Nigeria’s downstream oil sector is undergoing a critical resilience test as the closure of the Strait of Hormuz sends shockwaves through global energy markets, disrupting roughly 20 per cent of seaborne crude trade and pushing oil prices into a volatile $95–$120 per barrel range.
Yet, in a marked departure from past crises, Nigeria enters the second quarter of 2026 with a significantly stronger domestic position. For the first time in decades, the country’s vulnerability is no longer anchored on fuel import dependence.
Until recently, such a global disruption would have triggered acute supply shortages. However, the steady ramp-up of the Dangote Refinery—now operating at between 75 and 85 per cent capacity—alongside output from modular refineries, has reduced Nigeria’s reliance on imported refined products to just 15–25 per cent.
According to the latest outlook by the Society of Energy Editors, the country is now confronting a different kind of challenge. Rather than scrambling for supply, policymakers must manage how the benefits and costs of increased local refining capacity are distributed across the economy.
At the heart of Nigeria’s new energy architecture is the Dangote Refinery, which currently meets up to 85 per cent of domestic demand for petrol, diesel, and aviation fuel. This capacity has shielded the country from the global scramble for fuel imports that has gripped nations dependent on Persian Gulf exports.
However, this advantage brings its own risks. With international prices surging, there are growing concerns that locally refined products could be diverted to export markets where margins are more attractive. In response, authorities are expected to tighten enforcement of the Domestic Supply Obligation (DSO), using crude allocation as leverage to guarantee adequate domestic supply.
Rising crude prices also present a complex fiscal scenario. While government revenues are set to increase, the disparity between global landing costs and regulated local pump prices has widened. Petrol is projected to retail between ₦800 and ₦1,200 per litre, with the government likely to deploy windfall revenues to cushion consumers rather than allow a full price pass-through.
Diesel, which remains fully deregulated, is expected to surge sharply to between ₦1,600 and ₦2,800 per litre. This increase poses significant risks to transportation, manufacturing, and agriculture, with likely knock-on effects on inflation.
On the production side, Nigeria’s crude and condensate output is forecast at 1.65 to 1.80 million barrels per day, supported by stable deepwater operations and early progress in the Ogoni development framework. However, higher oil prices are also expected to intensify crude theft, a long-standing issue that could erode production gains and reduce fiscal windfalls.
Compounding this risk are emerging tensions among stakeholders in the Niger Delta over pipeline surveillance contracts, raising concerns about potential disruptions to oil infrastructure. Analysts have called for swift government intervention to prevent escalation.
In the power sector, improvements in gas supply—particularly through the OB3 pipeline—have enhanced generation potential. Nonetheless, the Nigeria Electricity Supply Industry continues to grapple with liquidity constraints. Rising diesel and gas costs are squeezing operators, with generation projected at 3,500 to 5,200 megawatts, limited more by financial challenges than fuel availability.
The outlook recommends a targeted, transparent injection of funds from oil windfall revenues to stabilize the sector, alongside clearer communication on tariff reforms.
Ultimately, Nigeria’s ability to navigate the current quarter will be decisive. Sustaining domestic supply, curbing crude theft, and balancing fiscal pressures could mark a turning point—signaling a transition from chronic energy vulnerability to a more resilient and self-reliant system.
Key indicators to watch include whether the Dangote Refinery maintains its domestic supply focus or pivots toward exports, and whether pipeline infrastructure can withstand increased pressure from oil theft amid elevated global prices.
