Nigeria is feeling the full impact of rising global oil prices, with no fuel subsidy to soften the blow. Since the government removed subsidies in 2023, households and businesses now face the direct consequences of crude price increases. As tensions in the Middle East push oil higher, domestic fuel costs, transport fares, and food prices are climbing rapidly, marking the first significant test of Nigeria’s post-subsidy economic model.
Without a government buffer, the transmission of oil price shocks is immediate. When global crude costs rise, importers pass these increases onto consumers, triggering higher petrol prices that ripple through transport and food supply chains. “Fuel prices sit at the center of Nigeria’s cost structure,” said a Lagos-based macroeconomist. “Once they move, transport follows, then food. It spreads quickly across the economy.” Previously, subsidies absorbed part of this shock, but now households bear the full brunt.
Despite higher oil prices theoretically boosting government revenue, Nigeria sees limited benefits. Domestic oil production remains below capacity, and most refined fuel is still imported. “The country exports crude but still imports fuel, so rising prices increase both revenues and costs at the same time,” explained energy economist Olugbenga Olaoye. This paradox means that inflation rises faster than economic growth, leaving everyday Nigerians to shoulder the cost.
Early signs of inflation are visible, with transport and food prices climbing alongside fuel costs. Experts warn that while subsidy removal addressed fiscal strain, it did not fix deeper structural weaknesses. Domestic refining capacity is low, government-owned refineries remain largely offline, and infrastructure gaps keep moving goods expensive. These limitations leave households exposed whenever global oil prices spike.
Policymakers face a delicate balance between maintaining reform credibility and shielding vulnerable households. Targeted support measures could help, but indiscriminate subsidies risk undermining the post-2023 framework. Long-term solutions, experts say, lie in expanding refining capacity, boosting oil production, and strengthening foreign exchange reserves. Until then, Nigerians will continue paying more for fuel at home even as the country earns from crude exports.
source: Business day