Fuel price hike imminent as oil prices exceed budget benchmark
Nigeria’s fuel market faces fresh turbulence as global oil prices breached a key fiscal threshold yesterday, a development that may further increase the nation’s petrol pumps to about N1,000 per litre.
While Nigerian grades, Brass and Qua Iboe, were trading slightly above $70 per barrel, Brent crude’s international benchmark climbed above $70 per barrel for the first time in months amid heightened geopolitical tensions.
On December 19, President Bola Tinubu presented the 2026 Federal Budget, anchoring revenue projections on a crude oil benchmark of $64.85 per barrel. At the time, analysts described this assumption as relatively conservative in the context of prevailing market fundamentals.
However, crude oil prices have since accelerated, with Brent surging past $70, a mark last seen in early August and WTI (West Texas Intermediate) also trading at multi-month highs above $65.
The increase reflects renewed geopolitical risk premiums in global markets, mainly amid intensifying rhetoric between the United States (U.S.) and Iran over nuclear and military tensions.
Oil markets have responded to escalatory statements and deployments in the Middle East with marked sensitivity.
Heightened talk of U.S. naval movements and potential conflict has injected fear of possible supply disruptions, despite there being no direct interruption of crude exports to date.
Analysts note that Iran, a major Organisation of Petroleum Exporting Countries (OPEC) member with output exceeding three million barrels per day, plays a critical role in maritime flows through the Strait of Hormuz, a chokepoint for roughly 20 per cent of global crude.
The risk premium, effectively the extra cost built into prices in anticipation of future supply constraints, is estimated by some analysts at $3 to $4 per barrel.
Earlier this week, Dangote Refinery and the Nigerian National Petroleum Company Limited (NNPCL) raised their ex-depot and retail prices, pushing pump prices into the N830 to N900 per litre threshold in major cities such as Lagos and Abuja.
Continued strength in crude benchmarks and further appreciation beyond Nigeria’s budget assumption could squeeze refinery margins and translate into higher consumer prices.
With refining and distribution costs closely linked to feedstock price, a sustained oil rally can quickly filter through to end-users, particularly in a deregulated market environment where subsidies no longer mask cost changes.
For 2026, Nigeria’s decision to assume a modest benchmark may prove prudent if crude reverses lower, but trends suggest volatility will remain a defining feature of oil markets in the near term.(Guardian)
