The Iran war is bad news for Nigeria.

Even though it’s an oil producing country, earning US$45.6 billion from oil exports or 80% of export revenue in 2023, the windfall from the rise in prices is unlikely to compensate for high import costs and the overall threat of rising prices.

First, the negative effects.

The oil price hike will raise production costs in many sectors of the global economy. This will affect Nigeria. Before the US and Israel launched attacks on Iran on 28 February, global inflation had been declining, from a peak of 8.7% in 2022 to less than 4% early in 2026. But the world now faces the risk of another era of inflation.

As Nigeria depends on imports, Nigerians should expect to pay more for goods and services, especially if the war persists. In 2024, the country spent about US$47.2 billion on imported goods like mineral fuels, machinery, electrical equipment, vehicles, plastics, cereals, pharmaceuticals, furniture and bedding. An increase in the global inflation rate would push up Nigeria’s import bill.

This is likely to exceed any windfall gains from the oil price increase.

Inflationary expectations could also result in merchants and firms in the formal and informal sectors raising their prices, causing a general increase in the economy’s overall price level.

In other words, Nigerians should brace for inflation, should the Iran war continue for several weeks. Nigeria has been struggling with rising prices. In 2025 inflation was about 27%.

Food insecurity is another worrisome fallout. There is a strong correlation between oil price, inflation and fertiliser cost. Nigerian farmers will be hurt by the rising cost of fertilisers, which they will pass on to consumers by way of higher food prices.

To be sure, there will be oil windfalls. Assuming that Nigeria’s oil production holds steady at a five-year average of about 1.3 million barrels per day and isn’t hampered by oil theft and production bottlenecks, the projections are that the country could earn between US$1.66 billion and US$21.8 billion in additional oil revenue, depending on the duration of the war. The lower projection could happen if the war lasted for a few weeks, while the upper bound would be the case if it lasted for months.

A windfall would be a welcome development for most countries. But Nigeria has an unsavoury history on this front. For instance, during Operation Desert Storm when the US launched attacks on Iraq in January 1991, Nigeria earned about US$12 billion in oil windfalls. But a lack of transparency meant that Nigerians never knew how much extra money the country had actually earned, or how it had been used.

A special panel had to be set up by a subsequent administration to investigate how much windfall had been earned and how it had been spent. The probe found that Nigeria had indeed earned US$12.4 billion, but could not find any record of how the money had been spent.

Nigeria lacks effective institutional frameworks for channelling oil windfalls into productive investments. It has systems in place, but they need more funding to have an impact.

The Nigerian Sovereign Investment Authority was set up as an independent investment body to support Nigeria’s quest for long-term economic development. It had US$35 billion in assets in 2026, and has invested in solar, medical, infrastructural, industrial and agricultural projects.

In addition, the government established an Excess Crude Account to ringfence earnings from oil windfalls. This ensures that funds are shared among different tiers of government, during periods of low crude oil revenue.

Some of the spending from the Excess Crude Account is expedient. For example, the money is sometimes used to cover budget deficits rather than to invest in new projects. There is also evidence that corruption eats into it and that it’s used to finance the ostentatious lifestyles of top government officials and political elites.

Ordinary Nigerians rarely benefit directly from oil windfalls.

The funds, in my view, would have greater impact if they were used to resuscitate the country’s moribund manufacturing sector, or invested in Nigeria’s crumbling infrastructure and educational and health facilities.

And apart from the lack of prudence and accountability, oil windfalls typically distract policy makers from taking measures to address structural problems in the economy. Windfalls from rising oil prices create the illusion that the economy is healthy. There’s an inflow of foreign exchange, external reserves look robust and there’s temporary liquidity in the foreign exchange market. An example is the 1973 oil windfall, when Nigeria was so awash with cash from oil exports that the head of state at the time said Nigeria’s problem was not the lack of money, but how to spend it.

Additionally, oil windfalls change relative prices and opportunities in favour of the oil sector and make non-oil sectors like agriculture and manufacturing less attractive.

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View Stephen's profile

South Africa produces no oil or natural gas, leaving it fully exposed to volatile international prices. The economy relies heavily on imported liquid fuels – petrol, diesel and jet fuel.

Given the spike in the price of oil this means that costs will be driven up across every sector. Even electricity prices are likely to rise. This is because diesel is used in power stations during production peaks. It’s also used to back up coal-fired and concentrated solar plants (using mirrors to concentrate sunlight).

So how do prices spread?

Liquid fuels like petrol, diesel, jet fuel and paraffin derive mainly from crude oil. When crude prices climb, so do theirs. South Africa uses “import parity pricing” for most fuels – the estimated cost to import them. The Department of Mineral Resources and Energy uses a methodology that lists all the costs of importing fuels and calculates the total price – the import parity price.

After the recent attacks on Iran began, average import parity pricing petrol prices jumped nearly R4.76 (30 US cents) per litre (23%) in just 10 days.

Regulated fuels include petrol, paraffin and residential liquid petroleum gas (LPG). The prices of these are adjusted only on the first Wednesday of each month. This means that global shocks are delayed a bit.

