• Economists seek levy cuts, subsidised transport, remote work
• Task FG on CNG buses, aggressive road repairs to cushion impact
• Dangote: We increased petrol prices to protect importers
• Says Middle East crisis threatening fuel availability

Nigeria risks crisis-level energy cost and micro squeeze as escalating disruptions to oil supplies push global prices towards $120 a barrel, threatening refined product price stability and pushing millions of already strained households to the edge.

The renewed crisis is a potential revenue windfall for the country, providing the authorities an opportunity to consolidate the modest gains of the external reserves, a firmer hold on the naira, which had lost over 65 per cent of its value to pro-market reforms, and boost federation revenue.

But with Nigeria’s supply still largely constrained by legacy challenges, such as underinvestment and high production costs, the macro space is limited, suggesting the additional losses by the citizens, who now pay the full cost of refined products, could outweigh the fiscal gains.

Businesses also face tougher times in terms of production costs, with no fiscal plans still not in the pipeline to cushion the high cost of diesel, a major production fuel in the country.

The latest supply shock was triggered after Saudi Aramco cancelled its September and October European crude allocations and scrapped cargoes scheduled for late-September loading onward. Reports indicate no Saudi crude cargoes will be available to European buyers until November.

The development effectively removes Saudi crude from the European market for the rest of September and October, tightening an already-constrained market and raising the prospect of Brent climbing towards $120 a barrel if the disruption persists.

The development is particularly significant for Europe, which is already facing a severe shortage of diesel and other refined products as disruptions around the Strait of Hormuz restrict supplies from the Middle East.

The latest supply shocks are also triggered by attacks on Saudi Arabia’s energy infrastructure and mounting disruption to crude export routes.

Analysts at Goldman Sachs and Capital Economics expect oil prices to move above $120 a barrel if the disruptions persist, with Brent potentially hitting $130.

The fresh crisis has compounded the squeeze created by the continuing disruption around the Strait of Hormuz, while Saudi Arabia’s East-West Pipeline remains shut after attacks on its infrastructure, limiting the kingdom’s ability to move crude to the Red Sea and bypass the strategic waterway.

For Nigeria, the emerging crisis complicates the existing paradox. While higher crude prices could improve the country’s oil earnings, lower domestic production and existing fiscal constraints mean the potential windfall may not translate into a significant revenue buffer. Rather, it could worsen the cost-of-living crisis that households and businesses currently face.

The country’s 2026 budget was anchored on a crude oil price of $64.85 a barrel and production of 1.84 million barrels per day. As of yesterday, Brent rose to $108.49, about $43.64 above the budget oil-price assumption; a move to $120 would increase the differential to over $55 a barrel.

However, Nigeria is producing below its budget estimate. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported average crude production of 1.5 million barrels per day in August, excluding condensates, leaving output about 340,000 barrels per day below the fiscal benchmark.

This suggests that Nigeria could only recover what it is losing to poor production from the price rally gain, while the citizens, like other citizens of different countries, bear the full debilitating consequences of the oil boom.

A further increase in global crude and refined-product prices could place additional pressure on domestic petrol prices, while diesel users may face an even sharper squeeze as international demand for gasoil intensifies.

Higher diesel costs would raise operating expenses for manufacturers, logistics operators, transporters, farmers and businesses that rely on self-generation, with a significant pass-through effect on general prices.

Yesterday, the National Bureau of Statistics (NBS) released the August consumer price index (CPI), which showed that headline inflation has slowed to 15.39 per cent while the food segment remained above 19 per cent.

Rising diesel prices mean additional costs of transporting food from the food basket states in the north to the south. Higher cost of transport could wipe out the gains of the food harvest.

The emerging global fuel shortage is simultaneously creating an opportunity for Nigeria’s Dangote Petroleum Refinery and Petrochemicals, as European buyers, already facing severe shortages of diesel and other refined products, could increasingly turn to African refiners for alternative supplies.

The disruptions linked to the Iran war had cut Europe’s diesel and jet-fuel supply by about a quarter and pushed inventories to a 12-year low. Dangote has responded by increasing exports of diesel and gasoil, while its jet-fuel exports have made it one of Europe’s largest external suppliers.

The development could, however, create a difficult domestic policy and market dilemma.

With European buyers willing to pay competitive international prices for diesel, Nigerian products could increasingly be diverted for export markets, particularly if international prices continue to climb.

The choice could improve Dangote refinery’s export earnings and profitability while intensifying concerns over the availability and cost of refined products for Nigerian businesses.

