Nigerians hoping for lower petrol prices may have to wait longer as renewed tensions between the United States and Iran push global crude oil prices higher, threatening recent gains in the energy market.
Crude prices climbed this week after the United States reimposed a naval blockade on Iranian ports and President Donald Trump threatened a 20 per cent cargo charge on vessels passing through the Strait of Hormuz before later softening his remarks.
The renewed uncertainty lifted Brent crude, the global oil benchmark, to $87 per barrel on Wednesday, its highest level since June. US West Texas Intermediate (WTI) also rose to $80 per barrel, while global stock markets weakened.
The rebound in oil prices has reduced expectations that petrol prices in Nigeria will quickly return to levels seen before the conflict in the Middle East.
Calls for a reduction in pump prices had intensified after crude prices fell sharply following the signing of a Memorandum of Understanding (MoU) between the United States and Iran in June.
With crude prices dropping by about 40 per cent at the time, many Nigerians questioned why the decline had not translated into cheaper petrol.
The criticism was directed at both the Dangote Refinery, which supplies more than half of Nigeria’s petrol, and fuel importers.
The Federal Competition and Consumer Protection Commission (FCCPC) also warned operators against exploitative pricing and anti-competitive practices in the deregulated downstream petroleum sector, saying sanctions would be imposed where necessary.
Authorities had begun engaging industry stakeholders amid growing public pressure before fresh hostilities resurfaced.
President Trump’s declaration that “the ceasefire is over” triggered another rise in oil prices, with Brent crude gaining more than five per cent as renewed strikes heightened concerns over supplies from the Gulf.
Petrol Prices Yet to Reflect Earlier Oil Decline
During the conflict, petrol prices from the Dangote Refinery fluctuated significantly.
From below ₦900 per litre before the crisis, ex-depot prices climbed from ₦1,075 to ₦1,175 within the first week of March. They later rose to ₦1,245 in mid-March before easing to ₦1,200 by the end of the month.
Prices remained within that range throughout April before peaking at ₦1,350 in early May.
Following the June MoU, prices declined to ₦1,175 and later ₦1,075 per litre in July.
Retail pump prices followed a similar trend, rising from around ₦870 per litre before the crisis to as much as ₦1,500 in May, significantly increasing transportation costs for households and businesses.
Although global crude prices later fell to around $73 per barrel, close to pre-conflict levels, pump prices in many parts of Nigeria remained above ₦1,000 per litre.
Energy analysts say petrol prices are influenced by more than crude oil costs.
Exchange rates, shipping charges, insurance costs, refining margins, import expenses and local distribution costs all determine the final retail price.
Razaq Fatai, an economist and Head of Advisory and Research at Vestance, explained that businesses often respond faster to rising costs than falling ones because of inventory financing and repayment obligations.
“If businesses adjust prices too quickly, they may struggle with cash flow and may find it difficult to restock,” he said.
Energy analyst Demola Adigun added that retail prices usually decline gradually as older inventories purchased at higher prices are replaced with cheaper supplies.
Fresh Risks for Fuel Prices
Analysts say the renewed instability around the Strait of Hormuz could keep oil prices elevated, delaying any significant reduction in petrol prices in Nigeria.
The situation has become more complicated after Dangote Refinery announced that locally supplied petroleum products would now be priced in US dollars.
The company attributed the decision to challenges accessing crude oil under the Federal Government’s naira-for-crude programme and higher international crude prices.
Industry experts warn that the move could expose Nigeria’s downstream petroleum market to greater foreign exchange volatility, increase demand for US dollars among marketers and place additional pressure on the naira.
“Nigerians need to brace up for a long ride,” Fatai said.
“It is only temporary, but it might also take a while. We find ourselves in an unpredictable situation.”
He, however, noted that the impact of the renewed US-Iran tensions is unlikely to be as severe as during the first phase of the conflict.
Energy analyst Dan Kunle said Nigeria’s limited crude oil production capacity continues to make the country vulnerable to global oil price shocks despite being a major oil producer.
“Nigeria is a developing country that lacks adequate infrastructure and does not possess a comparative or competitive advantage in the hydrocarbon sector.
“This is why Nigerians will struggle to get a stable oil price,” he said.
According to him, sustained investment in technical expertise, infrastructure and financing will be critical to improving Nigeria’s long-term energy security.
Author
