Nigeria's Energy Security Hangs in Balance as Global Oil Market Volatility Rises

The recent escalation of fuel prices in Nigeria has reignited the debate over whether to reinstate subsidies, which could shape the country's energy landscape by 2027. Atiku Abubakar has proposed targeted support for local refining rather than reviving import subsidies, while the government has rejected outright restoration but acknowledges the increasingly volatile global oil market.

The conflict between the US and Iran, as well as disruptions in the Red Sea, have turned energy security into a geopolitical issue. The Strait of Hormuz is particularly critical, with nearly 20 million barrels per day moving through it in 2025, a quarter of global seaborne oil trade. However, only 3.5-5.5 million barrels can bypass this route via pipelines.

The International Energy Agency (IEA) projects that supply will be 100.7 million barrels per day in 2026, down 5.7 million from 2025, due to ongoing disruptions. Nigeria, an oil producer, is not insulated from these shocks as its economy relies heavily on globally priced crude and refined products.

The removal of fuel subsidies in 2023 had a significant impact on the country's economics, with headline inflation already at 22.04% in March before the reform. Transport and food costs surged due to energy prices affecting movement, production, and goods.