Oil
Nigeria faces oil price dilemma as Middle East Crisis drives Brent above $126
LAGOS/ABUJA – Global energy markets are grappling with the most significant supply shock in years as a widening conflict in the Middle East pushes prices to their highest levels since 2022.
The surge, driven by the war between Iran and a U.S.-Israel coalition that began in late February 2026, has seen Brent crude oil briefly surpass $126 a barrel, marking a four-year peak. European gas futures also jumped 28% last week.
This volatility is fueled by the effective closure of the Strait of Hormuz, a critical maritime artery that typically handles 20% of the world’s oil and liquefied natural gas (LNG) trade.
However, the World Bank warns of “cumulative waves” hitting the global economy. Beyond direct energy costs, fertiliser prices are projected to rise 31% in 2026, threatening food security and increasing the risk of acute food insecurity for up to 45 million more people worldwide.
In response, the International Energy Agency (IEA) has launched its largest-ever release of emergency oil stocks to mitigate market volatility.
For Nigeria, Africa’s top oil producer, the spike presents a double-edged sword: a potential revenue windfall for the Federation Account, but fresh pressure on domestic fuel costs, inflation, and power tariffs.
Tensions escalated after attacks on key shipping lanes in the Strait of Hormuz and Red Sea last week, forcing tankers to reroute and insurers to hike premiums. LNG spot prices for Asian delivery jumped to $18/MMBtu, while European TTF gas traded above $15/MMBtu. The International Energy Agency warned that 1.8 million bpd of crude and 15% of global LNG flows are now at risk if disruptions persist.
Nigeria produces 1.5 million bpd and exports over 90% of its crude. At $104/bbl, the country earns roughly $156 million daily from oil, compared to $112 million when oil was $75/bbl in January.
“This is budget relief,” said Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “The 2026 budget benchmark is $77/bbl. At $100+, we could see $12bn extra inflow this year if prices hold and production stays stable.”
NNPC Limited confirmed that all May cargoes have been sold forward, with Qua Iboe and Bonny Light grades attracting premiums of $3-$4/bbl due to buyers avoiding Middle East crude.
Seplat Energy and other independents are also benefiting. Seplat’s Q1 results last week showed a 100% price upside on hedged volumes, helping lift profit 63%.
However, Nigeria imports 85% of its refined products and 100% of its PMS subsidy was removed in 2023. With global diesel and petrol prices tracking crude, Dangote Petroleum Refinery jerked up its petrol gantry price from N1,200 to N1,275 per litre, while coastal supply prices climbed to N1,215 per litre, according to price data obtained from Petroleumprice.ng. Diesel price has been increased to ₦1,800 per litre, up from ₦1,750, as the refinery has also suspended loading operations at the facility, the report quoted sources, including those at the refinery.
Invariably, “transporters will transfer this to food and goods immediately,” said Chinyere Almona, DG of the Lagos Chamber of Commerce. “We risk a new wave of inflation when CPI is already 31.2%.” Gas-to-power tariffs are also exposed.
The Federal Government at the weekend ruled out reintroducing subsidies but said it would “optimize” the benefits of higher oil prices. It would be recalled that former Finance Minister Wale Edun said windfall revenue will go into “infrastructure, debt service, and targeted social transfers.”
Remarkably, NNPC GCEO Bashir Ojulari said the company has ramped up security on pipelines to ensure Nigeria can produce and evacuate volumes to capture the price rally. “Every barrel counts now,” he told reporters in Abuja.
Meanwhile, the Ministry of Petroleum is fast-tracking gas projects like OB3 and ANOH to reduce domestic exposure to global LNG shocks. “The answer is more Nigerian gas for Nigerian power and industry,” said Minister of State for Gas, Ekperikpe Ekpo.
Analysts are split. Goldman Sachs sees Brent at $95-$110 through Q3 if conflict persists. JPMorgan warned that a full Strait of Hormuz closure could push oil to $130. Nevertheless, experts warn that if the Strait remains blocked, oil prices could potentially eclipse the record of $145 per barrel.
For Nigeria, the equation is clear: pump more, earn more, but shield consumers. With production recovering to 153,000 boepd at Seplat and NNPC targeting 1.8 million bpd by year-end, the country is racing to turn geopolitics into GDP.
“The next 90 days will decide if this is a boom or a bust,” said Bismarck Rewane, CEO of Financial Derivatives. “Price is not the problem. Volume and governance are.”
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