By Lekan Olayiwola

For Nigerians, escalating fuel prices are more than an item in a campaign speech. They determine filling-station queue, a driver deciding if a trip still pays, the cost of moving rice across states, and a household budget that buys less each month.

Hence, the return of subsidy to political debate reopens a fight likely to shape 2027. Atiku Abubakar has proposed targeted support for local refining rather than reviving import subsidies. Government has rejected restoring it outright, but the increasingly dangerous world’s energy market raises deeper questions.

The world is no longer a predictable oil market
The U.S.-Iran conflict and Red Sea disruption have turned energy security back into geopolitics. Houthis now threaten shipping at Bab el-Mandeb, adding strain to a system already vulnerable at the Strait of Hormuz. Saudi Arabia has shut its East-West pipeline after attacks, while crude loadings at Yanbu were disrupted. In 2025, nearly 20 million barrels a day moved through Hormuz — a quarter of global seaborne oil trade. About 15 million barrels of crude alone passed, one-third of global trade.

Yet only 3.5–5.5 million barrels a day can bypass Hormuz via pipelines. The Red Sea adds another chokepoint. The IEA reports disruptions delaying normalisation of flows, projecting 2026 supply at 100.7 million barrels per day — 5.7 million below 2025 — with inventories already down 507 million barrels since the war. For Nigeria, an oil producer, this matters as oil, refined products, shipping and insurance are globally priced. No crude output insulates it from shocks.
The experience since 2023 provides a useful warning

The removal of Nigeria’s fuel subsidy immediately reshaped the economics of movement and production. Headline inflation was already 22.04 per cent in March 2023, before the reform shock. Transport and food costs surged because energy prices ripple far beyond petrol, embedding themselves in the movement of people, farm produce, and manufactured goods. By October 2023, the National Bureau of Statistics put the average cost of a healthy diet at N703 per adult per day; by August 2024, it had climbed to N1,255.

Not every naira increase came from petrol; exchange-rate depreciation, insecurity, logistics and monetary conditions also mattered. Yet fuel remains a powerful transmission mechanism in a country where goods travel long distances and alternatives are scarce. That is why Nigerians’ resistance cannot be dismissed as reform though fiscally rational has been socially painful.

But cheap petrol is not the same as energy security
A subsidy can suppress the price consumers face, it cannot suppress the international price of crude, eliminate geopolitical risk or make global shipping cheaper. If Nigeria subsidises petrol while international crude rises sharply, government assumes more of the difference between economic cost and retail price.

That can provide immediate relief. It can also transfer an external energy shock from households to the public balance sheet.The IMF estimates that the savings associated with Nigeria’s fuel-subsidy removal could reach up to 2 per cent of GDP. It has also argued that maintaining the reform is important for fiscal sustainability while strengthening social protection.

However, Nigeria cannot simultaneously promise permanently cheap fuel, absorb large international price increases, maintain fiscal stability and assume that the subsidy bill will remain manageable. The issue is therefore not simply whether subsidy should return, but what Nigeria should subsidise, for whom, under what conditions and for how long.

Domestic refining changes the calculation
There is an important reason today’s debate is not identical to the subsidy debate of the past. Nigeria now has substantial domestic refining capacity, most visibly through the Dangote Refinery. Domestic refinery supply has already become a significant part of the petrol market. Industry data reported in 2026 put domestic petrol supply at roughly 39.5 million litres per day, with Dangote accounting for a major share. That changes the policy conversation.

A production-oriented intervention is conceptually different from subsidising imported petrol. Supporting domestic production can potentially reduce import dependence while strengthening a strategic national capability. But it does not make the underlying commodity free. Nigerian refiners still face crude costs, financing costs, logistics, operating costs and the international opportunity cost of crude. Nor should government intervention become an opaque mechanism for transferring public money to private producers.

The test must therefore be measurable: what quantity is supported, what price reduction reaches consumers, what fiscal ceiling applies, what obligations attach to participating refineries, and when does the intervention expire? Without such rules, a targeted subsidy can gradually become another permanent entitlement.

Nigeria needs an energy-shock strategy, not a petrol-price strategy
Nigeria must reduce the ways global energy shocks damage its economy. That means more than domestic refining. It requires reliable electricity, gas for industry and power, and stronger public transport and rail freight so that every rise in diesel or petrol does not trigger a logistics crisis. It means diversifying energy sources instead of treating petroleum as the universal answer. It also requires a social-protection system that can respond to exceptional shocks without permanently subsidising consumption

But there is need to distinguish between a temporary subsidy during an extraordinary geopolitical disruption as a crisis-response instrument from a permanent subsidy as an energy-pricing system. Confusing the two is how emergency policy becomes structural fiscal exposure.

Nigeria should therefore be able to say: if Brent rises because a major shipping chokepoint is disrupted, there is a predefined mechanism for cushioning vulnerable households and strategic economic sectors. If the international shock passes, the emergency mechanism should automatically wind down. That would be more credible than repeatedly discovering, in the middle of a crisis, that government has no instrument other than subsidising petrol.

The question Nigeria should really be asking
The global energy system is entering a period in which geopolitics, shipping, crude production, refining capacity and national security are increasingly interconnected. The IEA notes that disruption around Hormuz affects not only oil but LNG, fertiliser and other commodities; more than 30 per cent of globally traded urea also moves through the strait.

For Nigeria, that matters twice. The country is an oil producer exposed to the global price, but it is also an economy whose citizens remain highly exposed to the price of moving themselves and their goods. That is why the subsidy argument should move beyond the old binary of compassion versus fiscal discipline. The real policy challenge is to build an economy in which an oil shock abroad does not automatically become a household crisis at home.

Between subsidising consumption and building resilience
Subsidy may have a role in such a system, particularly as a temporary and tightly defined shock absorber. But subsidy alone cannot deliver energy security. It cannot build refineries, electricity infrastructure, mass transit, gas networks or productive industry.

Nigeria has spent decades asking how to make fuel cheaper. The more consequential question now is how to make the Nigerian economy less vulnerable when energy becomes expensive. That is the difference between subsidising consumption and building resilience. And in a world of contested shipping routes, geopolitical confrontation and increasingly strategic energy infrastructure, resilience may ultimately be the more valuable subsidy Nigeria can give itself.

Olayiwola is a peace and conflict researcher/policy analyst. He can be reached at [email protected]