The ongoing escalation of the crisis in the Middle East, specifically the conflict involving the U.S., Israel, and Iran, has pushed Brent crude prices above $100 per barrel. While this exceeds Nigeria’s budget benchmark of $64.85 per barrel, several structural and economic factors suggest the country may not fully reap the rewards of this surge.
This view was shared by economic expert and Chief Executive Officer of the Financial Derivatives Company (FDC), Mr Bismarck Rewane, during the Nairametrics Money Fair (Wise 1.0) held in Lagos between March 17 and March 18, 2026.
Mr Rewane said there are structural issues that could deny the country the opportunity of reaping benefits of high crude oil prices.
According to him and some other financial experts who participated in panel sessions during the Money Fair, structural inefficiencies and declining crude production could affect higher earnings from exports.
The paradox of Nigeria’s “oil windfall” is driven by three main factors – production shortfalls, refining challenges, and rising cost of living.
Production Shortfalls
Nigeria is currently unable to meet its OPEC production quota, which limits the volume of oil it can sell at these high prices. Nigeria has missed its OPEC quota of 1.5 million barrels per day for the seventh consecutive month. In February 2026, Nigeria’s crude production fell to 1.31 million barrels per day (bpd), missing the OPEC quota of 1.5 million bpd by roughly 190,000 barrels.
Production output has, according to analysts, been hampered by aged infrastructure, pipeline maintenance, and persistent oil theft. This means the country is capturing price gains but losing out on potential volume gains.
Apart from production constraints Rewane and other experts noted that the country is also affected by forward oil sales and swap arrangements.
Analysts opined that forward sales prevent the country from reaping much of the extra cash that could come through oil prices from reaching the national treasury.
These deals effectively commit future oil production to pay off current debts or secure fuel, meaning when prices rise, Nigeria is often delivering “pre-paid” barrels rather than selling them at the new, higher market rate.
Nigeria has increasingly used Forward Sale agreements to secure immediate loans. Under these deals, the NNPC commits a specific number of barrels to be delivered over several years to repay lenders (example, Afreximbank).
Energy economist, Mr Kelvin Emmanuel had some months back raised concerns about the implications of engaging in Forward Sale agreement, pointing out that it often leads to losses when oil prices rise in the international market.
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Talking about losses, if a deal was struck when oil was $65 per barrel, and oil is now $105 per barrel, Nigeria is essentially delivering $105 worth of oil to settle only $65 of debt. The $40 difference is a lost opportunity that does not enter the Federation Account.
The Refining Paradox
Despite the presence of the Dangote Refinery—which reached its full 650,000 bpd capacity in February 2026—domestic fuel prices remain tied to global markets, exposing the country to global volatility.
Since domestic refineries purchase crude at international market rates, because of shortage of local supply, a surge in global oil prices directly increases the cost of refined petrol (PMS) and diesel. Petrol prices in Nigeria have recorded about 39.5 per cent increase in just three weeks since the U.S/Israel-Iran war started on February 28, wiping out the “cushioning effect” many expected from local refining.
There are concerns that the high domestic fuel cost caused by a surge in global crude prices, could worsen the cost of living crisis endured by households and businesses in the country, eroding revenue gains made by the Federal government.
Higher energy costs are feeding directly into transportation, food distribution, and manufacturing. This risks reversing the 11-month downward trend in inflation, which had recently cooled to 15.06 per cent in February, analysts have warned.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in Mass Communication. He can be reached via @VICTOREZEJA on X
