Cardoso Warns Middle East Tensions Could Stall Nigeria Rate Cuts

…Says Policy Buffers Will Keep Nigeria’s Economy Resilient

Nigeria’s Central Bank Governor, Olayemi Cardoso, has warned that rising tensions in the Middle East involving the United States, Israel, and Iran could influence the country’s interest-rate decisions, highlighting the risk that higher oil prices may stoke inflation even as they bolster export earnings.

Speaking in an interview with the Financial Times, Cardoso said geopolitical shocks are likely to be transmitted to Nigeria primarily through energy prices and global financial conditions.

Both are closely monitored by policymakers ahead of the Central Bank’s crucial May meeting, which will assess the trajectory of borrowing costs in an economy still grappling with elevated inflation.

“Higher oil prices can support export earnings and strengthen the balance of payments, but they can also feed into domestic inflation through fuel, transport, and imported goods,” Cardoso said, underscoring the delicate trade-offs facing Africa’s largest oil producer.

Brent crude has surged past $100 per barrel in recent weeks amid escalating Middle East tensions, raising concerns over potential supply disruptions.

For Nigeria, where oil accounts for the bulk of foreign-exchange earnings, a sustained rally typically strengthens fiscal and external buffers.

Yet it also risks reigniting price pressures in an economy that has only recently begun to see inflation moderate after a prolonged surge.

Headline inflation slowed for the 12th consecutive month in February 2026 to 15.06 percent, even as the naira strengthened to N1,345 per dollar following mild fluctuations driven by rising geopolitical risk.

Cardoso stressed that policymakers remain alert to the possibility that higher global energy costs could reverse progress in stabilising domestic prices.

Imported inflation, particularly through refined fuel and other dollar-denominated goods, remains a key vulnerability despite ongoing foreign-exchange reforms.

The governor also highlighted a second channel of transmission: global investor sentiment. Heightened geopolitical uncertainty can dampen appetite for emerging and frontier markets, potentially slowing capital inflows and tightening financial conditions.

For Nigeria, which has worked to restore foreign investor confidence after years of currency distortions and capital controls, any pullback in portfolio flows could test recent gains in the naira and external reserves.

Despite these concerns, Cardoso expressed confidence in Nigeria’s ability to withstand external shocks.

Over the past two years, the Central Bank has rebuilt policy buffers, strengthened external reserves, and restored greater functionality to the foreign-exchange market. Monetary policy has returned “to a more orthodox footing,” reflecting the bank’s aggressive tightening cycle aimed at curbing inflation and stabilising the currency.

The comments suggest the Central Bank is unlikely to rush into easing rates, even if higher oil prices deliver short-term gains. Nigeria’s benchmark interest rate stands at 26.50 percent, following a series of hikes designed to tame price growth and anchor expectations.

Any renewed spike in global oil prices could complicate the path toward eventual rate cuts, which investors have been anticipating.