The World Bank has cautioned that rising global oil prices, driven by the ongoing Middle East conflict between the United States, Israel, and Iran, could push Nigeria’s headline inflation up by approximately 3.1 percentage points, driven largely by transport and other energy-related costs. The bank issued the warning in its Nigeria Development Update released on Tuesday, noting that the conflict has resulted in a global oil price surge after Iran closed the Strait of Hormuz, pushing crude prices from below $70 in late February to more than $100 by mid-March.
The bank’s analysis indicates that an increase in oil prices to about $80 per barrel, representing a 31.1 per cent rise relative to the pre-conflict scenario, would directly add around 3.1 percentage points to headline inflation under a full pass-through assumption. This reflects that transport and other energy-linked components account for roughly 10.1 per cent of the Consumer Price Index basket. Critically, the report states that this estimate captures only the direct effect, while the overall impact could be larger once indirect channels are considered, as higher fuel and electricity prices raise transportation and logistics costs across the entire economy.
The World Bank also attributed some domestic price pressures to the Dangote Refinery’s market position after the regulator ceased issuing import licences in early 2026. The refinery raised the ex-depot price of Premium Motor Spirit to about N1,275 per litre as of March 23, 2026, compared to an estimated import-parity price of around N1,122 per litre, implying a cost differential of roughly 12 per cent. This suggests that domestic refining, even at partial capacity, does not automatically translate into lower consumer prices when feedstock pricing remains tied to global benchmarks.
The bank further warned that the surge in global oil prices would put upward pressure on food prices, as rising global food and fertilizer prices feed into domestic inflation. For Nigerian households already grappling with elevated living costs, a potential 3.1 percentage point increase in headline inflation would represent a significant erosion of purchasing power. Nigeria’s headline inflation stood at 15.06 per cent in February, meaning an additional 3.1 points would push it toward 18 per cent, reversing some of the disinflation progress achieved through previous monetary policy tightening.
However, the World Bank noted that any potential appreciation of the naira could mitigate some of these effects. This highlights the interconnectedness of fiscal, monetary, and trade policies in determining ultimate inflation outcomes. For the Central Bank of Nigeria, the oil price surge complicates an already delicate balancing act between supporting economic growth and maintaining price stability. For households and businesses, the warning underscores the vulnerability of a fuel-importing economy to global energy shocks, reinforcing the case for strategic petroleum reserves and accelerated investment in domestic refining capacity beyond current levels.
