Stakeholders Push for Boost in Local Oil Output Amid Global Turmoil

There is renewed demand from stakeholders to ramp up domestic production capacity, as rising global oil prices triggered by the Middle East conflict, mounting public debt, and increased government spending have intensified pressure on costs and threatened Nigeria’s fragile disinflation journey.

The warning comes amid fresh concerns that recent gains in taming inflation could reverse as energy prices surge, feeding through to transportation, food, and industrial costs across the economy.

Bloomberg reported that the Governor of the Central Bank of Nigeria, Olayemi Cardoso, said authorities were closely watching the inflationary risks posed by the conflict.

“We have been extremely vigilant,” Cardoso said. “We’re monitoring it on a daily basis, and we will respond appropriately to ensure that at least we minimise the dysfunctional impact.”

According to the Bloomberg report, Nigeria, which had seen inflation decline steadily to 15.06 per cent in February after peaking at 31.5 per cent, now faces renewed upside risks as petrol and diesel prices rise.

Although Nigeria’s status as an oil producer offers some buffer, higher pump prices, driven partly by adjustments from the Dangote refinery, which supplies over half of domestic fuel, have already pushed up transport fares and business costs.

Cardoso added, “At a time like this, everybody would be cautious about the impact of the existing situation.”

Debt Burden Compounds Risks

Data from the Central Bank of Nigeria’s Q3 2025 statistical bulletin showed that credit to the government from deposit money banks stood at N3.013tn as of September 2025, reflecting continued reliance on borrowing to finance fiscal operations.

Further data indicated that Nigeria’s total public debt rose to N152.39tn as of Q2 2025, with N71.84tn in external debt and N80.55tn in domestic debt. Of the domestic component, the Federal Government accounted for N76.58tn, while states and the Federal Capital Territory held N3.96tn.

In a phone interview, the former President of the Chartered Institute of Bankers of Nigeria, Professor Segun Ajibola, said the country’s rising debt profile would persist unless production improves significantly.

“Debts will keep on increasing until production starts to pick up and starts to offset the debts. Until money is earned,” Ajibola said.

He added, “Someone could not be running a deficit project and not borrow. And you will discover that in the period you are talking about, the government deficit has also been increasing.”

Ajibola warned that fiscal deficits inherently drive borrowing, whether domestic or external, stating, “When government says we are running a deficit project, they are telling you they will borrow to run that project. And borrowing is both local and foreign. So, when the foreign one is not available, it creates problems.”

He stressed that even with prudent management, borrowing would remain inevitable in the short term, querying, “But how can the government run without borrowing? They don’t have to print money now, like the previous administration of the CBN. So, essentially, debts will keep on increasing until production starts to pick up and starts to offset the debts.”

On the inflation outlook, he cautioned that expanding government credit without corresponding revenue generation could worsen price pressures.

“If they don’t spend the money they don’t have, then we will be pushing it,” Ajibola maintained.

Fuel Price Shock Fuels Inflation

The Lagos Chamber of Commerce and Industry said the surge in global oil prices to about $112 per barrel, alongside rising domestic fuel prices, signals deepening inflationary pressure.

In a recent statement, the Director-General of the LCCI, Dr Chinyere Almona, said the increase in the Dangote refinery’s gantry price to about N1,245 per litre could push pump prices towards N1,500 per litre.

“The escalation of global crude oil prices to about $112 per barrel… signals intensifying pressure in Nigeria’s downstream market, with pump prices trending towards N1,500 per litre,” Almona said.

She added that the development was already transmitting inflationary shocks across key sectors. “This development is rapidly transmitting inflationary shocks across transportation, food, and industrial production,” Almona said.

The LCCI attributed the persistent fuel price challenge to structural supply deficits, noting that Nigeria’s daily petrol demand of over 50–53 million litres continues to outstrip effective domestic refining capacity.

Almona said, “This persistent fuel affordability challenge is fundamentally a reflection of a structural supply deficit.”

She warned that despite higher crude prices typically boosting government revenues, Nigeria’s gains remain limited due to production constraints: The dominant impact is adverse: cost-push inflation intensifies, industrial competitiveness weakens, and household purchasing power declines.”

Manufacturers Count Rising Costs

Manufacturers also affirm that the surge in fuel prices is squeezing margins and threatening output. Economic Confidential earlier reported that, in an exclusive interview, the Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, said energy costs remain a critical input for the sector.

“Fuel is a major input in production, transportation and energy supply, and it has a significant impact on the citizens and the whole sector of the economy,” Ajayi-Kadir said.

He warned that higher fuel prices would raise production costs, disrupt supply chains, and reduce competitiveness, saying, “The increase in fuel prices will increase the cost expended on power generation, thereby increasing the cost of production and reducing the profit margin.”

He added that logistics costs would also rise sharply, stating, “Increases in the price of fuel raise the transport fare, making distribution expensive and affecting the supply chain.”

Ajayi-Kadir noted that manufacturers would likely pass on higher costs to consumers, worsening inflation: “The extra cost will lead to an increase in the cost of finished products, thereby increasing the rate of inflation across the country, reducing consumer purchasing power.”

He also warned of declining competitiveness against imports: “Whenever there is an increase in production cost in the country, Nigerian goods will be more expensive compared to their competitors.”

Calls for Production-led Recovery

Stakeholders converged on the need for urgent structural reforms to boost domestic production, particularly in oil refining and manufacturing.

The LCCI called for increased crude supply to local refineries, enforcement of domestic supply obligations, and expansion of refining capacity.

“We call for urgent action to boost crude production specifically to feed our local refineries,” Almona urged.

She added that stabilising the naira and improving foreign exchange liquidity would be critical to moderating fuel prices and restoring investor confidence.

Analysts agree that the current crisis exposes the vulnerability of Nigeria’s economy to external shocks, given its reliance on imports of refined petroleum products and a weak industrial base.

With inflation risks rising, debt levels climbing, and fiscal space constrained, economists warned that Nigeria must accelerate production across sectors to generate revenue, reduce borrowing, and cushion households from rising costs.