Oil Price Surge May Disrupt CBN Policy Path — Analyst

The Central Bank of Nigeria may be forced to reconsider its monetary easing plans as rising global oil prices and escalating geopolitical tensions heighten inflation risks, according to Senior Market Analyst, Africa at FXTM, Matthew Anthony.

Fresh tensions in the Middle East, particularly linked to Iran, have sent shockwaves across global financial markets, triggering a sharp rally in crude oil prices and raising fears of renewed inflationary pressures worldwide.

Anthony noted that these developments could complicate the policy trajectory of central banks, including Nigeria’s.

Nigeria’s inflation rate had shown signs of moderation, easing to 15.06 per cent in February, prior to the latest geopolitical flare-up.

However, the recent surge in global oil prices has already begun to transmit into the domestic economy, with petrol prices rising by more than 30 per cent in recent weeks.

This has pushed up transportation and logistics costs, with knock-on effects on consumer prices.

According to Anthony, while Nigeria, as Africa’s largest oil producer, may benefit from higher crude prices in terms of revenue, the domestic inflationary impact of rising fuel costs could offset these gains and complicate monetary policy decisions.

“The inflation outlook is becoming increasingly uncertain,” he said, noting that the CBN’s earlier inclination toward rate cuts in 2026 may now be at risk.

“Rising energy costs and imported inflation pressures could force policymakers to adopt a more cautious stance.”

The naira has so far shown relative resilience amid the global volatility, depreciating marginally by about 0.3 per cent against the US dollar over the past two weeks.

The currency currently trades around N1,385/$, compared to approximately N1,360/$ before tensions escalated.

However, sustained pressure from capital outflows and a stronger dollar could test this stability.

Global markets have reacted nervously to the deepening crisis, with investor risk appetite weakening significantly.

Equities have come under pressure, while safe-haven demand has been mixed due to a stronger US dollar and shifting expectations around interest rates.

Crude oil prices have emerged as the focal point of the market reaction. Brent crude surged above $103 per barrel, driven by fears of supply disruptions following reported attacks on energy infrastructure in the Middle East.

The strategic importance of the Strait of Hormuz, a critical global oil transit route, has further amplified concerns about potential supply shocks.

Efforts to stabilise the market have so far had limited impact. The International Energy Agency announced the release of 400 million barrels from emergency reserves, its largest intervention to date, while the United States issued a temporary waiver allowing continued purchases of Russian oil.

Despite these measures, oil prices have remained elevated, underpinned by persistent geopolitical risks.

In the precious metals market, gold has struggled to gain traction despite heightened uncertainty.

A stronger US dollar and reduced expectations of interest rate cuts by the Federal Reserve have weighed on the metal. Market participants now anticipate only one rate cut in 2026, reflecting concerns that conflict-driven inflation could delay monetary easing.

Attention is also turning to key central bank decisions globally. The Reserve Bank of Australia has already raised interest rates for a second consecutive meeting, signalling growing concern about inflation risks.

Meanwhile, the European Central Bank and the Bank of England are under increasing pressure to reassess their policy paths if inflationary pressures persist.

For Nigeria, Anthony emphasised that the evolving global environment presents a delicate balancing act for the CBN. While the need to support economic growth remains, the resurgence of inflation risks, driven by higher energy costs and external shocks, may ultimately limit the scope for monetary easing in the near term.

“The CBN may have to prioritise price stability over growth support if inflation accelerates again,” he said, adding that policy flexibility will be critical as global uncertainties continue to unfold.