Hormuz crisis: Nigeria faces oil revenue opportunity, as crude climbs above $90

By Firdaus Jibril

Nigeria could be positioned to benefit from the latest surge in international crude prices as renewed tensions between the United States and Iran raise fresh concerns over global oil supplies.

Brent crude rose to $91.49 per barrel on Tuesday, while West Texas Intermediate (WTI) climbed to $85.25, as markets reacted to fading prospects of a lasting US–Iran agreement and the continued disruption of tanker traffic through the Strait of Hormuz.

The development followed the expiration of a 60-day US–Iran memorandum reached in June, with Iran indicating that it would adopt a more offensive military posture if diplomatic efforts fail.

The breakdown has heightened concerns that shipping through the Strait of Hormuz could remain severely restricted.

Hormuz is a major route for global oil supplies, making any prolonged disruption a concern for crude producers and consumers worldwide.
For Nigeria, however, the impact is more complicated.

Nigeria does not depend on the Strait of Hormuz to export its crude. Nigerian oil is produced largely offshore and onshore in the Gulf of Guinea, with exports shipped directly from domestic terminals.

This means a prolonged disruption in Hormuz will not physically prevent Nigeria from exporting its own crude.

Instead, Nigeria’s exposure is through the international oil market.

With Middle Eastern crude supplies facing shipping risks, tighter global supply could keep crude prices elevated. That could increase the value of Nigeria’s oil exports and potentially improve government revenues if the country can sustain production and export volumes.

Nigeria’s 2026 budget was based on a crude oil benchmark of $64.85 per barrel and an oil production target of 1.84 million barrels per day.

With Brent now trading more than $25 above the budget benchmark, the price environment is significantly more favourable to the government than the assumptions underpinning the budget.

However, Nigeria’s ability to benefit fully from higher prices will depend on production capacity.

The country has continued to struggle to meet its budgeted production target consistently. Recent data showed that Nigeria fell below its first-half oil production target despite meeting its OPEC quota.

This means higher prices alone may not translate into a proportionate increase in government revenue if production remains below target.

The renewed disruption could also have implications for Nigeria’s growing refining industry, particularly the Dangote Petroleum Refinery.

The refinery has traditionally relied heavily on Nigerian and other African crude grades, but it purchased two cargoes of crude from the United Arab Emirates in June, marking its first crude purchases from a Middle Eastern supplier.

A prolonged disruption around Hormuz could make Gulf crude more difficult or expensive to transport, potentially increasing the strategic importance of Nigerian crude for domestic refining.

This development comes as Nigeria continues efforts to improve crude supply to local refineries.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported that 53.7 million barrels of crude oil and condensate were supplied to local refiners between April and June, representing a 97.4 percent performance rate under the Domestic Crude Supply Obligation for the second quarter of 2026.

Dangote Refinery alone accepted 52.6 million barrels out of the 68.1 million barrels offered by producers during the quarter, according to NUPRC data.

The current oil shock could therefore strengthen the case for Nigeria to maximise domestic crude production and supply local refineries, rather than leaving domestic refiners exposed to volatile international crude markets.

There is also a potential opportunity for Nigeria’s downstream sector.

If disruptions continue to restrict supplies of crude and refined petroleum products from the Gulf, refiners outside the affected region could become critical suppliers to international markets. Dangote Refinery has already expanded its role in supplying refined products across international borders.

For Nigerian consumers, however, the impact could be less straightforward.

Higher international crude prices often raise the cost of refined petroleum products, but the ultimate effect on petrol, diesel, and aviation fuel prices in Nigeria will also depend on domestic refining output, crude supply arrangements, product exports, and local pricing conditions.

The latest development presents Nigeria with both an opportunity and a risk: higher crude prices could strengthen oil earnings and improve the economics of domestic production, while prolonged global supply disruptions could raise energy costs and create additional pressure on the downstream market.

The key question is whether Nigeria can leverage the current price environment to increase production, maximise crude export earnings, and strengthen domestic refining before the global oil market stabilises.

For now, while the Strait of Hormuz crisis is not directly blocking Nigeria’s crude exports, its impact on global oil prices leaves the country firmly exposed to the broader economic consequences of the unfolding US–Iran confrontation.