Oil above $100, Nigeria faces revenue windfall, fuel price risks

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By Udeme Akpan, Energy Editor

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Nigeria is poised for a major oil revenue boost but faces renewed pressure on fuel prices, inflation and operating costs as escalating hostilities between the United States and Iran push crude prices above $100 per barrel.

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Latest market data showed that the Organisation of Petroleum Exporting Countries Basket, including Nigeria’s Bonny Light climbed 8.76 per cent to $106.30 per barrel, from more than $90 per barrel on Wednesday.

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The rally followed a fresh escalation in the U.S.-Iran conflict, including attacks on Iranian oil tankers, heightening fears of disruptions to crude supplies, shipping routes and critical energy infrastructure in the Middle East.

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Revenue boost for government

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The immediate benefit for Nigeria is the widening gap between international oil prices and its 2026 budget benchmark of $64.85 per barrel.

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With major crude benchmarks above $100, Nigeria could earn substantially more from crude exports if the elevated prices persist, boosting government receipts from petroleum-sector royalties, taxes and other oil-related revenues.

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Stronger export earnings could also increase foreign-exchange inflows and provide additional fiscal space for infrastructure, debt obligations and other government expenditures.

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However, Nigeria’s ability to maximise the windfall will depend on production currently constrained by underinvestment and other factors.

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Naira could gain support

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In an interview with Vanguard, the National President of the Oil and Gas Services Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, said: “Higher oil earnings could strengthen Nigeria’s external position by increasing dollar inflows and improving foreign-exchange liquidity.

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“This could support the naira and ease access to dollars for businesses dependent on imports and foreign transactions.

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“The impact, however, will depend on actual crude production, export receipts and the amount of foreign exchange reaching the domestic market.”

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Fuel prices face pressure

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According to Obasi, “For consumers and businesses, the oil rally could bring higher energy costs.

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“Rising crude prices generally increase international refined-product prices, potentially putting pressure on petrol, diesel and aviation fuel if the geopolitical crisis persists.

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“Nigeria’s expanding domestic refining capacity offers some protection, particularly with the Dangote Petroleum Refinery increasingly supplying the local market.

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“Domestic refiners, however, remain exposed to higher crude feedstock costs, while their profitability will depend on movements in refined-product prices.”

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Inflationary risks

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Obasi said: “It was gathered that higher energy costs could complicate Nigeria’s battle against inflation.

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“Petrol directly affects transportation, while diesel is widely used by manufacturers, logistics operators, telecommunications companies and businesses relying on private power generation.

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“Any sustained increase in energy costs could therefore raise the cost of producing and distributing food, manufactured goods and services.”

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Domestic refining opportunity

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It was gathered that the crisis underscores the strategic importance of Nigeria’s investment in domestic refining.

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Higher international product prices could improve the commercial prospects of local refineries while reducing the country’s exposure to expensive imports and external supply disruptions.

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For the Dangote refinery and other emerging projects, the opportunity comes with a challenge: higher crude costs could squeeze margins if refined-product prices do not rise proportionately.

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Nigeria must maximise the windfall

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Oil above $100 presents Nigeria with a significant fiscal opportunity, but weak production could limit the gains.

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An industry leader that pleaded to be anonymous, said: “The priority should be to raise crude output, maximise export earnings and strengthen fiscal buffers, while using expanding domestic refining capacity to reduce exposure to external energy shocks.

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“The latest price surge therefore offers Nigeria the prospect of stronger revenues, but also tests its ability to manage the inflationary consequences of higher oil and energy costs.”

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