Where is oil windfall?

W****ith the prolonged US-Iran war causing disruptions in the global oil market and shooting up the prices of crude, Nigeria has raked in billions of naira in oil windfall in the last six months, Daily Trust can report.

While no public record exists of the exact amount made from the windfall, Daily Trust analysis estimates that Nigeria might have grossed about N5trn since the start of the US-Iran war in late February 2026.

At the peak of the war, worsened by the killing of the Iranian Supreme Leader, Ayatollah Khamenei, by a joint US-Israeli airstrike, Brent crude, the international benchmark price, traded above $115 per barrel in April as the supply disruption deteriorated.

Daily Trust reports that while rising crude oil prices are usually good news for an oil-producing country like Nigeria, as they strengthen government revenues and foreign-exchange earnings, they also push up fuel, transport, and food costs for households.

Estimated windfall in six months

The N58.47 trillion 2026 budget was based on a relatively conservative crude benchmark of $64.85 per barrel, with oil production projected at 1.84 million barrels per day. The budget was later reviewed upward to N67.7 trillion.

When the bill was passed in April, Chairman of the Senate Committee on Appropriations, Senator Solomon Adeola Olamilekan, also announced an increase in the crude benchmark to $75 per barrel.

With international crude prices now moving well above that benchmark, the gap creates additional earnings for Nigeria.

The early March surge of crude prices saw Brent Crude jump 10% to $82 immediately and by mid-March, it surged to near $120 as the Strait of Hormuz, the shipping route controlling one-fifth of the global fuel supply, closed.

From the peak of $117 in April, it cooled off to an average of $107 in May. By June, it eased to $85 due to the Memorandum of Understanding signed by both countries (US and Iran).

It came to the pre-war low at $72 in late June, but the renewed tension and escalation pushed prices up again above $100 per barrel.

At an average of $97 per barrel over six months, Nigeria would have raked in an extra $22 per barrel above the $75 projection.

Daily Trust reports that, on average, crude oil and condensate production had hovered around 1.6million barrels per day during the period under review, which is below the 2026 budget benchmark.

Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that the country produced an average of 1.68 million barrels per day (mbpd) of crude oil and condensates in August, up from 1.67mbpd recorded in July.

In July, combined crude and condensate production stood at 1.67 million barrels per day, comprising 1.505 million barrels of crude and 0.17 million barrels of condensate. The NUPRC attributed the monthly decline partly to operational challenges at the Erha and Akpo fields.

According to NUPRC, Nigeria’s crude oil production reached an average of 1.56 million barrels per day in June, 1.70mbpd in May 2026, 1.66 mbpd in April and 1.56 mbpd in March 2026.

At 1.6mbpd average, this means that Nigeria produced 48 million barrels in a month and 288 million barrels in six months, as against 324 million barrels at a projected 1.8mbpd.

However, in revenue terms, it is estimated that Nigeria grossed $27.9bn at an average of $97/barrel and 288 million barrels as against $24.3bn from the projected $75/barrel and 324 million barrels, leaving an excess of $3.6bn (about N4.78 trillion).

This analysis excludes the existing crude swap arrangement officially known as direct sale, direct purchase (DSDP) scheme introduced by the Nigerian National Petroleum Company Limited (NNPCL).

Under the programme, the Nigerian government took loans to be repaid through the sale of crude oil. This means that the future sale is deducted as a first-line charge from oil production.

It is estimated that around 300,000 barrels of crude oil have gone into that arrangement, but this could not be independently confirmed as there was no response from the NNPCL as of press time.

Experts say the rising crude prices present a golden opportunity for Nigeria to increase revenue and provide safety nets for Nigerians bearing the pangs of high energy prices, elevated fuel prices and the general cost of living worsened by the current disruption.

They observe that Nigeria would have gained more if it were able to achieve the projected 1.8m barrel-per-day oil production target.

Several attempts to get reactions from the Nigerian National Petroleum Company Limited (NNPCL) and the Ministry of Finance since last week have met a brick wall. Our correspondent, who visited the Abuja offices of the two organisations, could not get any comments. Also, calls, texts and WhatsApp messages sent to their spokespersons were not responded to.

