.
The Strait of Hormuz scenario also reveals a decline in Nigeria’s weighted indegree in refined petroleum, resulting in a loss of approximately 5.9 per cent. This reduction could significantly influence domestic prices, as refined petroleum feeds directly into petrol, diesel, aviation fuel, transportation, power generation, and logistics.
Wheat and Food Inflation
Wheat exposure is another major vulnerability for Nigeria, given its role as a key input in staple foods such as flour, bread, noodles, and pasta. Food accounts for 40.0 per cent of the CPI basket, and restaurants and accommodation services account for 12.9 per cent. A geopolitical shock that raises international wheat prices or disrupts supply could quickly feed into bread prices, flour-based foods, and broader household food costs.
Evidence from the World Bank NDU report (2025) shows that the average prices of food items most consumed by the poor increased fivefold between 2020 and 2024, compared to three-fold for overall food products. This highlights the disproportionate impact of a wheat shock on poor households.
Urea Fertiliser and Agricultural Impact
Urea fertiliser is the most direct channel through which Nigeria faces combined exposure to external shocks arising from both the United States and Iran. The simulation results indicate a significant loss if either of these countries were removed from the trade network. A disruption in urea supply would increase fertiliser prices, reduce affordability for farmers, and weaken crop productivity, leading to higher domestic food supply costs.
This matters because fertiliser shocks can feed into food inflation even when they do not enter the CPI basket directly. Given that food accounts for 40.1 per cent of the CPI basket, any fertiliser-induced increase in farm costs could have broad downstream effects on inflation.
Policy Implications and Social Protection
The analysis suggests that the likely impact of an escalation in the US-Israel-Iran conflict would extend beyond direct commodity price increases in Nigeria. The evidence demonstrates that the immediate effect would come through higher prices for refined petroleum, wheat, and urea fertiliser, which would likely feed directly into major components of the CPI.
In response, temporary and targeted government intervention is necessary to cushion the negative effects on inflation, welfare, and poverty. Priority should be given to stabilizing refined fuel supply, protecting wheat-dependent supply chains, and stabilizing fertiliser availability. Additionally, social protection measures are needed to support vulnerable households, given the declining coverage of social protection programs in recent years.
