Oil Prices: A Boost for Nigeria’s Economy or Setback for Energy Transition?

LAGOS, Nigeria — It was a sultry afternoon at a carpark in Lagos, southwestern Nigeria. The morning rain had left parts of the carpark waterlogged, forcing bus drivers to perch on the few dry patches they could find. With rising gasoline prices pushing up transport fares, there were few passengers. Some drivers passed the time with bottles of beer, while others gathered in small groups, trading jokes as they waited for business to pick up.

“We’re suffering,” Emmanuel Umokoro, who drives a shuttle bus between Ogba and Oshodi, told Truthdig. “We don’t take any money home. By the time we put gas in our vehicles and pay parking levies, we have nothing left. We come out just to feed ourselves. You can’t pay your children’s school fees; you can’t afford three meals a day.” 

Gasoline was selling at N1,400 (US$1.05) per liter that day, more than 40% higher than the price Umokoro paid in January, before the U.S. started bombing Iran.

The surge in global oil prices this year following the war and disrupted oil flows through the critical Strait of Hormuz has led to higher goods prices for Nigerians, but increased revenue and foreign exchange income for Nigeria. But it also comes at a time when the government has committed to an energy transition that would reduce the country’s dependence on fossil fuels and expand cleaner energy sources to reach net zero by 2060. To do that, the government needs the foreign income from oil, which raises the question: Can an oil windfall pay for a transition or just make it easier to postpone it? 

And for Nigerian households, the higher fuel prices mean higher energy and food costs, while communities in oil-producing and refining areas are already shouldering heavy environmental consequences.

Oil boom for the government, little relief for Nigerians

After the U.S. and Israel launched a military offensive against Iran in February, Iran responded in March by closing the Hormuz Strait (through which a third of the world’s seaborne oil trade passes). Countries dependent on oil imports quickly began to feel the economic consequences as crude prices skyrocketed. Japan and South Korea faced the highest risk of supply shortages, while other major importers such as India and China were exposed to rising energy costs. 

For Nigeria, Africa’s largest crude oil producer and the 15th-biggest producer globally, a crude price over US$100 would ordinarily be good news, given that the country’s 2026 budget was based on a projected price of $64.85/barrel. Some 70% of Nigeria’s export earnings are derived from oil, and Nigeria earned an estimated $4 billion in additional oil revenue in April and May alone, seeing higher financial allocations to its three tiers of government. July recorded the highest amounts since 2023. 

But for ordinary Nigerians, higher fuel prices impact everyday costs, especially transport and power for homes and businesses — which often rely on generators as the public electricity supply is inadequate. With a N70,000 (US$52) monthly minimum wage, and an estimated 133 million people living in poverty (over half the population), the higher prices mean households are  struggling to pay for housing, education and other basic needs.

“So the irony is that those collecting the money are different from those feeling the brunt of the effects of the higher prices,” Adeola Adenikinju, former president of the Nigerian Economic Society and a professor of economics at the University of Ibadan, told Truthdig. 

He added that the nonimplementation of local government financial autonomy has stripped citizens of the dividends of the windfall. In 2024, the Supreme Court ruled that federal spending allocations should go directly to the 774 local government councils, rather than via state governments, but the states have yet to comply.

For Umokoro, he says his seven-seater minibus fetches him N7,000 (US$5) per trip. But at the end of the day, after deducting fuel costs and other transport levies, he is left with less than N5,000 (US$3.57).

“I have not eaten; I will need to fix my tires. I could only go on one trip last week, and I borrowed money for fuel. We’re all in debt. You can’t afford to clothe yourself. We sometimes stay here till 10 p.m, looking for passengers,” he said, adding that the workers’ wives were leaving them over their inability to provide basic needs. 

The cost of oil dependence

Today, Nigeria refines most of its own oil, but it hasn’t always been that way. British colonial rule in the country established a culture and structures that put oil and large corporations before local and community needs, and set Nigeria up to export crude oil while importing processed and manufactured goods — leaving it very vulnerable to oil prices and foreign exchange rates. From 1914, oil licenses were restricted to British companies and individuals, and British multinational Shell-BP drilled oil in commercial quantities in Oloibiri in 1956 and began exporting crude to Britain in 1958, two years before Nigeria finally gained independence from Britain. 

Nigeria eventually built its own oil refineries, however, 1980s World Bank and IMF-enforced deregulation, subsidy cuts and the commercialization of state-owned enterprises coincided with years of inadequate maintenance, operational failures and crude supply disruptions that weakened the refineries, leaving all four state-owned plants offline for extended rehabilitation by 2020. The privately-owned Dangote Refinery began operating in 2024 and supplies Nigeria’s domestic market, but at international oil price rates.

