History has an audacious way of repeating itself, often because actors fail to learn from previous events or because the universe intends to teach entirely new lessons. In 1990, as the world watched the Gulf War unfold, Nigeria sat on the edge of the conflict but benefited tremendously from its tragic fallout. As a major oil producer, Nigeria’s economy received a temporary but massive boost.
Higher global oil prices at the time provided a welcome respite from the economic challenges of the era, while Nigeria’s strategic importance led to significant debt relief and increased international support. The “Babangida Windfall,” as these gains came to be known, saw billions of dollars in oil premiums flood the national coffers.
However, the long-term benefits were starkly limited. Despite reports of a $12.4 billion surplus, the consensus remains that this bounty disappeared into a “latent” hole of projects that yielded little for the common citizen. Fluctuating prices and production disruptions thereafter eventually ushered in a cycle of economic volatility that would become all too familiar in the decades to follow.
As the current war in Iran escalates following incursions by United States and Israeli forces, these historical lessons have gained renewed urgency. As geopolitical tensions rise, impact on global economy, especially the energy sector, remains of grave concern as the region houses the Strait of Hormuz, a vital chokepoint between Oman and Iran that connects the Persian Gulf to the Arabian Sea.
With approximately 20 million barrels of oil passing through this waterway daily (accounting for 20% of global consumption), Nigeria once again finds itself in a theater of extreme volatility. The question is no longer just whether oil will save the naira, but whether we have finally learned how to “keep the change.”
The primary mechanism of this potential shock lies in the immediate disruption of global supply expectations. The conflict has already pushed oil prices from $65 to $92 per barrel.
For Nigeria, a net exporter of crude oil with an OPEC quota of 1.5 million barrels per day and an average output of 1.7 million barrels per day (1.5-2% of the global market) according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), this theoretically improves export revenues and the current account.
Unlike the 1990s, when a significant portion of proceeds was lost to fuel importation, the 2026 landscape is secured by the 650,000-barrel-per-day Dangote Refinery. According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority’s (NMDPRA) 2025 “State of the Midstream and Downstream Fact Sheet,” the refinery meets a significant portion of the 56.7 million-liter daily domestic demand and about 61.78 percent of the country’s petrol needs in January 2026, potentially altering the traditional “windfall-for-imports” trap.
Even with this significant development, the benefits remain a double whammy. While higher prices could bridge the gap between government income and spending, Nigeria’s “Forward Sale Agreements” and Domestic Crude Supply Obligations may limit the immediate liquid gains. Having committed significant future volumes to lenders, much of the price surge may go toward fulfilling old debts rather than funding new growth.
Furthermore, higher global energy costs inevitably drive up logistics, import prices, and domestic inflation, threatening to neutralise any gain from crude sales for countries like Nigeria.
Nigeria’s removal of the fuel subsidy means global price rises now strike the economy head-on. With no buffer in place, higher international oil prices quickly push up the cost of energy and food at home. This shields the national budget from debt but leaves ordinary people to shoulder the full burden of inflation. To stop this from spiralling, those in charge must respond openly and steadily, keeping public trust and calming the economy.
The strength of Nigeria’s currency and financial stability now rests on how well the government handles its new policies. High oil prices may give the Naira a lift, but this rarely lasts or amounts to substantial benefit as our history has documented.
To keep the economy balanced, Nigeria needs strong foreign reserves as a safety net. Without a clear and honest strategy, sudden oil wealth will only mask deeper problems instead of solving them.
Lasting growth depends on turning these gains into productivity, not just spending. Leaning too heavily on oil income has always been a risky bet. Instead, today’s external shock should spark more investment in refining, liquified natural gas (LNG) production, and gas-to-power industries.
Fiscal rules must be set to smooth out oil revenue cycles, ensuring that the potential “Iran Windfall” of 2026 builds a foundation for the future rather than becoming another ghost of the past.