Rising fuel prices and Nigerians living standard

 

Since Isreal and United States of America started launching missile attacks on Iran on February 28, 2026, the world has not known peace. The ripple effects have sent shockwaves on every country of the world. Iran, a middle level world power has shown resilience despite suffering heavy losses in terms of men and infrastructure. Iran’s Supreme Leader, Ayatollah Ali Khamenei, the Supreme National Security Council Head, Major General Ali Larijani, the Chief of Staff of the Armed Forces, Major General Abdolrahim Mousavi, along with the IRGC Commander-in-Chief, Brigadier General Mohammad Pakpour, are some of the Iranian leaders that have been killed by the Israeli Defence Force and US airstrikes. Many of the Iran’s nuclear and energy sites have also been bombed.

According to an online source, as of Day 22 of the conflict, reported casualty estimates are: US military 60-84 (killed and wounded combined, per Pentagon briefings), Iranian military 1,840-2,576 (estimated killed, per US DoD battle damage assessments and IRGC acknowledgments), Iranian civilian 464-928 (killed and injured, per UN OCHA preliminary reports), and coalition allied forces 19-34 (killed and wounded, per coalition headquarters statements).

In retaliation, Iran has targeted US military bases and energy facilities in the Gulf Countries which consist of: Bahrain, Kuwait, Iraq, Oman, Qatar, Saudi Arabia and the United Arab Emirates All of these countries, except Iraq, are members of the Gulf Cooperation Council. The attacks on these countries have led to cancellations of hundreds of flights, shutdown of oil and gas facilities, as well as recession in hotels, tourism and hospitality businesses. There are high insurance premiums for vessels passing through the Persian Gulf while job losses are imminent.

 According to Iran News Wire of March 23, 2026, “Iran war economic impact is no longer a contained geopolitical issue—it has rapidly evolved into a global economic shock. What makes the 2026 conflict different is not just its scale, but where it is unfolding: the Strait of Hormuz, a chokepoint that once carried nearly 20 million barrels of oil per day—about 20% of global consumption—along with over one-fifth of global LNG trade. As that flow falters, the consequences are now rippling far beyond the Persian Gulf, feeding directly into inflation, energy prices, and household costs across Western economies.”

I have had the privilege of discussing the impact of this renewed Gulf or Middle East crisis on Nigerian economy on several media channels. There is no gainsaying the fact that the present Iranian war is a double-edged sword to Nigeria. On a positive note, the price of crude oil has skyrocketed to above $100 per barrel. The crude oil benchmark for Nigeria’s 2025 budget, currently operational is $75 per barrel while Nigeria’s 2026 budget benchmark is $64.85. In either cases Nigeria is making extra income which is well over the approved budget benchmark. This will help us save in our Excess Crude Account and Sovereign Wealth Fund. Our foreign reserve will also be healthier.  This will make Nigeria more credit worthy.

On the flip side however, the pump rice of petrol, diesel, aviation fuel and other petroleum products have risen astronomically. A couple of days ago, petrol that’s being sold for about N850 as at February ending now sells for N1,370 per litre in my area in Abuja.  Many have questioned that steep rise in the pump price of petroleum products despite having Dangote Refinery with 650,000 barrel per day refining capacity. However, in a March 9, 2026 press conference, Dangote Refinery's Managing Director and Chief Executive Officer, David Bird, stated that the company has to increase fuel prices due to the following reasons:

“Global Oil Market Volatility: The refinery is fully exposed to international commodity markets, including crude oil prices, freight charges, insurance, and financing costs. This exposure has led to increased operational costs, especially with the recent surge in crude prices from mid-$60 to nearly $120 per barrel within a week.  Rising Freight Costs: Shipping costs have also increased significantly, with tanker costs rising from about $800,000 to roughly $3.5 million per shipment in the current market environment.  No Discounted Crude: Despite the crude-for-naira arrangement, the refinery does not receive discounted crude. Nigerian crude is still purchased at international benchmark prices, which adds to the costs of fuel.” Dangote Refinery also receives only five out of about 15 cargoes it needed monthly from Nigerian government and therefore has to source the shortfall from outside the country.

Assuming Nigeria’s four moribund refineries are working optimally and that several other modular refineries are operational, perhaps there would have been healthy competition with Dangote Refinery. Unfortunately, the sole reliance on the DR is making the complex run as a monopoly. Licensing private companies to import refined petroleum products at this time will worsen the situation as the gulf crisis has led to a spike in global oil and gas prices.

The way forward for Nigeria is many. This includes halting of crude oil theft in the Niger Delta region. Despite the best efforts of Nigerian Navy and private oil pipeline surveillance contractors, Nigeria still records huge quantum of illegal oil bunkering.  Nigeria’s armed forces need to nip this in the bud. It’s important to also sell crude to DR at a negotiated discounted rate in order to ensure that the Refinery is able to sell refined petroleum products to Nigerian market at a lower rate over a long period of time. This will ensure price stability and affordability. It’s becoming apparent that Nigeria’s ailing refineries may never get well. Therefore, let’s cut our losses by selling off these antediluvian refineries to private entities. There should be an independent probe of the billions of dollars spent on the turn around maintenance that have not yielded any positive results. Those found to have misappropriated our common patrimony in oil and gas sectors should be prosecuted in court of law and made scapegoats.

President Bola Tinubu has been touting Compressed Natural Gas as a game changer and had initiated the Presidential initiative on CNG since May 2024. Unfortunately, the initiative has not produced desired results.  The conversion cost for private vehicle owners is astronomic and the filling stations across the country are very few. Take for instance, there are only five CNG fueling stations in Lagos and six in Abuja. These are grossly inadequate.

Because of the rising cost of living occasioned by this Persian Gulf crisis, Nigerian government at the national and sub-national levels have to roll their sleeves and do the following: Grant wage award and Cost of Living Allowance to workers. This will assist to cushion the deleterious effect of this rising cost of living pending when negotiations with workers unions will result in a new minimum wage. Government should also pause the implementation of personal income tax and other taxes that will erode the salaries and wages of workers. There should be increase in the number of beneficiaries of social investment programmes especially the conditional cash transfer to vulnerable people such as the aged, persons with disabilities and even the unemployed. The amount should be increased from the current N25,000 to N50,000 and should be for six months rather than the current three months.

Federal Government should stimulate increased crude oil production and incentivise more private refineries be it large scale or modular ones. If we are self sufficient in refining capacity, we would be insulated from the global shockwaves and volatility such as the one currently being experienced. Lastly, government should use the windfall from the increased crude oil price to upgrade and expand our social amenities such as electricity, roads, schools, hospitals and piped borne water. There should be proper accountability for the windfall unlike what was experienced in 2003 when much of the windfall was allegedly embezzled.

I.G: @jideojong