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Rising crude prices give Abuja a quick boost, but inflation, higher shipping costs, and deeper economic problems could take away these gains. Report by TOYE FALEYE.
Disruption in World’s Shipping Routes
The attack on the Skylight oil tanker in the Strait of Hormuz has revived concerns about major disruptions in one of the world’s most important shipping routes.
After Iran’s Revolutionary Guard declared the strait closed to international ships, shipping traffic fell sharply, insurers withdrew, and major companies like Maersk halted shipments.
The strait, through which about 20% of global oil supply passes, has become the focal point of international tension. For Nigeria, thousands of miles away, the ripple effects are immediate and significant.
Oil Windfall and Its Limits
Nigeria, the biggest oil exporter in Africa, could benefit from rising crude prices.
Brent futures are expected to go over $100 per barrel, a price last seen during Russia’s invasion of Ukraine.
According to one analyst, Nigeria will experience a short-term fiscal windfall from higher oil prices, but the underlying weaknesses in the economy prevent the country from fully benefiting.
The paradox is that Nigeria exports crude oil but imports refined products, leading to increased inflation at home.
For Abuja, this might lead to stronger foreign reserves and more room in the budget. But these gains are shaky. Because Nigeria relies on imported fuel, higher global oil prices mean higher costs at home, more inflation, and less buying power for people.
Shipping and Insurance Risks
Nigerian crude does not pass through Hormuz, but the world’s shipping market is connected. War risk premiums have jumped, making it more expensive to export and import goods. Tanker operators face uncertainty, and insurers are hesitant to cover trips in risky areas.
An energy expert points out that Nigeria’s crude will still find buyers, but transportation costs will increase. Insurance premiums and freight charges are set globally, so disruptions in Hormuz affect West African exports as well.
Call for Accelerated Diversification
The crisis highlights Nigeria’s vulnerability as an oil-dependent country. While there may be short-term financial gains, the volatility exposes deeper issues: overreliance on crude exports, insufficient refining capacity, and exposure to global changes beyond its control.
A former CBN deputy governor says this is a wake-up call for Nigeria to accelerate diversification and build domestic refining capacity; otherwise, the country will remain exposed to external shocks.
The Global Context
OPEC+ countries, such as Saudi Arabia and Russia, plan to increase oil output by 206,000 barrels per day starting in April. However, this small boost probably won’t make up for the loss if Hormuz stays closed.
Experts warn that as much as 20 million barrels a day could be blocked, which is about one-fifth of the world’s supply.
Opportunities And Challenges
For Nigeria, the Strait of Hormuz crisis brings both opportunities and challenges.
Higher oil prices may temporarily increase government revenues, but without meaningful reforms, the country risks remaining trapped in cycles of volatility.
The government should use this chance to accelerate refinery projects, such as the Dangote Refinery and other smaller facilities, so Nigeria can meet its own fuel needs instead of relying on imports at high prices.
Diversifying income sources—like agriculture, mining, and manufacturing—would reduce dependence on oil.
The oil windfall should be used strategically to stabilise the naira and rebuild foreign reserves, rather than funding routine expenses.
Increasing domestic fuel reserves would also help protect against future disruptions.
Nigeria should strengthen its role in OPEC+ and the African Union to ensure its interests are represented in global energy discussions.
Ultimately, the Strait of Hormuz crisis demonstrates that Nigeria cannot rely indefinitely on the fluctuations of the oil market. Real reforms are needed to turn temporary gains into long-term stability and growth.
