World Bank: Nigeria's Fuel Prices Surged Over 50% Post-Iran Conflict, Exacerbating Inflation

The World Bank has stated that fuel prices in Nigeria have seen an increase of over 50 percent since the start of the conflict in Iran, thereby intensifying inflationary pressures and sparking worries about the welfare of households.

During the presentation of the Nigeria Development Update (NDU) in Abuja, Fiseha Haile, the World Bank's Lead Economist for Nigeria, observed that while economic activity has remained robust, the sharp rise in energy costs is contributing to wider price increases across the board.

"While overall business activity has been expanding in recent months, indicating that the impact on growth has been relatively contained," Haile commented, "the shock is still being felt through higher inflation."

According to the Bank's assessment, the substantial jump in fuel prices has significantly driven up the costs of transportation, food, and production throughout the economy, with a particular note that diesel prices have almost doubled.

Although inflation saw a decrease to 15.06 percent in February from approximately 33 percent in December 2024, it remains at a high level when compared to neighbouring countries and has recently faced renewed pressure following the crisis in the Middle East.

Haile cautioned that the persistence of inflation poses a substantial risk to incomes and efforts to reduce poverty. He recommended that authorities consider easing restrictions on fuel imports to help alleviate supply shortages and stabilise prices.

Despite these challenges, Nigeria's economy is anticipated to experience growth, with business activity continuing in an expansionary phase and external buffers improving due to rising foreign exchange reserves. Nevertheless, more stringent global financial conditions continue to pose a threat to capital inflows, borrowing costs, and remittances.

The World Bank forecasts an economic growth of around 4.2 percent for 2026. It also advised policymakers to maintain a tight monetary policy, utilise oil revenue windfalls judiciously, and refrain from implementing blanket subsidies as measures to control inflation.

In parallel, the World Bank Country Director for Nigeria, Mathew Verghis, emphasised that inflation represents the most immediate threat to the welfare of households, highlighting that reducing price pressures is essential for restoring purchasing power.

Verghis pointed to the energy sector as requiring the most urgent reforms to stimulate growth. He warned that progress in off-grid solar solutions will be insufficient without addressing the foundational issues within the country's on-grid electricity system.

"Without that, Nigeria's aspiration to build a $1 trillion economy may remain out of reach," Verghis asserted.

He further underscored the necessity for stronger fiscal governance and enhanced coordination across Nigeria's decentralised governance structure, expecting state governments to assume a more prominent role in delivering essential infrastructure.