Crisis in the Middle East and how it affects Fuel prices hike in Nigeria

The commissioning of the Dangote Refinery in 2023 was seen as a protection against global energy price hike. The logic was simple, if we pump the oil here and refine it here, why should a conflict thousands of miles away in the Middle East dictate the price of a litre of petrol sold in Nigeria?

As of March 2026, with the escalating conflict between Iran and Western aligned forces, that logic is being tested. Despite Nigeria having the world’s largest single train refinery on our soil, fuel prices are climbing. The reason for this is due to some factors that affects Dangote’s fuel pricing system, one of which is the cost of raw material. Dangote Refinery is a private enterprise that must purchase its crude oil at international market prices. Oil is a global commodity priced against benchmarks like Brent Crude. Due to the war threatening the Middle East, the global supply of oil feels at risk. This causes the global price (Brent Crude) to increase and because Dangote’s raw material now costs more, the petrol he produces becomes more expensive to make.

Another major factor is logistics (Insurance and Freight); Even if the oil is sourced locally, the war risk applies to the shipping industry. The maritime world is interconnected; when tensions rise in the Middle East, marine insurance premiums spike globally. Many of the vessels used to transport crude or move refined products along the Nigerian coast are owned by international companies. These companies raise their rates to offset the increased risk and insurance costs associated with global instability. The issue of the exchange rate connection is also a determining factor, the Iran war doesn't just affect oil; it affects the US Dollar. In times of global conflict, investors flee risky emerging markets and pile into the Dollar as a safe haven. This strengthens the Dollar against currencies like the Naira.

Since oil is traded exclusively in Dollars, a weaker Naira means the refinery needs more local currency to buy the same amount of crude. Even with the Crude for Naira deal occasionally brokered by the government, the underlying value is still pegged to the international Dollar rate.

The truth is that Dangote Refinery has solved the problem of availability, but it cannot solve the problem of valuation. As long as Nigeria’s economy is tied to the global trade of oil, a spark in the Middle East will continue to affect fuel prices in Nigeria.