1. Oil Prices Surge as US–Iran Tensions Escalate

Global oil prices have surged in March amid escalating geopolitical tensions between the United States and Iran, with Brent crude trading above $100 per barrel and continuing to fluctuate around that level as markets respond to rapidly evolving developments in the Middle East. Nigeria’s Bonny Light crude has followed the rally, rising from roughly $75 earlier in the year to around $90 per barrel. The increase reflects growing concerns about potential supply disruptions around the Strait of Hormuz, the narrow shipping corridor between Iran and Oman through which roughly 20 percent of global oil supply passes each day. The strait is one of the world’s most critical energy transit routes, and Iran borders its northern coastline and as a result, tensions involving the country often trigger immediate risk premiums in global oil markets.

For Nigeria, higher oil prices improve near-term revenue prospects since the 2026 federal budget is benchmarked at $64.85 per barrel. At current levels, prices sit well above the fiscal reference point, implying stronger potential oil receipts for federal, state, and local governments although Nigeria’s fiscal gains remain constrained by production performance. Crude output continues to hover below the country’s OPEC quota of 1.5 million barrels per day and remains significantly below the 1.84 million barrels per day assumed in the 2026 budget.

However, the domestic effects of the price rally have already appeared in energy markets. The Dangote Refinery raised its petrol gantry price from approximately ₦774 per litre through successive adjustments to a peak of about ₦1,175 per litre before later reducing it to around ₦1,075 per litre as global crude costs rose, while cooking gas prices increased by roughly ₦100 per kilogram across depots nationwide. Nigeria still imports a substantial share of refined energy products and inputs: therefore, global oil price increases tend to transmit into domestic fuel and logistics costs.

This dynamic illustrates Nigeria’s structural oil paradox. Higher crude prices strengthen public revenues but can simultaneously raise energy and transportation costs for households and businesses.

Geopolitical tensions can also trigger risk off sentiment in international financial markets, prompting investors to reduce exposure to emerging and frontier economies. Such shifts in capital flows can place additional pressure on exchange rates and financial conditions in countries like Nigeria.

The overall economic impact will therefore depend on how quickly tensions ease and how Nigeria navigates the effects of higher oil prices on fiscal revenues, inflation, and the exchange rate.

2. Government Revises Implementation of Executive Order on Oil Revenue Remittances

The Federal Government has revised the implementation framework of Executive Order 9 (2026), issued in February, which mandates that oil and gas revenues due to the Federation be paid directly into the Federation Account. The directive originally aimed to eliminate layers of deductions within the petroleum revenue chain, including the 30 percent Frontier Exploration Fund and the 30 percent management fee retained by the Nigerian National Petroleum Company Limited (NNPC), to strengthen remittances available for distribution to federal, state,

 and local governments. 

The revised approach preserves the policy objective of improving transparency and remittance discipline while avoiding disruptions to existing contractual and operational arrangements within the petroleum sector. The Ministry of Finance has indicated that detailed implementation guidelines will be issued within three weeks, alongside a broader review of fiscal provisions under the Petroleum Industry Act.

The policy carries broader implications for sector governance. Oil revenues remain central to Nigeria’s fiscal framework, accounting for a significant share of Federation Account inflows and most of the export earnings. Strengthening remittance discipline could therefore improve the availability and predictability of revenues shared among federal, state, and local governments. However, industry observers have raised concerns that excessive centralisation of revenue flows could weaken the commercial autonomy granted to NNPC under the Petroleum Industry Act. The eventual impact will depend on how implementation balances fiscal oversight with operational flexibility within the oil sector.

3. Nigeria’s Net Foreign Exchange Reserves Rise to $34.8 Billion

Nigeria’s net foreign exchange reserves rose to $34.8 billion at the end of 2025, up from $23.11 billion at the end of 2024, according to the Central Bank of Nigeria. Gross reserves also increased from $40.19 billion in 2024 to $45.71 billion by year-end, rising further to $50.45 billion as of February 16, 2026. The improvement reflects stronger foreign exchange inflows and tighter management of the country’s external liquidity position.

