Supply chain disruption caused by the U.S.-Iran war exposed the fragility of Nigeria’s fuel reserve safety net
The global oil market crisis triggered by escalating geopolitical tensions in the Middle East during the first half of 2026 has unleashed a fresh wave of economic hardship across Africa, with Nigeria emerging as the continent’s hardest-hit fuel market.
Despite being Africa’s largest crude oil producer, the country has recorded a 39.5 per cent surge in petrol prices—the highest on the continent—as rising international crude prices, foreign exchange pressures, deregulation and supply chain disruptions combined to push pump prices to record levels.
This was revealed in the “Nigeria Half-Year Downstream Industry Report” released on Tuesday by the Major Energies Marketers Association of Nigeria (MEMAN).
The conflict between the United States, Israel and Iran, which began on February 28, 2026, triggered a sharp escalation in global crude prices, with international benchmarks rising above the $100 per barrel mark as ship movement through the Strait of Hormuz was disrupted.
The MEMAN report said the situation forced oil tankers to reroute around the Cape of Good Hope and turned a normal 18-day voyage into a nearly 40-day journey.
“During the first half of 2026, severe geopolitical tensions in the Middle East sparked immediate supply anxieties, injecting a heavy risk premium that drove international crude benchmarks past $100 per barrel,” MEMAN stated.
“This price surge was quickly compounded as the conflict bottlenecked traffic through the Strait of Hormuz, forcing maritime oil tankers to reroute around the Cape of Good Hope and stretching what is typically an 18-day voyage into a nearly 40-day journey.”
According to the report, the price surge in Nigeria significantly outpaced regional peers such as Egypt, which recorded a 14.3 per cent increase over the same period.
“Operating under a newly deregulated system, Nigeria experienced an immediate price transmission at the pumps.
“Data from the height of the crisis revealed that Nigeria recorded a 39.5% gasoline price surge, the sharpest increase across Africa, more than doubling the price jumps seen in regional peers like Egypt (14.3%).”
The sharp escalation has intensified inflationary pressures, increased transportation and production costs, and renewed concerns over the vulnerability of Nigeria’s energy security.
Strategic Pivot to Local Refining
The report noted that despite global supply disruptions, Nigeria’s downstream sector marked a pivotal transition toward energy self-reliance, anchored primarily by the operational scale-up of the Dangote Refinery alongside other domestic processing plants, which increased local fuel supply to displace imports.
It stated that Dangote Refinery accounted for the majority of local supply of Premium Motor Spirit (PMS), also known as petrol, within the period.
“Against the backdrop of this intense price shock, the downstream sector achieved a significant structural shift away from import dependence toward domestic refinery supply, driven primarily by the operational scale-up of the Dangote Refinery, which by the review period accounted for the majority of local PMS supply.”
It stated that the supply of petrol from local refining sources increased from 38.9 per cent in 2025 to 81.7 per cent in the first half of 2026. Also, local refineries met an average of 64 per cent of diesel (AGO) demand, while domestic gas processing facilities captured 90.5 per cent of the cooking gas (LPG) market.
Supply Deficit and Emergency Imports
MEMAN, however, stated that while local production expanded dramatically, domestic output alone proved structurally insufficient to fully meet national demand, especially during peak consumption periods. It said the deficit became evident between February and April, when national consumption systematically outpaced domestic refinery production.
To prevent widespread product stockouts and grid instability, industry regulators stepped in to issue targeted refined product import licenses to selected marketers. This hybrid supply approach, it explained, served as a vital buffer against severe international logistical bottlenecks.
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However, operating in a high-cost, volatile market forced marketers to optimize liquidity by drawing down physical buffers rather than maintaining expensive static wet stocks. This operational pivot, the report stated, caused national PMS stock sufficiency to decline steadily, from 33 days in January to a low of 16 days by May, against the 30-day statutory benchmark.
MEMAN said that with the emergency imports approved by the Nigerian Midstream and Downstream Regulatory Authority (NMDPRA), the nation recorded a recovery in stock sufficiency to about 20 days in June.
Call for Building Strategic Product Reserves
The MEMAN report further pointed out that the rapid depletion of national fuel reserves exposed persistent vulnerabilities in Nigeria’s supply chain resilience to external shocks.
The association of major fuel marketers emphasised the urgent need to establish state-backed Strategic Product Reserves alongside a dedicated Crude Oil Feedstock Reserve to safeguard domestic refineries and consumers from sudden foreign supply disruptions.
It further stated that simultaneously, open-market pricing dynamics altered domestic consumption patterns across the country, leading to a reduction in average daily consumption of petrol by 22.3 per cent and 17.5 per cent for Automotive Gas Oil (AGO), also known as diesel.
Looking ahead, MEMAN called for sustained regulatory oversight, stressing that it remains critical as local refining capacity continues to expand.
The association stressed that maintaining fair market competition, protecting end-consumers, and building investor confidence are essential steps to realizing the long-term benefits of Nigeria’s ongoing downstream energy reforms.
Victor Ezeja is a Nigerian journalist skilled in producing insightful news analyses, feature stories, and interviews that simplify complex issues and drive informed public discourse. His work combines rigorous research, balanced reporting, and compelling storytelling to highlight developments shaping industries and society. Victor, who holds a Master's Degree in Mass Communication, specializes in energy, aviation, business, and economic reporting. He can be reached via @VICTOREZEJA on X