The recent escalation between Israel and Iran could temporarily increase government revenue in Nigeria but also lead to higher fuel prices for the average citizen.
On Friday, the Israeli Defence Force launched coordinated strikes on nuclear sites in Iran. Iran responded on Saturday morning by launching over 100 drone missiles into Israel.
Following the attacks, global oil prices surged. On Saturday, Brent crude briefly rose to $78.50 per barrel, representing a 13 to 14 per cent increase in one day.
This was the largest single-day jump in oil prices since early 2022. The increase was driven by fears of broader supply disruptions in the Middle East.
MORE REVENUE FOR NIGERIA
Nigeria, one of the world’s largest oil producers, stands to benefit from higher crude prices. The 2025 national budget is based on a benchmark of $75 per barrel.
If oil sells above that, Nigeria is expected to earn more and meet its revenue targets for funding the budget, infrastructure and social projects.
As of Saturday, Brent crude was trading above $75 and Nigeria’s Bonny Light crude was approaching $80 per barrel. On the surface, this means more revenue from oil exports.
However, Nigeria’s oil production is not strong enough to cash in on crude oil price increases. The budget assumes a daily crude oil output of 2.06 million barrels. This means Nigeria can fund its budget if crude oil sells at $75 per barrel and the country produces 2.06 million barrels per day.
But actual production output has betrayed the budget. In May, data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed crude oil output at just 1.45 million barrels per day. When condensates are added, the total rises to 1.65 million barrels — still below the target.
With that figure, Nigeria also missed the 1.5 million barrels per day target allocated by OPEC for May. Production underperformance remains a key challenge, despite government efforts to address issues such as oil theft and vandalism.
Fewer barrels mean lower revenue, even when prices are high. Before 2023, Nigeria averaged between 1.4 and 1.5 million barrels per day. That shortfall continues to limit the country’s ability to fully benefit from oil price increases.
FUEL PRICES COULD INCREASE
Despite being a major oil producer, Nigeria still depends heavily on imported fuel. As of early 2025, Reuters reported that state-owned refineries were not producing any gasoline. The country relies on imports and the Dangote refinery to meet nearly 92 per cent of domestic fuel demand.
This reliance has come at a cost. Nigeria spent N15.4 trillion on petrol imports in 2024, up from N7.5 trillion in 2023. Though fuel importation has reduced, the volume is still significant.
According to the chairperson of the NMDPRA, daily imports have dropped from 44.6 million litres to 14.7 million litres. But with global oil prices rising, production costs at source markets increase, leading to higher pump prices locally.
Essentially, the countries that refine petrol for Nigeria to import may charge more for it because crude oil prices have gone up. Already, petrol prices are costly for Nigerian users.
According to the National Bureau of Statistics (NBS), the average petrol price in April 2025 stood at N1,239.33 per litre. This marks a 76.73 per cent increase compared to N701.24 in April 2024.
Although prices dipped slightly from the March 2025 average of N1,261.65, the year-on-year jump has added to the burden of living costs for many Nigerians.
President Bola Tinubu has repeatedly assured citizens that fuel prices will not rise, but market realities have contradicted this. Without subsidies, fuel prices directly reflect import costs.
As global oil prices increase, traders warn that landing costs for petrol and diesel will rise. These increases are expected to show up soon at petrol stations nationwide.
HISTORY REPEATING ITSELF?
Nigeria’s economy has always been sensitive to oil price movements. Oil accounts for over 80% of government revenue and about 40% of the country’s GDP, according to the World Bank. Past conflicts have shown how oil shocks ripple through the country’s budget and currency.
When crude prices collapsed in 2014 and 2015, Nigeria had to revise its oil price benchmark from $78 to $65 per barrel and devalue the naira.
When the Russia-Ukraine war started in 2022, Brent crude climbed above $100. While this raised Nigeria’s foreign exchange earnings, it also forced the government to reinstate petrol subsidies to ease the burden on consumers. The higher subsidy costs erased much of the oil revenue gain.
Each global conflict that affects oil markets has a similar outcome. Nigeria may earn more on paper, but internal inefficiencies and import dependence often cancel out the gains.
In theory, unless Nigeria fixes its domestic production problems and revives its refineries, the country will continue to suffer during every global oil price shock even when prices are in its favour.
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