March 3, 2026/CSL Update

• Crude oil prices are likely to remain elevated in the coming weeks; however, a pullback is expected as supply disruptions ease amid a potential de-escalation of the conflict.
• Higher oil prices present near-term upside potential for Nigeria’s external and fiscal balances. Meanwhile, we see heightened upside risks to inflation, driven by the pass-through effect of elevated crude prices on refined petroleum products.
• Despite expected short-term pressures, we maintain a constructive view on the Eurobond market, underpinned by improving macroeconomic fundamentals.

Global oil markets turned increasingly bullish over the past few weeks, as investors began pricing in the risk of a potential US military action against Iran, with brent crude oil futures price averaging about US$71 per barrel last week. These risks materialised last weekend following joint military strikes by the US and Israel on Iran, triggering a sharp escalation in Middle East tensions and pushing Brent crude prices upwards. Oil prices closed near US$80 per barrel yesterday, the highest level since January last year.

Since the US-Israel strikes, Iran has launched retaliatory attacks, including actions targeting neighbouring countries and oil vessels transiting the Strait of Hormuz, a critical corridor that accounts for over 20.0% of global oil and gas shipments. Accordingly, we expect oil prices to remain elevated in the near term amid sustained disruptions and heightened geopolitical risk premiums, although these pressures should gradually subside. Our expectation of an eventual price retracement is anchored on the possibility of de-escalation, particularly after Iranian Foreign Minister Abbas Araghchi signalled that the nation is open to negotiations should hostilities cease. We note that such an outcome would likely allow underlying market fundamentals, where global supply growth is projected to outpace demand, to reassert themselves.

In the interim, higher oil prices are broadly supportive for Nigeria, positively impacting the current account balance and boosting fiscal oil revenues. However, as we expect the recent price rally to be temporary, we do not anticipate a material deviation from our baseline outlook for the fiscal and external accounts. Meanwhile, we remain constructive on the Eurobond market as macroeconomic fundamentals remain strong.

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​​​​​CSL Economics and Strategy – Oil Price and Nigeria .pdf​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​