Unregulated fuels include diesel, jet fuel, fuel oil, bunker fuel and aviation gasoline. Sellers adjust prices immediately. For instance, some airlines added temporary fuel surcharges to tickets just four days after US and Israeli strikes on Iran.

Disruptions to oil supplies are already causing pain. Shortages were already evident by 12 March 2026. Nine days after the Iran attacks, South African farmer supplier Oos-Vrystaat Kaap closed its diesel order book. Some agricultural co-ops limited sales to 80 litres per customer per day.

This limits farming operations, which can reduce the supply of agricultural goods on the market, which drives up food prices or causes food shortages, or both.

In the 1973 oil crisis South Africa was forced to ration fuel. Service stations were closed after 6pm and over weekends. The speed limit was reduced to 80km/h to conserve fuel. If the Iranian conflict is protracted the government may introduce similar rationing.

Gas prices track oil. They too have spiked due to the Iranian disruptions. Like petrol, they are regulated, so consumer impacts lag slightly.

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View Rod's profile

Kenya will feel the impact of the price hikes because the country imports most of its oil from the Middle East – largely from the United Arab Emirates. Iranian drones hit the UAE’s major bunkering hub and crude export terminal port in mid-March 2026.

This will affect the arrival of new stock, which is likely to come in at a higher price. Energy prices internationally are eventually reflected at local fuel pumps.

The Kenyan government controls the price consumers pay for fuel, and is likely to ramp it up in the next cycle. Prices are set every 15th of the month.

The government has the option of subsidising the price of fuel. Most of the fuel consumed in Kenya is diesel, followed by petrol.

Subsidising diesel would bring political gains. Most public transport and commercial vehicles use diesel. A rise in its price would raise bus fares and other transport costs.

A steep rise in prices could have political consequences; Kenya’s next general election is in 2027 and higher fuel prices and subsequent inflation would be bad news for the current government. This would raise the cost of living in a country with a high youth unempoyment rate of 67% and memories of violent protests over state efforts to raise taxes.

There are two reasons the government is unlikely to go the subsidies route.

Firstly, the country is operating under a budget deficit of about 4.8% of its gross domestic product.

The finance ministry is unlikely to opt for increasing this gap to pay for fuel subsidies. It has other development priorities, like affordable housing and universal healthcare. Additionally, Kenya’s fiscal space is constrained by high debt payments and tax shortfalls.

Secondly, international lenders like the International Monetary Fund (IMF) are against government subsidies as they don’t always benefit the needy or the poor. The IMF is one of Kenya’s major lenders. In addition, subsidies, if not well targeted, can be a drain on the economy. They are sometimes given based on political instead of economic considerations.

It is also unlikely that Kenya can tap other countries – like Angola or Nigeria – for oil any time soon. Oil is traded through contracts for future delivery, which makes finding alternative markets tougher. These contracts are also used to hedge agaist price fluctuations.

Even the release of strategic oil reserves by a number of countries like the US and Japan has not eased prices. The market has interpreted the quantity released as too little, and maybe too late.

Switching to alternative energy sources is also difficult. Cars, trains, generators or planes can’t be modified overnight. Further, the price of gas – the alternative to oil for heating and power generation – is going up.

Another approach to stabilising prices would be for Kenya to increase oil production to take advantage of rising prices. Kenya discovered oil in 2012 but exploitation has been delayed by logistics. Higher oil prices could make exploitation viable. Kenya still imports most of its oil despite this discovery.

But ramping up oil production isn’t easy. It is capital intensive, requiring exploration for new wells and building infrastructure often in remote areas far from roads and ports or in deep waters. In Kenya, oil prospecting in the arid Turkana region in the north is an example of this.

Kenya, like many other countries, will have to ride the current situation out.

Consumers should brace themselves for an increase in prices across the board. One of the key drivers of inflation is the price of fuel and energy. The annual inflation rate was 4.3% in February 2026.

The oil price increase will initially be felt in the cost of transport, electricity bills and in all sectors that use energy in production. In the medium term, no sector will escape an increase in energy prices.

There may be a silver lining in higher oil prices for Kenya. This could make it possible for the country to competitively exploit its oil for export to markets desperate for alternative sources of oil like India and China.

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View XN's profile

Rising oil prices will affect Senegal in the short term. However, given Senegal’s new hydrocarbon production capacity and its ability to meet domestic demand, the country could benefit from this price increase in the medium and long term.

With the crisis in the Middle East since late February 2026, energy markets have been in turmoil. The price of Brent crude has surged, breaking the US$100 mark – its highest level since July 2024. This has triggered a chain of reactions. As a result, European gas prices rose by 40% in the days following the start of hostilities.

In Africa, this surge in prices will have negative consequences, particularly for energy bills, transport costs and public finances. Indeed, among Africa’s 54 states, around 40 depend on hydrocarbon imports to keep their economies running.

For Senegal, which is highly dependent on foreign markets, this increase is a real economic shock, despite the start of its oil and gas production in 2024. Against the common assumption that rising oil prices automatically benefit producing countries, the reality is far more complex.

In the short term, this situation is likely to lead to:

• increased government expenditure as a result of subsidies for some fuels

• higher transport costs

• higher prices for imported refined products

• potential increases in food and energy prices.

