By Kunle Odusola-Stevenson
In global energy markets, geopolitics has a habit of repeating old lessons.
The latest crisis in the Middle East—triggered by U.S. and Israeli strikes on Iran in late February, has again exposed the fragility of the world’s oil supply chain. Iranian retaliation has effectively choked traffic through the Strait of Hormuz, the narrow maritime corridor through which roughly a fifth of global oil and liquefied natural gas passes.
Within days, tanker movements slowed sharply and markets responded with predictable speed. Brent crude climbed above $84 per barrel, its sharpest weekly gain in decades, while analysts began openly discussing the possibility of triple-digit oil prices if disruptions persist.
For most oil-importing economies, such volatility is unwelcome news. For Nigeria, Africa’s largest crude producer, it represents something more complicated: the prospect of another sudden windfall.
Nigeria has been here before. The last time global conflict triggered such a surge in oil revenues, the outcome was not encouraging.
In 1990, Iraq’s invasion of Kuwait removed roughly 4.5 million barrels per day from world supply. Prices surged from about $17 to nearly $46 per barrel. Nigeria, producing close to 1.8 million barrels per day at the time, benefited from what economists later estimated as more than $12bn in unexpected revenue.
What became of that windfall has since entered the country’s political folklore.
An inquiry led by economist Pius Okigbo later reported that $12.4bn had flowed into opaque “dedicated accounts” outside normal budgetary oversight during the military government of General Ibrahim Babangida. By the time the panel concluded its investigation in the mid-1990s, most of the funds had disappeared.
The episode was more than a financial scandal. It symbolised a missed opportunity at a moment when Nigeria could have strengthened its economic foundations. The funds were meant to support strategic projects, including defence spending and the long-delayed completion of the Ajaokuta steel complex. Instead, the country emerged from the oil boom with little to show for it.
Three decades later, Nigeria finds itself confronting a similar moment, though under different economic circumstances.
The federal budget for 2026 assumes an oil price of roughly $65 per barrel and production of 1.84 million barrels per day. In practice, output has struggled to reach those levels. Production currently fluctuates between 1.46 and 1.58 million barrels daily, constrained by pipeline vandalism, operational disruptions and persistent oil theft in the Niger Delta.
Industry estimates suggest that as much as 400,000 barrels per day are lost to theft and sabotage, the revenue that would otherwise flow into government coffers.
Even so, the current price surge offers a potential fiscal reprieve.
If Brent prices remain near $80–$90 per barrel over the coming months and Nigeria manages to lift output modestly, and supported by deepwater developments such as the Egina field, the country could realise an additional $10–15bn in revenue over the next year.
For an economy navigating currency volatility, high debt service and stubborn inflation, such an inflow would be significant. It could strengthen foreign reserves, ease pressure on the Naira and create room for targeted investment.
Yet windfalls rarely arrive without complications.
Higher crude oil prices also feed into domestic inflation through spiralling transport costs and imported fuel. Petrol prices, already elevated after the removal of subsidies, could rise further, placing additional strain on households.
The broader question therefore is not whether Nigeria will benefit from higher oil prices, but whether it will manage the proceeds differently this time.
Other resource dependent economies offer useful lessons.
Norway remains the benchmark. Since the 1990s it has channelled most petroleum revenues into the Government Pension Fund Global, now valued at more than $2trn. The fund invests internationally, shielding the domestic economy from commodity volatility, while preserving wealth for future generations.
Chile provides another example. Through its Economic and Social Stabilisation Fund, built largely from copper revenues, the country has established clear fiscal rules that save excess earnings during boom periods and deploy them during downturns.
These models are not easily replicated, but their underlying principle is simple: commodity windfalls require institutional discipline.
Nigeria already possesses some of the necessary structures. The Nigeria Sovereign Investment Authority NSIA) and the Excess Crude Account (ECA) were both designed to manage surplus oil revenues. In practice, however, political pressures have often undermined their effectiveness.
A credible approach to the current windfall could follow several straightforward priorities.
First, a significant share of excess revenue should be channelled automatically into long-term savings through the sovereign wealth framework. This would help stabilise government finances and reassure investors concerned about fiscal volatility.
Second, part of the proceeds should address Nigeria’s rising debt burden. Public debt now exceeds $100bn, while debt servicing absorbs a large portion of federal revenues. Reducing foreign currency liabilities would lower financing costs and improve fiscal sustainability.
Third, the government could use the opportunity to accelerate investments that reduce structural dependence on imported fuel.
Despite its status as a major crude producer, Nigeria has historically relied heavily on imported refined products. Strengthening domestic refining capacity and gas infrastructure would ease pressure on foreign exchange reserves and improve energy security.
Finally, transparency will be critical. Clear reporting lines on how windfall revenues are allocated and credible oversight of the process, would strengthen public trust and enhance Nigeria’s reputation among international investors increasingly attentive to governance standards.
None of these steps require radical policy innovation. What they demand is consistency and the political will to do the right thing.
The global context makes the stakes higher than they were in the early 1990s. Energy markets are evolving rapidly as the transition to cleaner fuels gathers pace, while geopolitical tensions continue to reshape trade flows and supply chains.
For Nigeria, the present moment may therefore represent not only a temporary fiscal boost, but also one of the last major windfalls of the traditional oil era.
Thirty-five years ago, a similar opportunity slipped away.
Today, with oil prices rising again and global attention focused on energy security, Nigeria has a chance to demonstrate that it has learned from the past.
Whether it does so will matter not only to Nigerians, but also to the investors and policymakers around the world watching how Africa’s largest economy manages its most valuable resource.
Odusola-Stevenson, a public relations professional and communication strategist specialising in energy policy and reputation management in the oil and gas sector, lives in Lagos.