Daily Trust reports that despite rising prices, there has been no significant increase in the Excess Crude Account (ECA) established as a buffer for saving oil revenues earned above the budget benchmark.

While Nigeria is earning more from higher international crude oil prices, one of the country’s traditional oil savings mechanisms, the ECA, is showing little evidence of benefiting from the price surge, as checks indicated.

As of June 2026, according to the Federal Government, ECA stood at only $535,823.39, the same figure recorded in August 2025.

The idea of the ECA was that when crude prices exceeded the budget benchmark, the excess could be saved.

The money could then be used during periods of falling oil prices or other fiscal emergencies. But despite the surge in crude prices, there has been no substantial rebuilding of the account that used to hold billions of dollars.

*Daily Trust *reports that federal allocations shared among federal, state and local governments have risen considerably since the removal of fuel subsidy, but there was a significant drop in the August release.

What analysts say

Energy expert Oyebode Fadipe said the figures represent an estimated gross revenue gain based on the assumptions used in the analysis.

Fadipe noted that the mathematical breakdown of the estimated $27.936 billion in gross receipts was technically correct based on the average crude price and production figures used.

“Your mathematical breakdown of the gross receipts ($27.936 billion) is technically correct based on your stated averages,” he said, noting that the analysis showed a significant difference between the crude price used in the 2026 budget and the estimated average market price during the period under review.

However, Fadipe also pointed out that Nigeria’s actual production remained below the level projected in the budget.

He said the broader issue was whether the increase in crude receipts translated into a corresponding improvement in Nigeria’s finances and the welfare of citizens.

“What we have therefore is paper gain instead of cash reality. While the global oil surge theoretically grossed Nigeria $27.9 billion on paper, production shortfalls and debt-servicing arrangements mean the country is experiencing a jobless windfall where the average citizen feels only the inflation, not the revenue,” he said.

He also pointed to the potential impact of higher international crude prices on the cost of refined petroleum products, saying increased crude prices could raise the cost of fuel and offset some of the benefit of higher crude export earnings.

Fadipe said Nigeria’s failure to meet the 1.84 million barrels per day production target in the 2026 budget further limited the benefit that could have been derived from the crude price surge.

Marcel Okeke, former chief economist at Zenith Bank, said the analysis estimating Nigeria’s potential oil windfall is economically correct based on the assumptions used.

He, however, cautioned that higher nominal revenue does not necessarily translate into increased purchasing power, as rising prices can erode the real value of additional income.

He said the same principle should be considered when assessing Nigeria’s oil windfall, noting that the analysis could reasonably be used to estimate how much the country may have gained from the surge in crude prices.

What have Nigerians benefitted?

While the government benefits from higher oil prices, households, however, face a different reality given Nigeria’s current experiment with a market-based petrol pricing regime. This means that international energy-price movements can feed into domestic fuel prices. When crude prices rise, petroleum product costs can come under pressure with the end of the subsidy.

As the 2027 electioneering kicks off, the issue has taken the front burner, with one of the presidential hopefuls, Atiku Abubakar of the African Democratic Congress (ADC), promising to return the fuel subsidy.

Atiku had declared that if elected, he would replace Nigeria’s old import-subsidy regime with a targeted, capped, transparently budgeted and independently audited production subsidy designed to lower energy costs while accelerating domestic refining.

Dr Umar Yakubu of the Centre for Fiscal Transparency and Public Integrity said the federal government has failed to translate this price driven revenue boost into tangible relief for citizens struggling with high domestic fuel costs and inflation.

He stated that rather than building institutional buffers in the Sovereign Wealth Fund or ECA, excess receipts are routinely absorbed by recurrent expenditure, operational expenditures and debt service.

“Consequently, domestic pump prices remain tied to import costs and currency volatility, leaving Nigerians exposed to rising living costs without seeing the benefit of national windfall revenues.”

He, however, said to achieve long-term economic stability, excess oil revenues must be managed through a structured policy framework focused on savings, targeted capital investment, and absolute transparency.

He added that a fixed portion of all windfall funds should be mandatorily saved in institutional reserves to buffer against market shocks, while the balance is strictly ring-fenced for high-impact infrastructure.

