Date first published: 31/03/2026
Key sectors: oil and gas
Key risks: economic; fiscal stability; civil unrest
Risk development
On 30 March the pump price of petrol in the country rose roughly 67 per cent from NGN900 (US$0.65) to NGN1,400 (US$1.01) per litre since the start of the Middle East war. This followed a 23 March announcement by Dangote Petroleum Refinery and Petrochemicals, operators of the world’s largest single-train oil refinery, that it had shipped 456,000 tonnes of petroleum products to West, Central and East Africa, where it stated it would “help enhance energy security.”
Why it matters
This is distinctly important in a country that relies on diesel-powered generators for 75 per cent of its electricity demands, officially removed fuel subsidies in 2023, making energy prices particularly politically sensitive and contends with the persistent policy failure of being a fuel-importing oil exporter. Despite being Africa’s largest oil producer and the Dangote-owned refinery achieving its 650,000 barrels per day (bpd) capacity, Nigeria is still heavily dependent on fuel imports – accounting for up to 20 per cent of its goods import bill.
An estimated 30 per cent of Nigeria’s current 1.46 million bpd total production is tied to opaque oil-for-debt deals and forward sales, agreed at below recent market values. While the 2021 Petroleum Industry Act (PIA) created the framework to deliver a more self-serving domestic oil industry, its application has fallen short. Impacting local refining potential, this has exacerbated tensions between the company and the state-owned Nigerian National Petroleum Company (NNPC).
Increased pump prices will weigh heavily on unofficial subsidisation of fuel imports valued at US$12.3bln as outlined in the NNPC’s 2024 financial statement. Ahead of a January 2027 general election, the government will be under pressure to absorb some of the financial burden of higher fuel prices on citizens. A three-day strike by taxi drivers in Lagos from 16 March and informal worker protests on 31 March could foreshadow broader public discontent. Avoiding waves of civil unrest experienced in July and August 2024 in response to an unprecedented cost-of-living crisis will be paramount ahead of the vote.
Background
Under the PIA, Dangote is expected to receive all inputs locally but has only received around a quarter of its demand from the NNPC, forcing it to source more expensive crude shipments from Brazil to the US. Costs which are then passed on to the consumer at the pump. Furthermore, enforcement of priority access to Nigerian oil for Dangote has been neglected while international oil companies have maintained a US$3-4 premium per barrel sold in Nigeria, in part over potential divestment fears.
Any expectation of a windfall from elevated oil prices is partly negated by a convoluted supply chain, while a roughly 380,000 bpd deficit in budgeted production will see the economy lose out on around US$15bln in annual earnings.
Risk outlook
With the 2026 budget formed on a US$64.85 per barrel oil price benchmark, Abuja will likely forgo significant potential revenue on forward sales previously agreed at below market rates. Constrained production, among other issues, will likely continue to weaken the relationship with Dangote, who has expressed interest and capacity to export refined products to increasingly desperate African countries amid curtailed global availability. Limiting local fuel supply will likely force the government to mitigate inflation impacts to placate the people going to the polls in ten months. Should the government fail to control consequential price rises, civil unrest risks will be elevated.