The security intelligence firm SBM Intelligence has warned that escalating tensions between Israel and Iran could significantly impact foreign direct investment (FDI) and portfolio inflows in Nigeria and Ghana. This could result in stalled projects, reduced job creation, and potentially higher sovereign borrowing costs for both countries.
In its latest report titled, ‘The Escalating Iran-Israel Conflict and its Implications for West Africa’, the firm said that the conflict threatens the stability of regional currencies in West Africa.
“The Ghanaian cedi, despite being the world’s best-performing currency against the dollar this year, is vulnerable. Prolonged geopolitical uncertainty could trigger risk-averse sentiment in global markets, putting pressure on Ghana’s reserves as energy import costs rise.
“This trend could also undermine the recent surge in gold prices, weakening the appeal of gold-centred resilience strategies being pursued by countries like Ghana. Furthermore, geopolitical instability shakes investor confidence, leading to a flight to safer assets.
“For Nigeria and Ghana, this translates into a sharp decline in foreign direct investment (FDI) and portfolio inflows, stalling projects, slowing job creation, and potentially leading to higher sovereign borrowing costs,” the report said in part.
The ongoing hostilities have led to a sharp rise in global oil prices, with Brent crude increasing over 4%, from $69.36 to $74.23 per barrel. While this surge presents a fragile and short-term relief for West Africa’s major oil producers, SBM Intelligence notes that its benefits may be limited.
For Nigeria, whose 2025 budget is pegged at $73 per barrel, the price increase offers a potential boost to national revenue and a temporary easing of fiscal pressures. However, the report highlights that Nigeria’s ability to leverage this opportunity is constrained by low oil production levels.
Current data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) indicates that the country produces approximately 1.6 million barrels per day, including condensates. Moreover, a significant portion of Nigeria’s crude is sold through long-term contracts at much lower prices, further limiting the potential financial gains from the price hike.
“Historical precedent also shows this relief masks deeper vulnerabilities.
“During the 2022 Ukraine war, oil prices surged to $121, yet Nigeria’s inflation still soared to 18.6%. Similarly, when OPEC+ cuts pushed prices to $90 in 2023, inflation hit 26.7% in Nigeria and 38.1% in Ghana.”
On how the conflict could affect Nigeria’s fuel imports and domestic impact, the report said that despite being a major crude exporter, Nigeria remains dependent on imports for refined petroleum products.
“Consequently, rising global oil prices increase the cost of imported fuel and the reference rate for domestically refined products, translating into higher pump prices.”
SBM Intelligence said these increases ripple through the economy, pushing up transport, food, and power costs, which could trigger further inflationary surges in a country already under considerable economic strain following the removal of fuel subsidies.
“For Ghana, which imports almost all its refined petroleum products at an average monthly cost of $400 million, the situation is a looming economic threat.
“A sustained rise in global prices, coupled with a proposed GH¢1 fuel levy, could reverse recent relief at the pumps and trigger a ripple effect of hardship across the economy.”