Oil Tops $100 as Nigeria Weighs Revenue Gains against Fuel Costs

Nigeria’s oil earnings could rise as crude prices climb above $100 per barrel, but the same surge may make fuel and other energy costs harder to manage. The increase came after fresh struggle between the United States and Iran, which raised fears about oil supplies and shipping routes in the Middle East.

Market data showed that the Organisation of Petroleum Exporting Countries Basket, which includes Nigeria’s Bonny Light, rose 8.76 per cent to $106.30 per barrel from more than $90 on Wednesday.

For Nigeria, the price is well above the $64.85 per barrel used in its 2026 budget. If prices stay high, the country could receive more money from crude exports, petroleum royalties, taxes and other oil income.

But the benefit will depend on how much oil Nigeria produces and sells. Underinvestment and other factors have limited production, which could reduce the money earned from the price rise.

More dollars, but no easy gain

Higher export earnings could bring more dollars into Nigeria and give the government more room to pay debts, fund infrastructure and meet other expenses.

Mazi Colman Obasi, National President of the Oil and Gas Services Providers Association of Nigeria, said the rise could also help the naira.

“Higher oil earnings could strengthen Nigeria's external position by increasing dollar inflows and improving foreign-exchange liquidity,” Obasi told Vanguard.

“This could support the naira and ease access to dollars for businesses dependent on imports and foreign transactions.”

He said the result would depend on actual crude production, export receipts and how much foreign exchange reaches the local market.

The price rise also creates a difficult choice for the government. More oil income could help public finances, but higher crude prices may raise the cost of petrol, diesel and aviation fuel.

Obasi said rising crude prices generally increase international refined-product prices. If the crisis continues, that could put pressure on fuel prices in Nigeria.

Nigeria’s expanding domestic refining capacity offers some protection, especially as the Dangote Petroleum Refinery supplies more fuel to the local market. However, local refiners still face higher costs for the crude they use.

Their profits will depend on whether refined-product prices rise enough to cover those costs.

Fuel costs could spread through the economy

The effect of higher oil prices may not stop at petrol stations. Obasi said more expensive energy could make it harder for Nigeria to control inflation.

Petrol affects transport costs, while diesel is used by manufacturers, logistics operators, telecommunications companies and businesses that depend on private power generation.

“If higher energy costs continue, the cost of producing and distributing food, manufactured goods and services could rise,” he said.

The crisis also shows why domestic refining is important to Nigeria. Higher international fuel prices could make local refineries more commercially attractive and reduce the country’s need for expensive imports.

But the opportunity has a limit. Higher crude costs could reduce refinery profits if the prices of refined products do not rise by the same amount.