Energy Crisis to Reshape Nigeria’s Inflation Story
The energy crisis is expected to reshape Nigeria’s inflation expectations and will likely influence critical monetary policy decisions, analysts said, citing the U.S.-Iran conflict.
Despite Dangote Refinery’s refining capacity, Nigeria is not insulated from the global energy crisis, as petrol and diesel prices surged sharply in alignment.
In January, headline inflation continued its descent, coming in at 15.10% in January 2026, down from 15.15% in the prior month. This marks the tenth straight month of disinflation, reinforcing the view that price pressures are easing faster than anticipated.
Analysts said January’s reading is the lowest since late 2021, reflecting improved stability in the foreign exchange market, easing energy costs, and favourable base effects following the consumer price index rebasing earlier in 2025.
Food inflation print was also lower than expected, reflecting gains from the government’s ongoing import waiver policy on maize, rice, and sorghum. Additionally, the impact of Naira gains (+2.7% appreciation in January) supported a deceleration in core inflation during the period.
With the disinflation, the Central Bank cut the key interest rate by 50 basis points, a conservative policy rate reduction from 27% to 26.50%.
In the recent week, energy costs jumped due to the US-Iran war. Supply risks materialised after Iran blocked shipping channels, and now oil tankers are being attacked.
Brent trades above $100 per barrel on Thursdays, despite 32 countries releasing strategic oil reserves to ease pressure on energy costs.
While high oil prices could boost Nigeria’s foreign exchange receipts from hydrocarbon sales, Nigerians are already paying higher costs, which will automatically be reflected in the consumer price index.
Analysts anticipate Q1 inflation conditions to reflect the energy crisis, with petrol selling above N1000 at fuel stations and diesel at N1,500.
The inflation rate is expected to increase in the coming month, and the upward adjustment is also anticipated to slow the pace of interest rate cuts. The market anticipates that inflation will surge until the U.S.-Iran conflict is resolved, as the release of strategic oil reserves has failed to eliminate supply risks. Oando Gains 19% as Investors Shift Attention to Energy Stock
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