Rising tensions between Israel and Iran are already shaking global energy markets, with fears that disruptions around the vital Strait of Hormuz could trigger sharp oil price spikes, worsen inflation and slow economic growth worldwide. Analysts warn that the waterway carries roughly one-fifth of global oil supply, meaning any prolonged disruption could send crude prices above $100 per barrel and deepen pressure on both developed and emerging economies. Against this backdrop, former President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Dele Kelvin Oye, in this interview, warns that Nigeria must brace for tougher economic conditions as the conflict fuels global oil volatility, exposes the country’s long-standing reliance on crude exports and imported fuel, and threatens to intensify inflation and pressure on households. Excerpts:

What does this conflict mean for the global economy?

We’re living through the worst energy crisis since the 1970s. The Strait of Hormuz, which carries one fifth of the world’s oil, is almost shut down. Oil prices are climbing fast and could go much higher. For the global economy, this means slower growth and higher inflation at the same time. For Asia, which gets most of its oil through Hormuz, it’s an existential risk. For everyone else, it’s a reminder that the world is still deeply dependent on oil. For policymakers, this is not a temporary shock; it’s proof that energy security must be treated as a structural priority, not just a crisis response.

What ripple effects will Hormuz disruption create?

Hormuz is like the jugular vein of global trade. If it’s blocked, oil production in Iraq, Kuwait, and Saudi Arabia could fall sharply. Refineries may shut down, and ships are being forced to take long detours around Africa, driving up costs. The ripple effects are huge: Asian currencies could weaken, factories may ration energy, and food prices could spike because farming depends on diesel. For policymakers, energy crises quickly become food and trade crises. Planning must go beyond oil to protect supply chains and households.

How serious is this compared to past crises?

This is bigger than the Iraq War in 2003 and close to the 1973 oil shock. Prices are rising faster than during the Gulf War. Unlike past crises, Hormuz is practically closed to commercial traffic. Add to that leadership uncertainty in Iran and refinery shutdowns across multiple countries, and you have a perfect storm. For policymakers, today’s lean supply chains leave no cushion. Therefore, governments must build buffers – reserves, redundancy, and alternatives.

How does this affect Nigeria’s oil revenue?

Nigeria faces a paradox. Higher oil prices mean more export earnings, but also higher costs for importing refined fuel. At $100 per barrel, Nigeria could earn billions more, but production is below OPEC quotas, and budget expectations have already fallen short. Even with the Dangote Refinery, Nigeria still imports a lot of refined products. Fuel prices quickly jumped when global markets spiked.

Subsidies may return under political pressure, turning the current reforms’ gains into losses. In this regard, my message for policymakers is that windfalls must be managed carefully. Without structural reforms, higher oil prices will hurt more than they help.

Is this an opportunity or a threat for Nigerians?

It’s more of a threat. Yes, reserves are at a 13 year high, but ordinary Nigerians are already feeling the pain. Fuel prices have jumped, transport costs are eating up household budgets, and food inflation is likely to rise again. The wealthy may benefit from stable reserves, but the poor are hit hardest. The government must protect households from inflation; this must take priority over the current policies of celebrating reserves.

What practical effects will Nigerians feel?

Nigerians will likely feel the impact through a sharp rise in the cost of living.

Transport fares could increase by about 20 to 30 per cent, while food prices may rise by 15 to 25 per cent within the next two months. Businesses that depend on diesel generators would face much higher operating costs, a development that could force some small enterprises to reduce staff or lay off workers. For most families, this means fewer meals, children pulled out of school, and delayed medical care.

Policymakers should prioritise social protection, cash transfers, subsidies for farm inputs, and support for small businesses, which can soften the blow.

What about the naira, inflation, and imports?

The naira has been relatively stable, but rising import costs and capital flight could put pressure on it again. Inflation could easily climb above 20%, undermining the Central Bank’s credibility. Every imported good, from medicine to machinery, will get more expensive. Debt servicing will also rise. Defending the naira requires transparency, reserve management, and credible monetary policy.

The central bank’s current policy of punishment on the private sector through higher interest rates for the excesses of the public sector should be regulated by placing a cap on public sector borrowings.

What steps should the government take?

Government action would need to combine urgent relief with structural reforms. In the immediate term, within the next 90 days, authorities could stabilise fuel supply through crude-for-product swap arrangements with the Dangote Refinery. They may also expand cash transfers to vulnerable households to cushion the shock of rising prices.

Temporary restrictions on non-essential imports could help ease pressure on foreign exchange, while monetary authorities maintain a tight policy to control inflation but still support trade finance so businesses can continue importing critical inputs.

Over the medium term, within about two years, deeper reforms would be required. These may include the privatisation and full rehabilitation of Nigeria’s state-owned refineries to reduce reliance on imported fuel. The government could also accelerate the rollout of millions of solar home systems to lower household dependence on petrol and diesel generators. Oil revenue windfalls could be saved in the Nigeria Sovereign Investment Authority’s sovereign wealth fund with the consent of sub-national governments, creating fiscal buffers for future shocks. At the same time, targeted subsidies and support programmes for farmers would help boost agricultural production and ease pressure on food prices. For policymakers, crisis management must be paired with long term reforms. Transparency and political will are non negotiable. (Sunday Vanguard)

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