Rewane: Fuel price surge may push Nigeria’s inflation back to 19%

NIGERIA’S nearly year-long easing in inflation could be nearing an end, as new forecasts suggest price pressures are set to rise again. The expected reversal is largely linked to higher fuel costs and ongoing global disruptions tied to the Middle East conflict.

Speaking at an economic summit in Lagos on Friday, Chief Executive Officer of Financial Derivatives Company, Mr Bismark Rewane, projected that inflation could rise from about 15 percent to 19 percent by May. According to him, this development could complicate the Central Bank of Nigeria (CBN)’s monetary policy direction in the months ahead.

He explained that petrol prices have a direct and measurable effect on inflation, noting that a one percent increase in fuel costs translates to roughly a 0.079 percent rise in both transport fares and overall inflation. With petrol prices already up by about 42 percent, this could add between 3 and 4 percentage points to inflation within a short period.

Global developments are also intensifying the pressure. Since the initial joint strikes on Iran by the United States and Israel, key trade routes such as the Strait of Hormuz, which is responsible for about a fifth of global oil shipments, have faced disruptions, sending shockwaves across energy markets.

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Now in its fourth week, the conflict has continued to inflict economic strain globally, with ripple effects felt strongly in import-dependent economies like Nigeria. Already, refiners in Asia are competing aggressively for non-Middle Eastern crude, pushing prices for alternative grades to historic highs.

Locally, energy costs have surged sharply. Diesel prices have climbed by over 44 percent, while petrol has risen by more than 68 percent. As a result, transportation and logistics expenses have increased by around 20 percent, according to data from Financial Derivatives Company.

At the same time, food prices are also trending upward. Data from the National Bureau of Statistics (NBS) shows food inflation slightly above 12 percent year-on-year, with faster increases recorded on a monthly basis. Combined with higher import costs due to global supply disruptions, this is tightening household purchasing power.

These dynamics place the central bank in a difficult position. The Monetary Policy Committeen(MPC) is scheduled to meet on May 19 and 20, following a 50-basis-point rate cut in February that brought the benchmark rate down to 26.5 percent.

Rewane believes the likelihood of further rate cuts is slim if inflation accelerates as expected. He suggested the CBN may adopt a cautious stance similar to the US Federal Reserve by holding rates steady rather than easing further.

Despite rising inflation risks, economic growth is expected to remain positive. Nigeria’s gross domestic product (GDP) is projected to expand by about 3.08 percent in the first quarter of 2026.

However, sustaining that growth will depend on deeper structural reforms and stronger fiscal buffers, especially as external shocks persist.

On the currency front, the naira is expected to trade within a relatively tight range of N1,400 to N1,450 per dollar in the near term, supported by ongoing interventions. Nonetheless, continued inflationary pressure and global uncertainties could weigh on the exchange rate.

READ ALSO: Naira climbs to N1,358.28 on stronger reserves, higher oil prices, weaker dollar

Meanwhile, Nigeria’s stock market, which has seen strong gains in recent months, may begin to experience some pullback in line with broader global market trends, the report noted.

At a virtual webinar hosted by marketers in partnership with S&P Global Energy this week, Africa Head of Fuels and Refining at S&P Global Energy, Mr Stanislas Drochon, noted that Saharan Africa remains exposed to external shocks due to heavy reliance on imports, limited refining capacity, and inadequate storage infrastructure. 

He stressed the need for sustained investment in supply chain systems to enhance long-term energy security across the region.