Morganable Business/Economy
A major factor behind the spike was the temporary disruption of shipping routes through the Strait of Hormuz, a critical artery for global oil trade
kaNo —
Nigeria recorded the steepest increase in petrol prices across Africa in the first half of 2026, as global supply disruptions triggered by the Middle East conflict pushed pump prices up by 39.5 per cent, a new industry report has revealed.
The surge, detailed in the latest report by the Major Energies Marketers Association of Nigeria, highlights the country’s continued exposure to international oil market shocks despite recent gains in domestic refining capacity.
According to the Nigeria Half-Year Downstream Industry Report covering January to June 2026, geopolitical tensions involving Israel, Iran, and the United States, which escalated on February 28, sent crude oil prices soaring above $100 per barrel.
The conflict disrupted global supply chains and significantly increased the cost of transporting petroleum products.
A major factor behind the spike was the temporary disruption of shipping routes through the Strait of Hormuz, a critical artery for global oil trade.
Oil tankers were forced to abandon the route and sail around the Cape of Good Hope, more than doubling transit times from about 18 days to nearly 40 days.
“During the first half of 2026, severe geopolitical tensions in the Middle East sparked immediate supply anxieties, injecting a heavy risk premium that drove international crude benchmarks past $100 per barrel,” the report stated.
“These pressures were compounded as the conflict bottlenecked traffic through the Strait of Hormuz, forcing maritime oil tankers to reroute around the Cape of Good Hope and stretching voyages to nearly 40 days.”
The association explained that Nigeria’s deregulated downstream market meant the global price shock was transmitted directly to domestic consumers without the cushioning effect of subsidies.
As a result, Nigeria recorded the highest petrol price increase on the continent, far exceeding regional peers such as Egypt, where prices rose by 14.3 per cent.
“Operating under a newly deregulated system, Nigeria experienced an immediate price transmission at the pumps,” MEMAN said. “Data from the height of the crisis revealed that Nigeria recorded a 39.5 per cent gasoline price surge, the sharpest increase across Africa.”
Report Reveals Shift In Downstream Sector
Despite the price volatility, the report identified a major structural shift in Nigeria’s downstream petroleum sector, driven by increased domestic refining.
According to MEMAN, the share of locally refined Premium Motor Spirit (PMS) rose sharply from 38.9 per cent in 2025 to 81.7 per cent during the review period.
Domestic refineries also met an average of 64 per cent of diesel demand, while local gas processing facilities supplied 90.5 per cent of cooking gas consumption.
“Against the backdrop of this intense price shock, the downstream sector achieved a significant structural shift away from import dependence toward domestic refinery supply,” the report stated.
Between February and April, domestic production fell short, creating a supply gap that required intervention from regulators.
“This supply-to-consumption deficit became evident when national consumption consistently exceeded domestic refinery output,” MEMAN said.
To prevent shortages, authorities issued import licenses to selected marketers, adopting a hybrid supply model that combined local production with imports.
This approach, the report noted, helped stabilize the market during the peak of the crisis.
The report also revealed that marketers significantly reduced fuel inventories in response to rising replacement costs.
Holding large volumes of fuel became increasingly expensive in a volatile pricing environment, prompting operators to prioritize liquidity over stockpiling.
Nigeria’s Fuel Reserve Drops
As a result, Nigeria’s fuel reserve levels dropped sharply. PMS stock sufficiency declined from 33 days in January to just 16 days by May, well below the statutory benchmark of 30 days.
By June, reserves had recovered slightly to around 20 days following the resumption of imports.
“The decline in stock sufficiency underscores the urgent need for government-backed strategic petroleum reserves,” the report stated, adding that such buffers would help cushion future global supply disruptions.
Beyond supply challenges, the report highlighted a significant shift in consumer behavior due to high fuel prices.
Nigerians responded to rising costs by reducing consumption, with average daily demand for petrol falling by 22.3 per cent, while diesel consumption dropped by 17.5 per cent.
The association attributed this trend to price sensitivity in an open-market system, where consumers adjust usage in response to cost increases.
Middle East Conflict Alters Supply Routes
In a broader analysis of global trade dynamics, MEMAN noted that the Middle East conflict fundamentally altered petroleum supply routes.
With access to the Strait of Hormuz restricted, suppliers increasingly turned to alternative sources, including the U.S. Gulf Coast and West Africa.
These shifts extended delivery timelines and raised freight and insurance costs, placing additional strain on global shipping capacity.
“Under normal conditions, Gulf-origin cargoes could reach key markets in about 18 days,” the report explained. “However, rerouting extended voyages to nearly 40 days, significantly delaying supply flows and increasing logistical costs.”
The disruption, MEMAN added, reinforced the importance of diversifying refining hubs and highlighted the growing strategic role of Atlantic Basin suppliers in maintaining global fuel availability during crises.
Looking ahead, the association stressed that while Nigeria’s downstream reforms particularly deregulation and increased local refining are beginning to yield positive results, sustained regulatory oversight will be critical.
“As domestic refining expands and the downstream sector evolves, sustained regulatory vigilance will remain essential to fostering fair competition, protecting consumers, and strengthening investor confidence,” the report concluded.
The findings underscore a dual reality for Nigeria’s petroleum sector: while progress is being made in reducing import dependence, the country remains highly susceptible to global market shocks, underscoring the need for stronger buffers and long-term energy security planning.
