Olufemi Adeyemi Fresh geopolitical tensions in the Middle East are beginning to cast a shadow over Nigeria's energy sector, with industry stakeholders warning that the renewed confrontation between the United States and…
What the source says
Olufemi Adeyemi Fresh geopolitical tensions in the Middle East are beginning to cast a shadow over Nigeria's energy sector, with industry stakeholders warning that the renewed confrontation between the United States and Iran could have far-reaching implications for fuel pricing, foreign exchange demand and the operations of the Dangote Petroleum Refinery. The growing uncertainty follows a fresh round of military exchanges involving both countries, reigniting fears over the security of the Strait of Hormuz, one of the world's most strategic oil shipping routes. The renewed instability has unsettled global energy markets and raised concerns over crude supply chains, particularly for countries and refineries that rely on imported feedstock. Against this backdrop, indications have emerged that the Dangote Petroleum Refinery has commenced dollar-denominated transactions effective today, a development linked to persistent challenges in accessing sufficient domestic crude oil supplies under the Federal Government's crude-for-naira initiative. Industry sources attributed the development to the continued inability of the Nigerian National Petroleum Company Limited (NNPCL) and International Oil Companies (IOCs) to fully meet their obligations to supply crude oil locally in naira, forcing the refinery to increasingly source crude from international markets at significantly higher dollar-denominated prices. Under the crude-for-naira arrangement, the refinery was expected to receive about 15 crude cargoes monthly. However, industry insiders said deliveries have consistently fallen short. "Under the crude-for-naira deal, the refinery was to be supplied 15 cargoes a month. However, they barely meet up to five cargoes, resulting in having to import at high dollar prices." The situation has reportedly been compounded by the Nigerian Midstream and Downstream Petroleum Regulatory Authority's (NMDPRA) decision to issue fresh fuel import licences to marketers, a move stakeholders say has increased pressure on foreign exchange demand. The development comes at a time when the naira continues to experience exchange rate volatility, with the dollar trading at about N1,450 over the weekend, further increasing the refinery's import costs and overall exposure to foreign exchange fluctuations. The latest escalation between Washington and Tehran occurred after the United States launched another round of strikes on Iranian targets early Sunday, extending a pattern of military exchanges that have steadily weakened the fragile ceasefire reached between both countries last month. According to reports, the latest strikes were aimed at reducing Iran's capacity to threaten commercial shipping routes through the Strait of Hormuz, a narrow waterway that serves as one of the world's busiest and most important energy corridors. The Strait of Hormuz remains a critical gateway for global crude exports, handling a significant percentage of international oil shipments. Historically, any threat to shipping activities within the corridor has triggered spikes in crude prices and heightened uncertainty across global financial and energy markets. For Nigeria, analysts say the implications extend beyond international diplomacy. Industry sources noted that prolonged instability in the Gulf region could further complicate crude procurement for the Dangote Refinery at a time when domestic supply commitments remain inconsistent. Should the refinery increasingly depend on imported crude to sustain production, experts believe the accompanying foreign exchange exposure could encourage a broader shift towards dollar-based pricing for refined petroleum products. Such a development would represent a significant setback to ongoing efforts aimed at easing pressure on Nigeria's foreign exchange market through local refining while also undermining the Federal Government's crude-for-naira policy. The United States military confirmed carrying out the latest wave of attacks shortly after accusing Iran of threatening commercial vessels transiting the Strait of Hormuz. According to the U.S. Central Command, the operations were intended to prevent further attacks on international shipping and safeguard freedom of navigation through the strategic waterway. Iranian state media, however, reported that the American strikes extended well beyond the Strait of Hormuz, targeting several locations across central and western Iran. Among the locations reportedly affected were Ahvaz and Khondab, while authorities in Khuzestan Province confirmed strikes in Omidieh, Mahshahr, Behbahan, Dezful, Andimeshk and Abadan. The latest military exchanges followed days of heightened tensions after Iran allegedly intensified threats against maritime traffic within the Strait of Hormuz and commercial shipping routes across the Gulf. According to U.S. military officials, Iran's Islamic Revolutionary Guard Corps fired at commercial vessels navigating the waterway and also deployed drones and cruise missiles within the area. Captain Tim Hawkins, spokesman for the U.S. Central Command, said, "American forces successfully intercepted at least one cruise missile and a one-way attack drone launched by Iranian forces." The renewed confrontation has intensified concerns over possible disruptions to global oil supplies. Brent crude, the international oil benchmark, reacted sharply as investors monitored developments around the Strait of Hormuz, while oil prices have remained highly volatile amid fears that prolonged hostilities could disrupt global supply chains. Shipping companies have also become increasingly cautious, with reports indicating a noticeable decline in maritime traffic through the Strait of Hormuz as operators continue to assess the growing security risks in the region. The ripple effects are already being felt across several emerging economies that depend heavily on imported energy products and access to dollar liquidity. For Nigeria, economists warned that sustained increases in crude prices, freight costs and insurance premiums could trigger renewed inflationary pressures, intensify demand for foreign exchange and ultimately push domestic fuel prices higher. The concerns come as the country continues efforts to stabilise the naira, improve energy security and reduce dependence on imported petroleum products through increased domestic refining capacity. Analysts also cautioned that while higher international crude prices could temporarily boost Nigeria's oil export earnings, those gains may ultimately be outweighed by increased import costs, exchange rate pressures and rising domestic fuel prices if crude sourcing challenges for local refiners persist. With neither Washington nor Tehran showing clear signs of de-escalation, attention remains firmly fixed on the Strait of Hormuz, whose stability continues to play a pivotal role in determining global energy market confidence and, by extension, the economic outlook for countries such as Nigeria.
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