Now, while oil and gas account for only about 4% of the GDP, they generate up to 90% of Nigeria’s total foreign exchange earnings. Nigeria needs these earnings to then import raw materials, technology and other manufactured supplies.

To make fuel relatively affordable for its people, the government subsidized fuel prices from the 1970s in response to global energy crises that shot up crude prices and led to a global recession. But sustaining the regime cost the country 5% of its GDP. 

That changed in 2023, when President Bola Tinubu’s administration removed the petrol subsidy, ending a system that had kept pump prices artificially low for decades. Petrol prices more than doubled within months, rising from about N190 (US$0.14) per liter to over N500 ($0.38), before climbing further as the naira weakened and other costs rose.

Environmental harm

Oil isn’t just costing Nigerians at the pump, however. Exploration and production continue to exact a high human and environmental health cost. 

Dr. Dumnamene Fyneface, executive director of the Youths and Environmental Advocacy Centre (YEAC-Nigeria), told Truthdig that crude oil exploration has left Niger Delta communities grappling with polluted water, depleted fish stocks and degraded farmland.

An estimated nine to 13 million barrels of oil spilled into the Niger Delta from 1960 to 2010. In Nisisioken Ogale, a community in western Ogoniland, Rivers State, benzene, a known carcinogen, was detected in drinking water from wells at concentrations more than 900 times the World Health Organisation’s guideline. 

“We don’t have potable water anymore,” said Umokoro, who left his hometown in Delta State for Lagos as a young man because of the contamination and the disruption it caused to local livelihoods.

He last went back six years ago. “I have a house and extended family there. But what do you want to stay there for? You have no land to farm, you have nothing. We hustle here and send what we can back home.”

Multinational oil companies Shell and Eni have faced scrutiny over oil spills and their handling of pollution in the Niger Delta, with Amnesty International documenting hundreds of reported spills by both companies. According to the National Oil Spill Detection and Response Agency, 458 publicly available oil spill records were logged in 2025. 

Oil infrastructure can also see explosions that claim lives. Just recently, on Oct. 15, 2026, a gas pipeline explosion in Aleto, a community in Rivers State, injured 20 people and damaged over 50 houses. Residents said the pipeline had been leaking for weeks before the blast. A 1998 pipeline explosion in Jesse, Delta State killed over a thousand people, and a 2006 explosion in Lagos killed hundreds. Another incident in 2020 claimed 23 lives. 

Oil refination in Lagos

Waves from the Atlantic Ocean come with heavy gusts of wind that sweep through Akodo Ise, a coastal community in Lagos. Normally, Super Agbude, a fisher, would be far into the water, preparing to return to shore with his catch. But on this day, he sat idle with other fishers, waiting for calmer water as ocean surges and coastal changes have disrupted their fishing. 

Residents say the surges, which they link to the nearby Dangote Petroleum Refinery, have worsened the pressures on their livelihoods. Construction of the refinery began in 2016, and it started producing diesel and aviation fuel two years ago. Agbude has fished in Akodo Ise since 2003.

“This place was so fine,” Agbude told Truthdig, elongating the diphthong to emphasize the beauty of his community. Now, ocean surges wash away homes, schools, farmland and graves, while the danger posed by the raging waves sometimes keeps fishers out of the water for weeks.

The community is about 27 kilometers (17 miles) from the Dangote Refinery, the world’s largest single-train refinery with a 700,000 barrels/day oil processing capacity. The refinery is owned by Africa’s richest person, Aliko Dangote.

It now covers 87% of domestic petrol demand in Nigeria. The facility is flanked by a three-kilometer deepwater jetty built for high-load vessels and serving as the marine gate for crude intake and for exporting fuels and petrochemicals.

In 2021, the refinery’s management said its jetty was built with technology that would not affect the coastline, assuring residents in coastal communities of its commitment to protecting the shoreline and fishing activities. But residents told Truthdig that while they initially saw the project as progress, they now blame extensive marine dredging and infrastructure construction along the Ibeju-Lekki coastline for ocean surges and rising water levels that have disrupted their fishing and coconut farming.

“I used to be happy, but when the Dangote Refinery came, problems came with it. We no longer saw fish to kill; our coconut trees and ancestors’ graves were washed away. … We used to supply fish in surplus, but now there is no fish because the work on the Dangote refinery has spoiled Ibeju-Lekki completely,” said Agbude. 

“There is nothing left here. The waves are washing away our homes.”