How countries are mitigating high fuel prices

President Tinubu had said in late August that governors had agreed to take a series of measures to reduce the cost of transportation across the country by October 1 through the adoption of Compressed Natural Gas (CNG) and electric vehicles in the public transport system.

However, findings by this paper revealed strong indications that many states may not meet the deadline. Many states have just one CNG station, some have two or three, while others have none amid a dearth of CNG conversion facilities in most states.

Countries, including several African nations, have introduced measures to cushion the impact of the cost-of-living crisis triggered by high costs of fuel.

For instance, the Kenyan government introduced fuel tax adjustments and energy support measures after rising global crude prices threatened transportation and food supply chains.

In April, President William Ruto said the government moved to calm growing public anxiety over rising fuel prices, insisting that government subsidies, tax cuts and import arrangements have helped prevent steeper increases at the pump.

“The price of fuel has increased everywhere in the world, but in Kenya, we had planned to ensure that the prices, which would have increased very highly, were moderated. The government has used Sh6.5bn to subsidise fuel costs in Kenya. We have also reduced VAT to ensure that we moderate fuel prices, and I want to assure you that my government will do all it can,” Ruto said.

In South Africa, temporary fuel levy adjustments and expanded interventions were introduced to limit imported fuel inflation.

The Minister of Finance, in consultation with the energy ministry, approved a short-term cut of 300 cents per litre on petrol and 393 cents per litre on diesel. The relief measure ran from 6 May to 2 June 2026. The country also reviewed transportation support programmes amid concerns that rising diesel prices could worsen food inflation and logistics costs.

Namibia rolled out fuel price stabilisation interventions and subsidy support to protect transport operators and consumers from volatile international oil prices.

To reduce the impact on consumers, the government temporarily reduced or suspended selected statutory fuel levies by up to 50 per cent for three months from 1 April 2026.

India announced reductions in excise duties on petrol and diesel and urged state governments to cut local fuel taxes. The Indian government reduced excise duty on petrol from 13 Indian rupees per litre to 3 Indian rupees per litre while completely removing a ₹10 per litre excise duty on diesel. The intervention reportedly cost the government nearly ₹70bn every two weeks in lost revenue.

France expanded fuel rebate schemes for motorists while maintaining electricity support programmes worth billions of euros. The rebates reached as high as €0.30 per litre. Germany adopted temporary fuel tax reductions and expanded public transport incentives to reduce inflationary pressure.

The United Kingdom maintained energy support programmes and fuel duty freezes introduced during earlier energy crises. It maintained its 5p per litre fuel duty cut and continued household energy support programmes worth hundreds of pounds for vulnerable consumers.

The United States released millions of barrels of crude oil from its Strategic Petroleum Reserve and debated temporary fuel tax holidays to moderate gasoline prices. American lawmakers also debated a temporary federal gasoline tax holiday worth 18.4 cents per gallon to reduce fuel costs for consumers.

Experts seek transparent management of oil windfall

Dr. Ayodele Oni, an oil and gas expert, urged the federal government to adopt a disciplined and transparent approach to managing Nigeria’s emerging oil windfall, warning that the opportunity could be lost if the additional revenue is not deliberately saved and invested.

Oni said the current increase in crude oil prices presents Nigeria with an opportunity to strengthen the economic reforms implemented in recent years, particularly because some of the factors that undermined previous oil booms have changed.

“The first thing to say is that this windfall is real, and it is arriving at a time when Nigeria is far better placed to keep it than in past cycles,” he said.

According to him, Nigeria’s experience during previous periods of high oil prices, particularly in 2008 and 2011, showed how easily additional petroleum revenues could be absorbed by government policies and rising expenditure.

“In 2008 and 2011, high oil prices were largely consumed by fuel subsidies and an overvalued exchange rate,” he said.

Oni noted that the economic environment is different today, with the removal of the petrol subsidy and the adoption of a more market-determined exchange rate regime.

“Today, the subsidy is gone, the exchange rate is market-determined, gross reserves have climbed above $50 billion and the National Assembly has already moved the benchmark from $64.85 to $75 to bring part of the upside into the budget,” he said.