For consumers, the immediate risk is that the global oil shock could produce the opposite of the expected benefit from higher crude prices: more expensive petrol and diesel, higher transport and production costs and another wave of pressure on already-stretched household and business finances.

The Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, charged the Federal Government to temporarily suspend taxes, fees and levies imposed on refineries to help contain the impact of rising global energy costs.

Yusuf, who spoke with The Guardian yesterday, however, cautioned that reducing the cost of locally supplied crude alone may have limited impact on domestic fuel prices, given that only about 30 per cent or less of crude produced is currently being supplied locally to refineries.

He said: “The percentage of crude that is being supplied locally is just about 30 per cent or less. So, if they sell crude at these costs or the subsidiaries of crude, it may not have much impact.

“But if the government can look at all the fees and levies, taxes that they pay, and the government suspends that for now, so that the costs will be lower. The costs will be limited to the costs of operations and the costs of the feedstock. That may bring some relief to the refineries, which cannot be transmitted in terms of lower prices.”

Yusuf also called for increased government investment in mass transit as higher petrol and diesel costs raise the burden on households.

He charged that federal, state and local governments should prioritise mass transit buses that can convey citizens at highly subsidised rates.

“So rather than going and buying SUVs and building flyovers and setting up airports, they should invest more in public transportation, which can now provide subsidised transportation for the citizens,” he said.

Yusuf also advocated a reduction in the number of commuting days for workers and greater adoption of remote work as a way of reducing transport and energy costs.

For businesses and households, Yusuf recommended greater investment in alternative energy sources, particularly solar, alongside the use of energy-efficient appliances.

He said a more regular electricity supply would also reduce dependence on diesel and petrol generators, thereby easing the impact of high energy costs on businesses and households.

A petroleum economist, Prof. Wumi Iledare, said the Federal Government should expand public transportation powered by compressed natural gas (CNG) and liquefied petroleum gas (LPG), alongside road maintenance, to reduce fuel consumption and ease pressure on consumers.

Iledare, who spoke with The Guardian, said increasing the use of alternative fuels for public transportation would lower operating costs, improve citizens’ purchasing power and enhance energy affordability.

He said: “The government can increase public transportation with the use of CNG and LPG for buses. That will make the cost of operation lower.”

The petroleum economist also urged the government to prioritise road maintenance, saying improved road conditions would reduce fuel consumption and help ease pressure on pump prices.

“And that will actually lead to less consumption of petroleum fuel, which then can affect the price at the pump,” he said.

President/Chief Executive of Dangote refinery, Aliko Dangote, had explained the latest increase in the price of petrol from N1,265 to N1,350 per litre at the Dangote refinery’s gantry, attributing the adjustment to escalating international market costs, higher crude acquisition expenses and rising freight charges.

Dangote, who spoke during a television interview monitored by The Guardian yesterday, said the prevailing business environment, particularly the downstream petroleum sector, had become too hostile to fresh investments, warning that entrepreneurs were increasingly reluctant to commit billions of dollars to projects that could be undermined by unstable policies and imported products.

Dangote explained that the previous N1,265 per litre price had become unsustainable for market participants, particularly importers who, according to him, could no longer sell at that rate without incurring substantial losses.

“At N1,265, none of the importers were able to sell. They were at a standstill because if they sold, they would record a big loss,” he said.

According to him, the refinery had initially waited in the hope that international prices would decline, which did not materialise.

Dangote explained that the refinery had to take account of the cost of crude oil and other expenses associated with bringing the product to the market. He noted that the company had purchased crude in May at $124 per barrel, stressing that the refinery could not absorb every increase in the international market.

He, however, clarified that the $124 crude purchase was part of the refinery’s cost exposure and should not be interpreted as the current price of crude oil.

“We cannot subsidise everything,” he said, adding that the refinery could not sell below the prevailing traded market price when it was also buying crude without receiving any special discount.

According to him, the cost of transporting crude had also risen sharply amid the Middle East crisis and the disruption of shipping routes.  He cited the cost of transporting crude from Forcados to Lagos, saying the journey, which ordinarily takes about half a day, had at one point attracted a freight bill of almost $4 million.

Dangote further explained that crude prices were determined by monthly averages, meaning that the exact average price for September would only be known at the end of the month.

He said the refinery would continue to adjust its prices in line with market realities, stressing that it had also reduced prices in the past month and a half without being pressured to do so.

“When the price drops, we drop it. We are being very patriotic,” he said.