The world is once again reminded of the precarious balance of energy markets. Geopolitical tensions in the Middle East, particularly the escalating conflict involving the United States, Israel, and Iran, have sent shockwaves through global oil supply chains.

With the Strait of Hormuz, a critical chokepoint through which roughly 20 percent of the world’s oil passes, under threat, energy traders have raced to price in risk, and consumers around the world are feeling the impact.

For Nigeria, Africa’s largest oil producer, these developments present both challenges and unprecedented opportunities.

Rising global crude prices offer Nigeria and its West African neighbors an opportunity to capture market share, attract investment, and provide a diversified crude supply for global buyers seeking alternatives to Middle Eastern supply.

Middle East Tensions and the Global Oil Shock

The killing of Ayatollah Ali Khamenei, Supreme Leader of Iran, by a coordinated US-Israel strike has intensified fears of a full-blown military escalation in the Middle East.

Missile exchanges, attacks on allied military bases, and growing regional insecurity have triggered immediate reactions in the oil markets.

“The escalation around the Strait of Hormuz has created a perfect storm for energy markets,” says Jonathan Gunu Taidi, SAN, an expert in international energy law.

“Because so much of the world’s crude passes through this narrow maritime corridor, any threat to its operation reverberates globally.

Prices rise almost instantaneously, and the effects are felt in every sector, from transportation to manufacturing. At the same time, crises like this may create openings for West African producers to become reliable alternative suppliers for global markets.”

Within 48 hours of the escalation, Nigeria experienced immediate consequences.

Fuel stations adjusted pump prices, transport fares climbed, and businesses that rely on petrol-powered generators felt the squeeze.

Small industries such as bakeries, barbershops, and carpentry workshops, already contending with operating cost pressures, faced increased overheads.

Aliko Dangote, Chairman of the Dangote Group, talked about the human dimension of these economic shocks during his Eid visit to President Bola Ahmed Tinubu.

He said, “Africa is already paying debts. If this crisis doesn’t de-escalate, we’ll end up paying high prices. People like barbers, bread makers, and small industries who rely on generators will feel the heat if energy prices keep rising. Many depend on daily earnings. If they don’t work, they won’t eat.”

Opportunities for Nigeria and West African Producers

While the crisis has created short-term pain, it also presents a rare opportunity for Nigeria and other West African oil producers to expand their role in global markets.

Magnus Abe, presidential nominee for the Nigerian Upstream Petroleum Regulatory Commission NUPRC, described the conflict as a global economic crisis with far-reaching implications for oil-producing nations.

“The crisis contributes to rising global fuel prices, but it also presents an opportunity for Nigeria to strengthen its oil sector and increase revenue through improved crude oil production and international sales,” he said.

West Africa’s advantages are clear

Diversifying global crude supply away from the Middle East, leveraging the Atlantic Basin’s proximity to Europe and the Americas. Expanding regional influence through coordinated exports; capturing rising global demand for non-Middle Eastern crude and attracting foreign investment into upstream and refining sectors.

Beyond Nigeria, countries like Angola, Ghana, and Senegal complement this potential.

Angola, Sub-Saharan Africa’s second largest oil producer, has invested heavily in LNG and upstream production, expanding offshore platforms and deepwater capacity.

Ghana continues to develop offshore fields in the Jubilee and Sankofa blocks, increasing production potential, while Senegal is emerging as a producer with strategically positioned reserves across its Rufisque, Sangomar, and Grand Tortue fields.

Combined, these nations position West Africa as a viable alternative for global buyers seeking supply diversification.

Analysts note that coordinated exports and regional infrastructure investments could allow the sub-region to partially offset disruptions from the Middle East.

Nigeria’s Oil Production Capacity

Nigeria currently produces between 1.4 and 1.5 million barrels of crude oil per day, according to the International Energy Agency’s March 2026 report.

While this reflects the nation’s maximum operational capacity, analysts emphasize that Nigeria has limited spare capacity, unlike some Middle Eastern producers.

“The biggest obstacle is the lack of significant spare capacity,” says Nigerian energy analyst Ayodele Oni. “Infrastructure gaps, outdated pipelines, and security issues in the Niger Delta restrict our ability to scale quickly.”

Even so, targeted investments, upstream reactivation projects, and regional coordination could allow West Africa to partially offset global supply gaps, presenting Nigeria and its neighbors with opportunities to strengthen both domestic and regional markets.

