Despite a sharp decline in global crude oil prices following the easing of tensions in the Middle East, industry experts warn that Nigerians may not see a significant reduction in petrol prices immediately, even as the country faces a potential loss of more than $11.4 billion in oil earnings due to the crash in crude prices.
The calls for lower fuel prices have intensified in recent weeks as international crude benchmarks retreated from war-induced highs of about $114 to around $74 per barrel, following the ceasefire agreement between Iran and Israel and the reopening of shipping routes through the Strait of Hormuz.
Apparently heeding the calls for price reduction, Dangote Petroleum Refinery has slashed the ex-gantry price of premium motor spirit (PMS), also known as petrol, by N50 per litre.
In a notice to customers, the refinery said the ex-depot price had been adjusted downward from N1,175 per litre to N1,125 per litre, while the coastal supply price was reduced from N1,495,215 per metric tonne to N1,428,165 per metric tonne.
The refinery attributed the price reduction to the easing of tensions in the Middle East, which has led to a decline in global energy prices.
However, stakeholders said yesterday that while crude prices fall rapidly, petrol and diesel prices typically adjust more slowly due to inventory costs, refining cycles, logistics expenses, and market dynamics.
Before the Middle East hostilities, prices of Premium Motor Spirit (PMS) averaged N800 per litre across the country but remained around N1,300 yesterday, showing an increase of about N500 per litre even when oil prices stayed close to the pre-war level of $74 per barrel.
The development comes as Nigeria, Africa’s largest crude oil producer, faces a significant decline in oil revenue after benefiting from elevated prices during the brief Middle East conflict.
Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) show that Nigeria’s crude oil production averaged about 1.6 million barrels per day between January and May 2026. Production stood at 1.627 million barrels per day (mbpd) in January; 1.483mbpd in February; 1.546mbpd in March; 1.663mbpd in April and 1.7mbpd in May.
At average crude prices of about $114 per barrel during the conflict period, Nigeria’s oil sector was estimated to generate roughly $5.4 billion in monthly revenue. With prices now hovering around $74 per barrel, monthly earnings could decline to approximately $3.5 billion if production remains unchanged.
This translates to a monthly revenue reduction of about $1.9 billion. Over the remaining part of the year, cumulative losses could exceed $11.4 billion compared with revenues generated during the period of elevated prices.
The decline reflects the correction in oil markets after fears of supply disruptions eased and maritime traffic resumed through the Strait of Hormuz, one of the world’s most important energy transit corridors.
This is coming ahead of the 2027 election, when political office holders focus more on electioneering and when the country is upping borrowing to finance budget deficits.
According to data from S&P Global MINT and S&P Global Commodities at Sea, vessel traffic through the Strait of Hormuz rebounded sharply on June 24, reaching a record 78 vessels in a single day. The figure surpassed the previous conflict-era high of 49 vessels and helped push total monthly vessel movements to 551, compared with 438 in April.
The recovery followed the establishment of a new safe shipping corridor along the Omani coast by Oman and the International Maritime Organisation (IMO). More than 40 per cent of vessels transiting the waterway on June 24 utilised the new route.
The increase in shipping activity has eased concerns over global oil supply disruptions that had pushed crude prices sharply higher during the conflict.
Additional relief has come from rising fuel oil exports across the Middle East.
Reuters reports that fuel oil exports from the region are expected to rise by about 20 per cent in June to roughly 508,000 barrels per day as tanker traffic improves and major producers, including Saudi Arabia, Iraq and Oman, increase shipments from ports outside the Persian Gulf.
Iraq’s fuel oil exports from Syria’s Baniyas Port reportedly reached a record high this month, while Oman is expected to post its highest fuel oil export volumes in more than two years.
Although analysts caution that geopolitical uncertainties remain, the restoration of shipping activity and improving fuel exports have contributed to the sharp correction in crude prices.
Yet the expected decline in domestic fuel prices has not materialised at the same pace.
A petroleum economist and former President of the Nigerian Economic Society (NES), Prof. Adeola Adenikinju, said consumers were justified in demanding lower petrol prices given the sharp fall in crude oil prices.
“The call is in order,” Adenikinju said. “With the sharp decline in crude oil prices, petroleum product prices should begin a descent from the high prices they were before the signing of the agreement between the United States and Iran.”
However, he explained that fuel prices often exhibit what economists call “asymmetric price behaviour”, in which prices rise rapidly when costs increase but fall more slowly when costs decline.
The phenomenon, commonly referred to in energy economics as the “rocket-and-feather effect”, describes situations where fuel prices shoot up rapidly like a rocket when crude prices rise but drift downward slowly like a feather when crude prices fall.
Head of Energy and Power at Fidelity Bank, Emeka Nkemakolam, said market realities would ultimately determine how quickly petrol prices respond to lower crude prices.
Nkemakolam said: “The global oil prices are not determined by clamours from interest groups; they are determined by the demand and supply of the commodity. If inventories in retail outlets were purchased at higher prices, how would marketers reduce prices when they have not purchased new stock at the lower prices?”
Professor of Economics, WumiIledare, said calls for further reductions in petroleum product prices were justified given the recent decline in crude oil prices. However, he noted that fuel prices do not always move in tandem with crude prices due to “asymmetric price transmission.”
On the impact of lower oil prices on government earnings, Iledare said a decline in Nigeria’s monthly oil export revenue from about $5.4 billion to $3.5 billion would have significant macroeconomic implications. He said reduced foreign exchange inflows could put pressure on the naira, constrain government revenues, widen fiscal deficits and increase borrowing requirements if sustained over time.
He noted, however, that the Petroleum Industry Act (PIA) 2021 made Nigeria’s fiscal framework more resilient through value-based royalty mechanisms.
Nevertheless, he emphasised the need for prudent management of oil windfalls and greater revenue diversification.
Partner at Kreston Pedabo, Olufemi Idowu, said calls for a reduction in petrol prices were understandable given the recent moderation in global crude oil prices, but cautioned that lower crude prices do not automatically translate into immediate relief at the pump in Nigeria.
Meanwhile, fuel prices across Africa continue to vary widely, reflecting differences in government policies, subsidies and market structures.
According to GlobalPetrolPrices data analysed by Statista, Malawi has the continent’s highest petrol price at $3.83 per litre, followed by Zimbabwe ($2.08) and Rwanda ($2.01). Libya remains the cheapest market at just $0.024 per litre, supported by heavy subsidies and large oil reserves. Other low-price markets include Angola ($0.327), Algeria ($0.355), Egypt ($0.454) and Sudan ($0.700), while petrol sells for about $1.51 per litre in Cameroon and $1.35 per litre in Ghana.
SOURCE: GuardianNigeria