Nigeria’s reserve improvement is particularly notable compared with recent years. Net reserves stood at just $3.99 billion at the end of 2023 despite gross reserves of $33.22 billion.
By late 2025, the net position had risen to $34.8 billion, indicating a substantial strengthening in the country’s underlying external liquidity position.

Stronger reserve buffers enhance Nigeria’s capacity to support exchange rate stability, meet external obligations, and absorb shocks in global financial markets. However, sustaining this improvement will depend on continued FX inflows, stable oil revenues, and consistent policy credibility in the foreign exchange market.

4. Nigeria’s Public Debt Reaches ₦153.29 Trillion as Fiscal Pressures Persist

Nigeria’s total public debt rose to approximately ₦153.29 trillion ($103.94 billion) as of the third quarter of 2025, according to data released by the Debt Management Office (DMO). Domestic debt accounts for the largest share at ₦81.82 trillion, representing about 53.37 percent of the total, while external debt stands at ₦71.48 trillion, or 46.63 percent. The Federal Government holds the majority of these obligations amounting to ₦77.81 trillion, reflecting its central role in fiscal borrowing, while states and the Federal Capital Territory account for roughly ₦4 trillion. The composition highlights Nigeria’s increasing reliance on domestic borrowing instruments such as Federal Government bonds and treasury bills to finance fiscal operations.

While Nigeria’s debt to GDP ratio remains moderate relative to many emerging economies, which typically average between 60 and 70 percent of GDP, the ratio is estimated at roughly 52 percent following the recent GDP rebasing exercise. However, the country’s fiscal vulnerability lies less in the size of its debt stock and more in the limited revenue available to service it. Nigeria’s public finances are constrained by a relatively narrow revenue base, which means even moderate debt levels can create significant fiscal pressure. In 2025, debt service obligations absorbed an estimated 50 to 60 percent of federally retained revenue, leaving limited fiscal space for capital investment and social spending after recurrent obligations are met.
This dynamic has important implications for public finance management. High debt servicing costs constrain the government’s ability to expand infrastructure investment, health spending, and other development priorities without increasing borrowing levels further. It also makes fiscal planning more sensitive to revenue shocks, particularly fluctuations in oil production and global commodity prices.

Stabilising Nigeria’s debt trajectory will therefore depend less on reducing borrowing  and more on strengthening the revenue base that supports it. Improvements in oil production, expanded tax collection, growth in non-oil exports, and continued reforms to improve  fiscal transparency will be central to widening fiscal space. Without sustained revenue growth, however, the current structure risks reinforcing a cycle in which a large share of government income is directed toward servicing existing obligations rather than financing long-term economic development.

5. Private Sector Activity Returns to Expansion as PMI Rises to 53.2

Nigeria’s private sector returned to expansion in February 2026, with the Stanbic IBTC Purchasing Managers’ Index (PMI) rising to 53.2 from 49.7 in January. PMI readings above 50 indicate improving business conditions relative to the previous month. The rebound suggests that January’s dip into contraction territory was likely a temporary slowdown rather than the start of a sustained downturn, restoring the broader expansion trend observed through most of the past year.

Cost pressures also eased during the period. The naira’s appreciation below ₦1,400 per dollar since late January contributed to a marked slowdown in input cost inflation, which fell to its weakest pace in over six years. With cost pressures moderating, firms raised output prices at the slowest rate since January 2020. The easing in price pressures improved product affordability and supported the recovery in new orders, reinforcing the rebound in business activity.

Despite the improvement, operational constraints remain visible beneath the headline expansion. Firms continue to report delayed client payments, shortages of materials, and electricity supply challenges, which have contributed to a build-up in backlogs of work.
While the February reading signals renewed momentum in private sector activity, sustaining this recovery will depend on continued exchange rate stability, further easing of inflationary pressures, and improvements in infrastructure and power reliability that affect business operating conditions.