World Bank warns oil price surge could worsen Nigeria's inflation

The World Bank has cautioned that rising global oil prices could push Nigeria’s headline inflation up by about 3.1 per cent points, driven largely by transport and other energy-related costs.

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The bank issued the warning in the Nigeria Development Update released on Tuesday, citing the ongoing Middle East conflict between the US/Israel and Iran for the cause.

The ongoing Middle East 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. Nigeria’s headline inflation in February stood at 15.06 percent.

In the Development Update, the World Bank warned that the surge in the oil price will add 3.1 per cent points to the headline inflation as a result of increased prices of transportation and logistics costs in the economy.

“Overall, an increase in oil prices to about US$80 per barrel, representing a 31.1 per cent rise relative to the pre-conflict scenario, would directly add around 3.1 ppts to headline inflation under a full pass-through assumption, reflecting that transport and other energy-linked components account for roughly 10.1 percent of the CPI basket.

“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 also raise transportation and logistics costs across the economy. These pressures are already visible in Nigeria’s downstream market,” the report stated.

The World Bank also attributed the predictions to Dangote Refinery stopping the issuance of import licenses in early 2026, which also led to an increase in the petrol price across the country.

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The bank also said the surge in global oil prices would put upward pressure on food prices, as rising global food and fertilizer prices feed into domestic inflation.

READ ALSO: Middle East war could reverse disinflation trend – CPPE

“Dangote Refinery, the main supplier of refined petrol after the regulator ceased issuing import licenses in early 2026, raised the ex-depot price of Premium Motor Spirit (PMS) to about N1,275 per liter as of March 23, 2026, compared to an estimated import-parity price of around N1,122 per liter, implying a cost differential of roughly 12 per cent.

“In addition to higher energy costs, the conflict is also likely to put upward pressure on food prices, as rising global food and fertilizer prices feed into domestic inflation. On the other hand, any potential appreciation of the Naira could mitigate some of these effects.”