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LAGOS – Emerging markets, particularly energy-importing economies such as Nigeria, are facing mounting economic pressure as rising oil prices triggered by the Middle East conflict drive up production costs, fuel inflation and weaken household purchasing power.
As revealed by McKinsey Global Institute (MGI) research in its Global Economics Intelligence executive summary, April 2026, while the global economy continues to grow and major economies remain resilient, the latest energy shock is exposing the vulnerability of developing nations that are already grappling with high living costs, currency pressures and fragile consumer demand.
The ongoing conflict in the Middle East has disrupted global energy markets, with the closure of the Strait of Hormuz threatening one of the world’s most important oil transit routes.
The waterway typically carries about 20 million barrels of oil daily and accounts for more than a quarter of global seaborne oil trade. The disruption has pushed oil prices into the $100–$110 per barrel range, fueling uncertainty across commodity markets and raising concerns about a new wave of global inflation.
For Nigeria and many emerging economies, the consequences extend far beyond the energy sector. Higher oil prices are increasing transportation, manufacturing and logistics costs, while also pushing up the prices of fertilisers, food products and industrial inputs.
Although Nigeria is Africa’s largest crude oil producer, the country remains dependent on imported refined petroleum products and imported industrial inputs, making it vulnerable to rising global energy costs.
The impact is already being felt across businesses and households. Manufacturers are facing higher fuel expenses, more expensive transportation and increased costs for imported raw materials. For many companies operating on thin margins, the rising cost of production is forcing difficult decisions, including reducing output, increasing prices or delaying expansion plans.
Consumers are facing a similar squeeze. Rising energy prices are filtering through to food, transportation and everyday goods, eroding purchasing power at a time when many households are already struggling with elevated living costs.
In emerging economies, energy shocks tend to spread quickly through the broader economy because fuel costs affect almost every stage of production and distribution.
Global data suggest the pressure is intensifying. According to S&P Global, manufacturing costs in emerging markets rose sharply in March as the Middle East conflict increased fuel, transportation, commodity and import costs. The result is a broad-based cost shock that is reducing profitability for businesses while placing additional strain on consumers.
The challenge for Nigeria is particularly acute because higher oil prices do not automatically translate into economic gains. While stronger crude prices can boost government revenues and foreign exchange earnings, the benefits are often offset by higher import costs, rising inflation and increased pressure on businesses and households.
The country’s dependence on imported fuel and industrial goods means that global price increases quickly filter into the domestic economy.
Across emerging markets, inflation is once again becoming a major concern.
Higher energy costs are pushing up transportation expenses, food prices and production costs, creating a fresh wave of inflationary pressure just as many economies were beginning to stabilise after previous shocks.
India provides a clear example of this trend. Retail inflation accelerated to 3.40 percent in March, reaching a ten-month high as fuel and transportation costs increased.
Food inflation also strengthened, reflecting the broader impact of rising energy prices on supply chains and agricultural production. Similar pressures are emerging across many developing economies where energy imports account for a significant share of total spending.
For households, the effects are becoming increasingly visible. Rising fuel and food prices are consuming a larger share of monthly incomes, leaving less money available for discretionary spending.
While retail sales figures in some countries may appear strong in nominal terms, much of the increase reflects higher prices rather than stronger demand.
This shift is important because consumer spending remains one of the key drivers of economic growth across emerging markets.
As households cut back on non-essential purchases, businesses face weaker demand, reducing investment and hiring opportunities. The result is a gradual loss of economic momentum even as headline growth figures remain positive.
Globally, economic growth has shown remarkable resilience.
The United States recorded annualised growth of 2.0 percent in the first quarter of 2026, while China expanded by 5.0 percent year-on-year.
However, the benefits of this resilience are not being felt equally across the world. Emerging markets continue to face greater exposure to commodity price shocks, exchange-rate volatility and external economic risks.
The latest energy crisis is also complicating the outlook for central banks. Policymakers had been expected to begin lowering interest rates as inflation moderated earlier in the year. However, rising oil prices have revived concerns about inflation, forcing many central banks to pause planned easing measures.
This creates a difficult environment for countries such as Nigeria, where borrowing costs are already high and businesses need access to affordable credit to expand operations.
Central banks are now caught between two competing priorities: supporting economic growth and preventing inflation from accelerating further.
Most major central banks have responded by keeping interest rates unchanged and adopting a cautious approach. Their concern is that cutting rates too early could fuel inflation at a time when energy prices remain elevated and inflation expectations are rising.
Financial markets are also reflecting this uncertainty. Although global stock markets have recovered from the sharp volatility experienced earlier in the year, investor confidence remains fragile.
Commodity markets continue to react to developments in the Middle East, with oil, metals and agricultural products all experiencing significant price fluctuations.
For emerging markets, this uncertainty creates additional challenges. Higher global interest rates and geopolitical risks often lead investors to shift capital toward safer assets, putting pressure on local currencies and financial markets. A weaker currency, in turn, makes imports more expensive and can further fuel inflation.
The pressure is evident across industrial sectors. Manufacturers worldwide continue to operate in expansion territory, but growth is slowing as higher input costs and supply chain disruptions weigh on business activity.
Services sectors are also showing signs of weakness, particularly in economies where consumers are cutting discretionary spending.
Nigeria’s manufacturing sector is likely to face similar headwinds as rising energy costs increase production expenses and reduce competitiveness. Businesses that depend heavily on imported machinery, raw materials or fuel are particularly exposed to further increases in global commodity prices.
Despite these challenges, the global economy has not entered a recession. Growth remains positive, labour markets in many countries are still relatively resilient and business activity continues to expand.
However, the pace of growth is becoming increasingly uneven, with emerging markets bearing a disproportionate share of the burden created by higher energy costs.
For Nigeria and other developing economies, the message is clear: the latest oil price shock is not simply an energy story. It is a broader economic challenge affecting inflation, consumer spending, business profitability and economic growth.
As geopolitical tensions continue to disrupt global energy markets, emerging economies are finding themselves on the front line of a new cost-of-living crisis.
Unless oil prices stabilise and supply disruptions ease, businesses and households across Nigeria and other emerging markets are likely to face continued pressure in the months ahead, forcing policymakers to navigate an increasingly difficult balance between controlling inflation and supporting economic growth.