He said the priority should now be to consolidate the reforms rather than return to policies that could quickly consume the additional revenue.

“So what this portends, if handled properly, is a genuine chance to consolidate the reforms of the last three years rather than reverse them,” Oni said.

However, he cautioned against treating the entire difference between the budget benchmark and prevailing international crude prices as money available for immediate spending.

“I would also temper the framing slightly. The excess above the benchmark flows into the Federation Account and is shared monthly through FAAC, which is published. The question is therefore not whether the money exists on paper, but whether it is being ring-fenced and applied deliberately,” he said.

Oni also pointed to Nigeria’s production challenges, saying the country would have benefited more if it had achieved the production level contained in the 2026 budget.

On how to deploy the additional revenue, Oni identified four key priorities: transparency, targeted consumer support, investment in oil production, and strengthening the country’s financial position.

“First, transparency: publish a monthly statement of the excess crude proceeds and route the Federal Government’s share through the NSIA Stabilisation Fund, which has a statutory framework already in place,” he added.

He also opposed a return to blanket fuel subsidies, recommending targeted interventions instead.

“Second, use a defined portion to cushion consumers in a targeted way — transport support, accelerated CNG conversion, and ensuring domestic refineries, including Dangote, receive crude under the domestic supply obligation in naira — rather than returning to a blanket subsidy that would swallow the gain within months,” he said.

Oni further called for investment in infrastructure capable of increasing future oil revenue.

“Third, reinvest in what actually multiplies revenue: pipeline security, well restoration and unlocking the deepwater projects the recent tax remission order was designed to attract,” he said.

His fourth recommendation was for the government to strengthen its financial buffers.

“Fourth, protect the reserve position and pay down expensive debt,” he said.

Oni warned that Nigeria should not treat the current oil-price surge as a permanent source of income, saying, “Windfalls do not last. Gulf prices could fall as quickly as they rose. The institutions we build while the money is flowing are what will remain.”

Speaking to Daily Trust, Emeritus Professor of Petroleum Economics, Prof. Wumi Iledare, said Nigeria’s recent crude price surge presents an opportunity, but the windfall must be managed within the Petroleum Industry Act (PIA) and the approved national budget.

He stated that not all additional oil revenue is available for government spending as the PIA’s royalty-by-price mechanism legally commits part of the price increase to the Nigerian Sovereign Investment Authority (NSIA), where it becomes sovereign savings and investment capital rather than ordinary budget revenue.

He added that NSIA’s financial reports confirm that it continues to receive these contributions.

“A separate category is the additional petroleum revenue that actually accrues to the Federation when oil prices exceed the assumptions used in the approved budget. That revenue should first improve budget performance, reduce the financing gap and limit new borrowing. The amount available depends on production, royalties, taxes, allowable costs, exchange rates and collection efficiency. The central question is therefore: how much additional petroleum revenue has actually accrued to the Federation?”

“Even Federation revenue that is available for fiscal use does not automatically create authority for new spending. Existing appropriations remain binding, and expenditure outside the approved budget must follow the required legal process, including a supplementary appropriation where necessary.”

He added that the priorities should therefore be to account transparently for the windfall, direct legally committed royalty-by-price revenue to sovereign investment through NSIA, channel available additional Federation revenue to strengthen the approved budget and reduce deficit financing, build fiscal buffers and savings where legally appropriate and authorise any new spending through the proper legislative process.

“Nigeria should not convert a temporary oil-price increase into permanent spending commitments. Oil prices are volatile, and expenditure based on unsustainable prices could create serious fiscal problems when prices fall.

“The principle is simple: windfall revenue should strengthen fiscal sustainability before it expands government spending. Nigeria’s objective should be to convert temporary petroleum revenue into lasting economic and social value through transparent accounting, lower borrowing, sovereign savings and carefully selected, properly appropriated investments,” he said.

Prof Iledare added that the real test of an oil windfall is not how much the government can spend today, but how much lasting value Nigeria can create from revenue that may not be available tomorrow.

From Abdullateef Aliyu, Lagos, Faruk Shuaib & Daniel Adaji