Their woes are further compounded by the surging oil prices. The last time Agbude went fishing four days earlier, he said he fuelled his boat with N43,000 worth of fuel and spent 11 hours in the ocean, going as far as 17 fathoms. His catch was worth N10,000 and he ran at a loss.

“Na shortage na,” he said in pidgin English. “I sold my catch, and we drank garri.”

Community leaders say they had repeatedly raised their concerns with relevant authorities and received visits from federal and state representatives, who promised to address their plight. However, they said little has changed, and the situation has worsened.

Oil prices: a catalyst or inhibitor for transition?

Seeking to address the climate challenges and damage by fossil fuels, Nigeria launched its Energy Transition Plan (ETP) in 2021 and revised it in 2024. It notes the twin challenges of providing access to energy and combating climate change, with targets to achieve affordable and clean energy by 2030. 

However, Nigeria estimates that achieving net-zero emissions by 2060 would require about US$500 billion in additional capital investment above business-as-usual levels. It projects that the investment could generate $686 billion in fuel savings, but Global South countries like Nigeria can’t obtain the additional capital so easily.

Adenikinju says whether the current oil price windfall helps or hinders Nigeria’s ETP will depend on the government’s long-term strategy, and he believes energy transition is currently a secondary priority for the government.

“I think they are more interested in the short-term revenue to finance development,” he said.

There’s no reason to believe the government plans to channel increased oil earnings into measures such as expanding liquefied petroleum gas access in rural areas, Adenikinju says, but he sees the windfall as an opportunity for Nigeria to attract green investment.

However, without a clear commitment to the transition, including concrete measures like including adopting cleaner fuels for government-owned vehicles and transport assets, he fears the additional oil revenue could make it easier for the government to postpone the shift.

“I think it’s going to push it further, further down,” he said.

Tengi George-Ikoli, lawyer, economist, and Nigerian country manager at the Natural Resource Governance Institute, also noted the contradiction between continued investment in fossil-fuel infrastructure alongside Nigeria’s energy transition ambitions. 

She believes this year’s oil windfalls should go towards the transition, to “a better and more sustainable tomorrow,” and pointed to the Nigeria Sovereign Investment Authority’s fund models for managing surplus oil revenue.

“Mechanisms to absorb oil price hikes exist. However, historically, Nigeria has not adhered to strong governance principles when managing its oil windfalls. These mechanisms — stabilization fund, sovereign wealth fund and the excess crude account — have not been well managed over the years,” she told Truthdig.

Adenikinju also warned that Nigeria cannot afford to wait until the global shift away from fossil fuels becomes unavoidable. Countries that fail to prepare, he said, could eventually be forced into a more difficult transition when they have fewer options.

“One day we will just wake up, and the world would have moved on. It will come; it will happen,” he said. “A climate-sensitive government will prepare for that transition.”

Adenikinju did note however, that Nigeria’s policies occur within a broader “global reluctance” to move away from fossil fuels, and the incentive to phase out oil and gas would remain weak until major economies, like the U.S., fully commit to the transition.

What a just transition means for Nigerians

Communities in the Niger Delta are unclear about the importance of an energy transition, Fyneface says, and are more concerned about what the shift away from oil will mean for their livelihoods.

“The most common community understanding of transition is solar panels in place of generators,” he said, adding that beyond that, residents are asking what happens to oil wells and other infrastructure as companies divest or reduce their operations.

He said communities are concerned about abandoned wells that are not properly decommissioned or capped, as well as oil-contaminated sites and other environmental damage left behind by decades of extraction.

Their concerns also extend to jobs and businesses that have grown around the oil industry such as pipeline surveillance, and the informal economy built around oil facilities, including boat transportation, catering, trading and Kpo-Fire (artisanal refining of crude to extract kerosene, diesel or petrol). 

“It is indeed contradictory that we are still opening new oil fields and wells and at the same time talking about energy transition and reduced dependence on fossil fuels,” Fyneface said.

The success of Nigeria’s energy transition will depend on whether ordinary Nigerians experience it as an improvement in their daily lives, Olumide Idowu, founder and director of the International Climate Change Development Initiative, told Truthdig.

He said it would be difficult to convince people to embrace cleaner energy when alternatives remain expensive or unreliable, particularly amid complaints over electricity costs and persistent blackouts. The transition, he said, must come with affordable alternatives, infrastructure and consumer education.

“People will support the energy transition when they can see that it reduces their costs, that it’s something that improves their lives and even creates opportunities for their families,” Idowu said.

Transition policies shouldn’t be imposed, and should be communicated in local languages so that people can understand and participate in it, Idowu emphasized. “The just transition cannot be something done to the community. It must be something designed with the community and ultimately owned by them.”