By: Tijani Salako.
A sharp decline in global crude oil prices following a peace agreement between the United States and Iran has raised expectations of lower fuel prices in Nigeria, although experts warn that the development could also reduce the country’s oil revenue.
International oil benchmarks fell significantly on Tuesday after both countries reached an agreement to end months of hostilities and reopen the Strait of Hormuz, one of the world’s most critical oil shipping routes.
Brent crude declined by 4.53 per cent to $83.37 per barrel, while West Texas Intermediate (WTI) fell 4.69 per cent to $80.90 per barrel, reflecting growing optimism that disruptions to global oil supply could ease in the coming weeks.
The decline marks a reversal from the price surge recorded during the conflict, when concerns over supply disruptions pushed crude prices sharply higher.
Commenting on the development, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the fall in crude prices presents both opportunities and challenges for Nigeria.
According to him, lower crude prices are expected to eventually translate into reduced pump prices for petrol, diesel, aviation fuel and cooking gas, providing relief for consumers and businesses battling high energy costs.
“With the peace deal, crude oil prices will plummet and naturally this should cascade into the local oil market. So, I expect petrol prices to gradually return to pre-war levels,” Yusuf said.
He noted, however, that the impact would not be immediate because fuel marketers and distributors are still selling inventories purchased when international oil prices were significantly higher.
According to him, the adjustment process could take several weeks as existing stock is gradually exhausted.
“Many distributors are carrying old stock acquired at higher prices before the latest developments. That means the reduction in fuel prices will likely be gradual rather than instantaneous,” he explained.
Yusuf added that the reopening of the Strait of Hormuz and the expected return of Iranian crude exports could further increase global oil supply, exerting additional downward pressure on prices.
He projected that if crude prices eventually decline to around $65 per barrel, petrol prices in Nigeria could return to a range of between N800 and N900 per litre, depending on market conditions and exchange rate movements.
While lower fuel prices could help moderate transportation and production costs across the economy, Yusuf warned that the development carries significant fiscal implications for Nigeria, whose government revenues remain heavily dependent on crude oil exports.
“The flip side is that Nigeria will lose the windfall gains it enjoyed during the period of elevated oil prices. Lower crude prices will inevitably translate into lower oil earnings and weaker government revenue,” he said.
According to him, countries that benefited from higher oil prices during the conflict but were not directly affected by disruptions in the Middle East are likely to see those gains diminish as global prices retreat.
The peace agreement, which is expected to be formally signed in Switzerland on Friday, received further momentum after U.S. President Donald Trump announced that a deal had been reached with Iran and indicated that oil shipments through the Strait of Hormuz would resume once the agreement takes effect.
The breakthrough is widely viewed as a major development for the global energy market because it reduces fears of prolonged supply disruptions from one of the world’s most strategic oil transit corridors.
The agreement is also expected to allow Iran to resume crude oil exports during an initial 60-day ceasefire period, while broader negotiations on sanctions and nuclear issues continue.
Despite the optimism, industry stakeholders cautioned that uncertainty remains. They noted that oil markets are likely to remain sensitive until the agreement is formally signed, the Strait of Hormuz is fully cleared for navigation and normal shipping operations resume.
Analysts said the extent of the decline in oil prices over the coming weeks will depend on the durability of the peace deal, the pace of Iran’s return to the market and broader global demand conditions.
For Nigeria, the development presents a familiar trade-off: lower energy costs for households and businesses on one hand, and reduced oil export earnings for government finances on the other.
