Nigeria's petrol discount programme, launched just over a month ago, faces escalating fiscal pressure as crude oil prices climb amid conflict in the Middle East. Brent crude, the global benchmark for Nigeria's oil, approached $110 a barrel earlier this month, while both Brent and US benchmark West Texas Intermediate have traded above $100. Goldman Sachs has warned that prices could reach $120 a barrel if attacks on vessels intensify, threatening to widen the government's financial burden significantly.
Finance Minister Taiwo Oyedele announced the 30-day intervention on October 8, requiring Nigerian National Petroleum Company Limited retail outlets to sell petrol at cost without profit margins. The government set a wholesale price benchmark of N1,350 per litre, with refiners and importers absorbing costs above that level. Using an estimated discount of N66 per litre and national demand of about 50 million litres daily, the programme would cost approximately N3.3 billion daily, or N99 billion over 30 days at Brent's closing price of $104.28 on October 8. However, if Brent crude reaches $120 per barrel, the estimated cost could rise to about N114 billion, representing an additional N14.9 billion, or 15.1 percent increase, above initial projections.
Research firm BMI, a unit of Fitch Solutions, estimated the total cost at between 0.2 percent and 0.4 percent of gross domestic product, applying the National Bureau of Statistics' 2025 nominal GDP figure of about N441.5 trillion. This translates to a range of about N883 billion to N1.77 trillion. BMI expects the discount to remain in place for about six months rather than 30 days, with phasing out expected in late first-quarter or early second-quarter 2027, citing an anticipated US-Iran agreement that could bring crude prices down. The research firm warned that a prolonged scheme could hurt government revenue, worsen the fiscal position and pressure the naira, forecasting the budget deficit will widen to 3.3 percent of GDP in 2026 from 1.7 percent in 2025.
Experts raised concerns about the scheme's structure and sustainability. Jide Pratts, country manager at TradeGrid, warned that the government risked reverting to subsidies without clear price monitoring, noting that digital tools were essential to trace spending. Olatide Jeremiah, chief executive of Petroleumprice.ng, suggested a more efficient approach would target subsidies to specific groups rather than the entire population. The timing coincides with general elections scheduled for January 2027, with BMI noting the package fits pre-election spending increases already built into its forecasts.
For savers, borrowers and business owners in Nigeria, the scheme's potential extension and rising costs could increase government borrowing needs, potentially pushing interest rates higher and putting pressure on the naira's value. The geopolitical risks remain acute, with analysts doubting US President Donald Trump's prediction that the war would end after November elections, as fighting continues with neither side advancing peace talks. Helima Croft of RBC Capital Markets said Brent could top $120 by year-end if fighting continues, noting that Yemen's Houthis had taken the Red Sea port of Mokha, enabling more direct attacks on Saudi energy infrastructure and threatening maritime traffic through the Bab el-Mandeb strait.