Rising fuel prices reignite inflation nightmare

…Price could hit N2,000/litre- Retail owners
…Dangote approves 20 marketers for loading

Nigeria’s fragile progress in taming inflation is once again under threat as a new surge in fuel prices ripples through Africa’s biggest oil-producing country, stoking fears that the country could slide back into a prolonged cost-of-living crisis.

Fresh increases in the price of petrol and diesel are filtering through the economy, pushing up transport fares, food prices and manufacturing costs in a nation where energy expenses remain a dominant driver of consumer inflation.

Economists say the latest spike, triggered by a mix of global oil market tensions and domestic pricing adjustments, could reverse months of tentative stability in consumer prices and reinforce inflationary pressures that have weighed heavily on households since 2023.

On Monday, Dangote Petroleum Refinery raised its ex-depot price for petrol to about N1,175 per litre, while diesel climbed to around N1,620 per litre, marking the fourth price revision within a week and sending shockwaves through the downstream sector.

The sudden adjustments come as Nigerians are still grappling with the aftermath of the government’s decision to end petrol subsidies in 2023, a reform that dismantled decades of artificially low fuel prices but triggered a sharp surge in inflation across the economy.

Analysts warn that the renewed price volatility could amplify those earlier effects.

“Further increases in petrol and diesel prices would worsen inflation, cause job losses, deepen economic hardship, increase transportation costs, and raise the prices of goods and services nationwide,” Billy Gillis‑Harry, national president of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), said.

Gillis-Harry noted that petrol remains essential for daily transportation and household mobility, while diesel is a critical energy source for industries and manufacturing operations across the country.

As a result, he said any significant rise in fuel prices would inevitably ripple through the broader economy, affecting production costs, logistics expenses and consumer prices.

Fuel prices have an outsized influence on Nigeria’s consumer basket because they directly affect transportation, food distribution and industrial production.

Once energy costs rise, businesses often pass the additional burden through supply chains, making everything from farm produce to building materials more expensive.

In a research note seen by BusinessDay, Lagos-based investment firm Afrinvest warned that while the geopolitical shock could bolster Nigeria’s oil revenues and export earnings, the broader economic impact may prove more complex as higher energy prices feed through to domestic inflation.

“Like many non-combatant economies, Nigeria is likely to experience significant indirect effects if the conflict persists or escalates,” the firm said.

The latest price increases are unfolding against a backdrop of turbulence in global energy markets.

Escalating geopolitical tensions in the Middle East have pushed crude oil prices higher, raising import costs for refined petroleum products across Africa and increasing volatility in global supply chains.

For Nigeria, the biggest immediate economic risk lies in the inflationary consequences of rising energy prices.

The effects of a tight monetary policy by the Central Bank of Nigeria and a less volatile naira helped moderate inflation through 2025, contributing to an 11-month disinflation streak that began in April 2025.

Even after the methodology used to calculate inflation was revised earlier this year, the data still shows a clear downward trend. Under the new framework, headline inflation fell from 27.6 percent in January 2025 to 15.1 percent in January 2026, reinforcing what analysts say is a genuine disinflationary process.

However, Afrinvest warned that rising global energy prices could disrupt that progress.

“Despite limited direct trade exposure between Nigeria and the Middle East, the secondary effects of higher global energy prices pose a downside risk to Nigeria’s inflation outlook,” the firm said.

Higher crude prices typically translate into more expensive imports, particularly for raw materials, intermediate goods and machinery, as well as higher freight and insurance costs during periods of geopolitical tension.

“This cost pressure would likely transmit into broader domestic price levels,” the note read.

The country’s food supply chain runs on diesel for perishables grown in the Niger Delta lowlands or food baskets in the Middle Belt, which travel hundreds of kilometres to consumers in Lagos, Abuja and Port Harcourt aboard trucks that fill up at commercial pumps.

Any increase in diesel costs is almost immediately reflected in transport tariffs, which traders then embed in retail prices.

Small businesses face a compounded squeeze. Nigeria’s chronic electricity shortages force millions of enterprises, from cold-chain operators to hospitals to corner shops, to run petrol or diesel generators around the clock.

For these operators, rising fuel prices do not merely inflate logistics costs; they simultaneously raise the cost of staying open. The double exposure is already forcing price increases and, in some cases, operational cutbacks.

Petrol could reach N2,000

Retail fuel prices could climb even more dramatically if geopolitical tensions persist.

PETROAN warned that petrol could reach N2,000 per litre in the coming months if global oil market disruptions continue.

According to a statement signed by Joseph Obele, PETROAN’s national public relations officer, the association urged the leadership of NNPC Ltd. to accelerate efforts to bring Nigeria’s domestic refineries fully online.

Specifically, the group called on Bayo Ojulari, the national oil company’s chief executive, to facilitate the immediate commencement of production at the Port Harcourt Refinery’s Area 5 plant and the Warri Refinery.

PETROAN warned that the ongoing conflict involving Israel, the United States and Iran is already pushing petroleum prices higher globally while threatening critical energy routes.

“Sustained drone and missile attacks now threaten critical oil routes and infrastructure, creating uncertainty in global supply chains,” PETROAN said.

Before the escalation of geopolitical tensions, petrol sold at roughly N774 per litre in Nigeria. Prices have now climbed above N1,000 per litre, an increase of about 30 percent.

Diesel, known as Automotive Gas Oil (AGO), has surged even more sharply. Previously sold at around N950 per litre, it has risen above N1,400 per litre in many markets, representing an increase of nearly 50 percent.

If global tensions persist, PETROAN warned petrol prices could approach N2,000 per litre while diesel may climb close to N3,000 per litre, intensifying cost pressures across households and businesses.

Dangote approves selected marketers

Amid the market turbulence, the Dangote refinery has also moved to restrict petrol loading to a limited group of marketers after temporarily suspending truck-out operations earlier in the week.

Industry sources said the refinery released a list of consortium marketers permitted to continue lifting Premium Motor Spirit (PMS) from its facility, while other marketers remain on hold pending further directives.

Companies allowed to continue loading include NIPCO Plc/11 Plc, MRS, TotalEnergies, Conoil, AA Rano, AYM Shafa, Northwest, Rainoil/Eterna, Ardova Plc and NNPC Retail.

Others on the list are Masters Energy, Nepal Energies, Sobaz, Optima, Bovas, Soroman Nigeria Ltd, Heyden, Integrated Oil & Gas, Techno and Fatgbems.

The temporary restriction followed the refinery’s earlier suspension of PMS loading, during which several trucks were asked to leave the premises, fueling speculation within the downstream sector that another price adjustment could be imminent.

Market participants say the move underscores the growing influence of the Dangote refinery on Nigeria’s fuel supply chain.

Outlook for 2026

The trajectory of Nigeria’s inflation battle may now depend heavily on forces beyond its borders.

If geopolitical tensions continue to disrupt global energy markets, fuel prices could remain elevated for months.

That scenario would intensify inflationary pressures across Africa’s largest economy and test the resilience of reforms introduced since the subsidy removal.

For now, economists say Nigeria is entering another period of uncertainty.

“Fuel prices are the single most important trigger for inflation in Nigeria,” Aisha Mohammed, an energy analyst at the Lagos-based Centre for Development Studies, said. “When they rise sharply, the entire economy feels the shock.”(BusinessDay)