Beyond Nigeria, it exports to neighboring West African countries, including Ghana, Togo, Benin, and Sierra Leone.

Refining Capacity and the Dangote Refinery

Historically, Nigeria exported crude oil while importing most refined petroleum products.

Domestic refineries in Port Harcourt, Warri, and Kaduna operate below capacity due to neglect, underinvestment, and technical inefficiencies.

The Dangote Group is driving a continental energy and industrial footprint that extends well beyond Nigeria.

The Dangote Refinery in Ibeju Lekki, Lagos, has changed that dynamic. Processing around 650,000 barrels per day, it supplies roughly 60 million liters of fuel daily to the domestic market.

This reduces regional dependence on imports, strengthens energy security, and positions Nigeria as a hub for refined fuel distribution.

“The Dangote Refinery is our salvation in these volatile times,” says Billy Gillis Harry, President of the Petroleum Products Retail Outlets Owners Association of Nigeria. “It allows Nigeria and neighboring countries to withstand price shocks and maintain supply stability.

Although it cannot fully replace Middle Eastern supply, it stabilizes domestic markets, supports industries, and allows the region to capture new export opportunities amid global disruptions.”

By partially buffering West Africa against the current oil shock, the refinery ensures a continuous fuel supply for power generation, transportation, and industry.

While it does not neutralize global volatility, its strategic operations give the region leverage in responding to global crises.

Structural Risks and Constraints

The oil sector in Nigeria faces deep-seated systemic challenges that include pipeline vandalism, oil theft, outdated infrastructure, and inconsistent policy.

These issues reduce the nation’s capacity to fully maximise rising global prices.

Long-time insecurity in the Niger Delta region remains a cause for concern, as obsolete pipelines and refineries require serious investment.

Unstable policies, administrative bottlenecks, and unpredictable regulatory environments deter foreign investors from investing in the sector.

 Resolving some of these obstacles is important to allow Nigeria and other regional partners to make use of the opportunity presented by the global market challenge.

This question of whether Nigeria can weather these global storms all depends on how determined and prepared it is to take the right steps.

Its refineries are near comatose, and with the Dangote Refinery, the country has a chance to mitigate the problem of importation.

It needs to leverage the Dangote Refinery and invest in more oil production, which will improve its daily output.

Bureaucratic bottlenecks for investors must be checked by creating efficiency in the industry, such as the deregulation of the downstream sector.

The oil sector in Nigeria is bedeviled with different challenges that have limited the country’s ability to take advantage of global price changes. 

Nigeria cannot completely avoid global economic shocks. That much is clear. But it can reduce how badly those shocks hit at home if the right steps are taken.

One obvious area is local refining. With the Dangote Refinery and similar efforts, Nigeria has a chance to depend less on imports.

Processes need to be simpler and more predictable so private investors are willing to come in.

The government could temporarily support part of local fuel consumption during periods of sharp global price volatility as this would not amount to a return to the large-scale subsidy regime of the past, but would serve as a short-term stabilisation measure.

We also need to understand that when fuel prices rise, transport costs go up. Food becomes more expensive. Small businesses struggle to stay afloat.

Power generation is affected, creating a ripple effect that reaches almost everyone.

That is why improving refining capacity and infrastructure matters. It is not just policy; it is about stability.

Nigeria’s economy is heavily dependent on oil revenue, and any sustained price drop threatens foreign exchange inflows and public finances.

Finally, Nigeria should not act alone. Working with other West African producers can strengthen the region’s position and make supply more reliable.

As Dangote warned, a prolonged crisis could further destabilise economies, particularly in Africa, where fiscal buffers are limited, and debt pressures remain high.

“If it doesn’t de-escalate, we’ll end up paying high prices. Africa is very busy paying debt, and putting this again on top of us is going to add a lot of hardship on people, on the government, on the people, on everybody, for something that we have no involvement in.”

He stressed that energy costs are central to nearly all sectors of the economy, meaning sustained increases would have widespread and cascading effects on livelihoods and production.

“So, if this thing doesn’t de-escalate, it is going to keep going up and up and up, and governments cannot really now go and add salaries also. So, people will really feel the hinge barbers, people who are doing bread, people who have industries, who have to fire their own generator,” he said.

“If they don’t work, they won’t eat. So I think really we just need all hands on deck to pray that this thing comes to an end,” he said.