Another Great Oil Crisis Is Here
By
Pius Mordi
Oil prices rose in the 1970s due to major Middle Eastern geo-political conflicts and the newly organised market power of oil-producing nations under the auspices of Organisation of Petroleum Exporting Countries (OPEC). Following the Yom Kippur War between Israel and the Arab world, Arab members of OPEC proclaimed an oil embargo against nations supporting Israel. Exports to the United States and other Western allies stopped or dropped sharply. The effect was instantaneous and devastating. Crude prices quadrupled from about $3 to $12 per barrel almost overnight.
It was a development that shook the world and brought the economies of the western countries to their knees. But the United States, western Europe and Japan did not let the enormous lessons to be learnt slip by.
Short-term conservation and emergency measures that were adopted ranged from fuel limits and rationing, lower national speed limits (such as 55 mph in the U.S.), consumer raining systems and restricted gas station operations.
Long-term strategic and economic adjustments include the introduction of Strategic Petroleum Reserves, emergency fuel stockpiles to buffer against future supply cutoffs, pushing automakers to build smaller, more fuel-efficient cars, shifting supply away from the Middle East and increasing imports from stable regions like the North Sea, Nigeria, and Indonesia.
It was a season that ushered Nigeria into the era of petro-dollars when the then military regime had much more revenue than they had any idea how to utilise it to accelerate the country’s development.
The crisis was triggered by the Yom Kippur War of October 6 to 26, 1973 when Israel routed Egypt and Syria after they had launched a coordinated surprise attack on the Jewish nation during Yom Kippur, the holiest day in the Jewish calendar.
Now, its another Yom Kippur season again. Just like then, Israel and the Middle East is the main theatre of the conflict that has upended global oil supply.
Again, just as in the 1970s, Nigeria is reaping tremendous foreign earnings from the spike in international prices. Significantly, there’s a marked difference. The enhanced revenue from crude oil sale has put the people in a quandary. The removal of subsidy on petrol and the decision to sell crude oil to Dangote Refinery, the only functional one, at prices determined by the international market have created a different ball game. Unlike during the great oil crisis orchestrated by the Yom Kippur war, Nigerians are at the wrong end of the stick despite the increase in revenue. At a time the naira has lost its value, the high cost of petrol has upended the economy, with a spiralling inflation. It is a time that calls for logical measures to alleviate the challenges facing the populace. Indeed, it is not the time for sloganeering and bandying of data that do not reflect the state of living of Nigerians.
Unfortunately, that is precisely what Heineken Lokpobiri, Minister of State, has opted to do. Reacting to the impact of the conflict in Iran on the economy and on the people, Lokpobiri said that crude oil was an international commodity, and its price is being determined by global market forces, regardless of the volume produced by individual countries. I think it is a faulty reading of the effect of the war on Nigerians. What is happening now was not part of the script. Nobody reckoned with a war Donald Trump would start without any discernible objectives or exit strategy. But it has happened and given the man’s erratic attitude and inability to have a firm grasp of geo-political issues beyond telling his MAGA crowd that he is a genius, Trump may not be able to lift the choke hold on global oil supply.
As the western world did when the Yom Kippur war led to the quadrupling of crude oil prices, there are some lessons Nigeria can learn from the ongoing conflict in Iran.
The war involving Iran and the wider Middle East has exposed once again the vulnerability of economies that depend heavily on imported goods, energy inputs and foreign exchange. For Nigeria, the danger is particularly serious because higher international oil prices provide additional government revenue while simultaneously raising the cost of fuel, transportation, food, fertiliser and other imported inputs. The International Monetary Fund (IMF) estimates that poverty has reached about 63 percent on Nigeria’s national poverty line, while 27 million Nigerians faced food insecurity in late 2025.
Nigeria therefore needs to treat the crisis not simply as an oil-price opportunity but as an economic emergency requiring disciplined management.
The first priority should be protecting vulnerable households from imported inflation. Higher crude prices can increase government revenue, but that benefit should not disappear through wasteful spending. A portion of any temporary oil windfall should be channelled into targeted cash transfers, food-security programmes and transport support for the poorest households. The IMF has similarly stressed the need to expand and properly fund Nigeria’s social-protection system as higher fuel and food prices threaten to worsen poverty.
Second, Nigeria must use the oil windfall to strengthen its external buffers rather than immediately increase recurrent expenditure. Higher oil receipts can improve the country’s foreign-exchange position and fiscal revenues. Building reserves and maintaining confidence in the naira would help reduce the cost of essential imports when international prices and shipping costs are elevated.
Third, we must accelerate domestic refining and energy security. The emergence of the Dangote Refinery has already substantially reduced Nigeria’s dependence on imported refined petroleum products. But international crude prices still influence domestic fuel prices, even when the fuel is refined locally. Government policy should therefore ensure reliable domestic crude supply to Nigerian refineries, while encouraging investment in additional refining, gas processing and renewable energy.
Fourth, Nigeria should use the crisis to reduce its broader import dependence. Agriculture deserves particular attention. Fertiliser, machinery, chemicals and other imported inputs become more expensive when oil prices, freight rates and foreign-exchange costs rise. Supporting local production of these inputs, expanding irrigation and improving rural infrastructure would make food prices less vulnerable to external shocks.
Finally, the government must resist the temptation to respond to the crisis through excessive borrowing or uncontrolled money creation. Such measures may provide temporary relief but could recreate the fiscal and inflationary pressures that Nigerians have struggled with in recent years. The World Bank has advocated maintaining macroeconomic stability, rebuilding fiscal buffers and providing targeted support to vulnerable households.
The Iran conflict should therefore be viewed as both a threat and a warning. Nigeria can benefit temporarily from higher oil revenues, but the real measure of economic management will be whether those revenues are converted into stronger reserves, cheaper domestic production, better infrastructure and protection for poor households. An economy that exports crude oil but imports too many of the goods its citizens consume will remain vulnerable to wars it did not start and shocks it cannot control.
The immediate objective should be to shield Nigerians from the worst effects of the crisis. The longer-term objective must be to build an economy in which an international conflict in the Middle East does not automatically translate into higher prices and greater hardship in Nigerian homes.
