Nigeria Faces Higher Fuel Prices As Global Oil Market Moves Towards $120

Nigeria Faces Higher Fuel Prices as Global Oil Market Moves Towards $120 Nigeria is facing renewed pressure on fuel prices, inflation and household finances as disruptions to global oil supplies push crude prices towards $120 per barrel, raising concerns over the stability of petrol and diesel prices in the country. The Guardian reports that the latest supply shock has been worsened by disruptions around the Strait of Hormuz, attacks on energy infrastructure in Saudi Arabia and the cancellation of Saudi crude allocations to European buyers for September and October. Analysts at Goldman Sachs and Capital Economics have warned that crude prices could move above $120 per barrel if the disruptions persist, with Brent potentially reaching $130 The surge in crude prices could provide Nigeria with additional oil revenue and potentially support foreign exchange reserves and government finances. However, the benefits could be limited because the country is producing below the assumptions underpinning its 2026 budget. Nigeria’s budget was based on an oil price of $64.85 per barrel and crude production of 1.84 million barrels per day. Brent crude had risen to $108.49 per barrel, about $43.64 above the budget benchmark, while Nigeria’s average crude production stood at about 1.5 million barrels per day in August, according to the Nigerian Upstream Petroleum Regulatory Commission. That left production roughly 340,000 barrels per day below the budget projection. The increase in international crude and refined-product prices could put further pressure on domestic petrol prices, while diesel users may face an even stronger squeeze. Higher diesel costs would affect manufacturers, transport operators, farmers, logistics companies and businesses that rely on generators and other forms of self-generation. The additional operating costs could eventually be passed on to consumers through higher prices for goods and services. Nigeria’s August inflation rate stood at 15.39 per cent, while food inflation remained above 19 per cent, according to figures cited by The Guardian. Higher diesel prices could also increase the cost of transporting food from northern food-producing areas to southern markets, potentially putting additional pressure on food prices. The latest international market pressures have already affected petrol pricing at the Dangote refinery. Aliko Dangote said the refinery increased its petrol price from N1,265 to N1,350 per litre because of rising international crude prices, higher crude acquisition costs and increased freight charges. He said the previous N1,265 price had become unsustainable for importers, who could no longer sell at that level without making losses. He also said transportation costs had risen sharply amid the Middle East crisis and disruption to shipping routes. The global supply shortage could provide an opportunity for the Dangote Petroleum Refinery, particularly as European buyers seek alternative sources of diesel and other refined products. The Guardian reports that disruptions linked to the Iran war have reduced Europe’s diesel and jet-fuel supply by about a quarter and pushed inventories to a 12-year low. Dangote has increased exports of diesel and gasoil, while its jet-fuel exports have also expanded into the European market. However, stronger international demand could create a domestic supply dilemma if Nigerian refined products are increasingly diverted towards export markets where buyers are willing to pay competitive international prices. The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, called on the Federal Government to temporarily suspend taxes, fees and levies imposed on refineries to help cushion the impact of rising energy costs. Yusuf also called for increased government investment in mass transportation, including subsidised buses, to reduce the burden of higher petrol and diesel prices on households. He further advocated greater adoption of remote work and investment in alternative energy sources such as solar power Petroleum economist Professor Wumi Iledare urged the government to expand public transportation powered by compressed natural gas CNG liquefied petroleum gas LPG. He also called for more aggressive road maintenance, arguing that better roads could reduce fuel consumption and help ease pressure on pump prices. The measures, according to Iledare, could reduce transportation operating costs and improve consumers’ purchasing power. For households already dealing with high living costs, another increase in petrol or diesel prices could translate into higher transportation, food and other household expenses. Businesses could also face rising production and logistics costs, particularly those heavily dependent on diesel and petrol-powered generators. The current oil shock therefore presents Nigeria with a difficult balance: higher crude prices could increase government oil earnings, but the same global market pressures could raise domestic energy costs and intensify financial pressure on households and businesses. With international crude prices moving towards the $120-per-barrel mark, the outlook for domestic fuel prices and inflation will increasingly depend on the duration of the global supply disruptions, Nigeria’s crude production levels and the ability of domestic refiners to meet local demand.