The increase in the price of a barrel of oil results in global inflation with impacts on the cost of imported goods. The inflationary effect leads to a decrease in household purchasing power, costs for the private sector and additional expenses for the state.

Petroleum imports represented a substantial share of Senegal’s total imports (22.4% in 2024), exerting a heavy burden on the trade balance.

Are subsidies for petroleum products and electricity a possibility?

The Senegalese government began to remove them in 2023, aiming for market-based pricing by 2025. But the subsidies remain substantial and account for more than 4% of GDP.

On December 2025, the government intervened again and reduced gasoline and diesel pump prices. It lowered the price of premium gasoline from approximately US$1.65 to US$1.53 per litre, and diesel from about US$1.26 to US$1.13 per litre.

At the same time, authorities decided to increase electricity subsidies for more than 1 million of the country’s most disadvantaged citizens.

The two steps mean that the Senegalese government will have to spend even more to maintain the prices it has set for gasoline and electricity.

Depending on how long the Middle East conflict lasts, there might also be an upside for Senegal in the longer term.

Senegal is a new hydrocarbon producer. Production at the Sangomar oil field began in June 2024, marking the country’s entry into oil production. This was followed by the first shipments of non-liquefied gas from the Greater Tortue Ahmeyim gas field in February 2025. Thus, an increase in the oil price will boost Senegal’s revenues from hydrocarbon exploitation.

Instead of the US$127 million projected in the budget, the Senegalese government is expected to collect around US$167 million, a gain of US$40 million thanks to the higher oil prices.

But this financial windfall will not protect the country in the short term. Moreover, Senegal currently lacks the capacity to refine its own crude or redirect its production for domestic consumption. Consequently, the government faces a precarious position: managing a severe short-term supply crisis while steering an economic transformation in the medium and long term.

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View Ibrahima's profile

Ethiopia is a highly oil-dependent country and is therefore vulnerable to global oil price shocks.

In recent years, fuel imports have accounted for about 15%-20% of total merchandise imports. This makes them the largest import category, leaving the economy exposed to fluctuations in international oil prices.

Ethiopia remains predominantly rural. Most household energy needs are met by biomass, followed by oil and electricity. An increase in oil prices primarily affects the transportation and logistics sectors. This directly affects consumers, as well as industries that depend on transportation for inputs and distribution of products.

Changes in oil prices have significant implications for the government, households and investment. They translate into higher inflation as fuel subsidies do not always absorb increase in oil prices. Historically, increases in fuel prices in Ethiopia have been closely linked to rising transport costs. For example, the Addis Ababa City Administration Transport Bureau increased the city’s public transport tariff on 16 March 2026.

To cushion the economy from volatile global oil prices, the Ethiopian government has traditionally subsidised fuel during periods of sharp price increases and reduced these subsidies when global prices stabilise. During periods of low oil prices, the government has often kept domestic prices steady to help offset the high fiscal costs incurred during times of subsidy.

However, in recent years, under pressure from the International Monetary Fund and due to concerns about fiscal sustainability, the country has been gradually reducing fuel subsidies.

But this current spike in oil prices has resulted in the government once again introducing an emergency fuel subsidy to protect households and businesses and to ease inflationary pressures.

Diesel is being subsidised by 60% and petrol by 64%.

Without the subsidies, domestic fuel prices would be more than twice their current levels. With the introduction of the emergency subsidy, prices of diesel have gone up by 8%, petrol by 2.3% and kerosene by 5%.

Households and businesses will still feel the pinch. But the subsidy has absorbed the bulk of the potential price increase.

Nevertheless, the country is already suffering from supply shortages. There are long queues at gas stations and disruptions to economic activity. The situation has been made worse by hoarding, as some suppliers anticipate further price increases, creating artificial shortages and encouraging illicit trade. The finance ministry has launched a nationwide crackdown on illicit fuel trade.

While subsidies provide a cushion against an immediate surge in price levels, a sustained increase in global oil prices would put significant fiscal pressure on the government. Moreover, fuel imports account for a large share of foreign exchange outflows, putting a strain on reserves, widening the trade deficit and contributing to currency depreciation.

Over time, this fiscal burden may become unsustainable, limiting the government’s ability to maintain price controls. Given the economy’s heavy reliance on fuel for transportation and cooking, this would likely translate into broader inflationary pressures.

In the short run, the primary impact of rising oil prices is increased fiscal pressure on the government. If the conflict persists and oil prices continue to climb, the government may no longer be able to absorb the shock through subsidies, eventually leading to high inflation across the economy.

Ethiopia’s recent strategic shift towards electric vehicles is a welcome step in reducing its dependence on imported oil. The country has also invested heavily in hydroelectric power, most notably with the inauguration of the Grand Ethiopian Renaissance Dam in 2025.

Together, these developments signal a longer-term effort to reduce reliance on oil and build a more energy-secure and sustainable economy.

Over time, reducing exposure to geopolitical shocks will require a continued transition towards domestic energy sources as well as broader international efforts to stabilise global energy markets.

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View Tsegay's profile