Nigeria’s fuel market is facing another potential price shock after fresh fighting between the United States and Iran pushed international crude prices above $90 a barrel and revived fears over global energy supplies.
Brent crude, the international benchmark used to price much of the world’s oil, rose more than 2% on Monday after US forces struck Iranian rocket launchers on Larak Island near the Strait of Hormuz.
Iran responded by attacking US military targets in Jordan, raising fears that the conflict could escalate again and further disrupt one of the world’s most important energy routes. The latest oil-market reaction to the US-Iran strikes
The renewed fighting comes at an uncomfortable time for Nigerian consumers. Petrol prices have already climbed sharply in recent days, with retail prices reaching between about ₦1,310 and ₦1,400 per litre in different parts of the country.
Petrol is already getting more expensive
The latest global oil shock comes after Dangote Petroleum Refinery increased its petrol gantry price by ₦65 per litre on August 29.
The increase took the refinery’s gantry price from ₦1,200 to ₦1,265 per litre. It was the third increase announced by the refinery in just eight days.
The three adjustments have raised the refinery’s gantry price by ₦100 per litre, or about 8.6%, since August 21.
The effect is already visible at filling stations. Petrol is selling at about ₦1,310 per litre in parts of Lagos and Ogun, while prices have reached ₦1,350 or more in some northern locations and other areas farther from the refinery.
In some markets, the pump price is approaching ₦1,400.
Why the oil price matters to Nigeria
At first glance, higher crude prices should appear positive for Nigeria.
The country is an oil producer, so stronger international prices can increase government revenue and improve the value of crude exports.
But the benefit is not that simple. Nigeria’s domestic fuel market is now closely connected to international crude prices because refiners and other market participants operate in a deregulated environment.
That means movements in global crude prices can eventually influence the cost of refined petroleum products.
The situation is even more complicated for Dangote Refinery. Reuters reported last week that the refinery still imports around 30% to 40% of its crude intake, despite Nigeria being a major oil producer. The company has said accessing sufficient Nigerian crude at competitive prices remains a challenge.
That creates a link between international energy disruptions and the cost of producing fuel in Nigeria.
The Strait of Hormuz is the bigger concern
The renewed fighting is particularly important because it involves the Strait of Hormuz.
Before the conflict, roughly one-fifth of the world’s oil supply moved through the waterway.
Shipping activity has fallen sharply since the war began, and Reuters reported that only about five visible commodity vessels passed through the strait each day over the weekend.
The disruption has already added a significant risk premium to global energy markets.
A new escalation could push prices higher if shipping companies become even more reluctant to move cargoes through the waterway or if physical oil supplies are disrupted.
Nigeria faces a difficult balancing act
The immediate question for Nigerian consumers is whether the latest global oil movement will translate into another round of domestic petrol increases.
There is no automatic one-for-one relationship. Dangote Refinery has argued that the price of crude available in the market today does not necessarily determine the cost of petrol being produced today.
Crude may have been purchased weeks earlier, transported by sea and stored before it reaches the refinery.
That explains why the refinery’s latest petrol increase came even after Brent crude had fallen from recent highs.
However, a sustained rise in international crude prices would create a different situation.
If refiners have to purchase new crude at higher prices and shipping costs also rise, the pressure on domestic fuel prices could become more persistent.
Consumers could feel the pressure beyond the filling station
Higher petrol prices rarely remain confined to the fuel market. Transport operators may face higher operating costs. Businesses that rely on generators could spend more on energy. Food distributors may face higher logistics costs.
Manufacturers could also see their operating expenses rise if transportation and energy costs increase. That means another sustained oil shock could place additional pressure on household budgets even if Nigeria benefits from higher crude export earnings.
The effect could become particularly important if petrol prices continue rising while other living costs remain elevated.
Nigeria’s refining expansion faces a fresh test
The crisis also puts Nigeria’s refinery strategy under the spotlight.
The Dangote Refinery was designed to reduce the country’s dependence on imported refined petroleum products and give Nigeria greater control over its fuel supply.
The refinery’s growing output has already changed the structure of the country’s downstream market.
But the current situation highlights another challenge: having a large refinery does not completely shield Nigeria from global energy shocks if the refinery still depends partly on imported crude and international supply chains.
The refinery is also preparing for a potential multibillion-dollar initial public offering later this year, with investors watching its ability to secure crude at competitive prices.
What Nigerians should watch next
The most important indicators over the coming days will be the direction of Brent crude, developments around the Strait of Hormuz and the cost of crude available to Nigerian refiners.
A prolonged US-Iran confrontation could keep international oil prices elevated. While a return to negotiations could ease some of the pressure.
For Nigerian consumers, however, the bigger question is whether the country’s growing refining capacity can provide enough protection from international shocks to prevent another sharp increase in petrol prices.
The answer may determine whether the latest global oil crisis remains a temporary market disturbance or becomes another cost-of-living problem for households and businesses across Nigeria.
