Rising Fuel Costs Could Raise Inflation To 19% — Rewane

Nigeria’s inflation rate could climb from 15 per cent to 19 per cent by May, driven largely by rising petrol prices and broader supply disruptions linked to the ongoing conflict involving Iran, the United States and Israel, economist Bismarck Rewane has warned, in a development that could complicate the Central Bank of Nigeria’s monetary policy outlook and reduce the chances of further interest-rate cuts.

Chief Executive Officer of Financial Derivatives Company (FDC), Bismarck Rewane spoke on Saturday at a 2026 economic summit in Lagos, where he said the sharp rise in domestic fuel prices was already feeding into transportation costs and wider consumer prices across the economy.

“Every one percent increase in the price of petrol will lead to a 0.079 percent increase in transportation costs and inflation,” Rewane said.

He noted that petrol prices have already risen by about 42 per cent, a trend he estimated could translate into an additional three to four percentage points in inflation over the next two to three months.

That projection comes at a delicate moment for monetary authorities, with the Central Bank of Nigeria scheduled to meet on May 19 and 20 to decide on the Monetary Policy Rate.

The apex bank reduced the benchmark rate by 50 basis points in February to 26.5 per cent, raising expectations that a softer inflation environment could create room for further easing.

But Rewane said a renewed acceleration in price pressures may now force policymakers to adopt a more cautious stance.

“If inflation increases this way, the chances and probability that the CBN brings interest rates down further is low,” he said, adding that the central bank may instead mirror the posture of the United States Federal Reserve by holding rates steady until inflationary risks subside.

The warning underscores the growing economic fallout from the conflict in the Middle East, which has entered its fourth week and disrupted major oil and commodity trade routes, including the Strait of Hormuz, a vital channel that accounts for roughly one-fifth of global oil shipments.

The closure and instability around key shipping lanes have unsettled global energy markets, increased freight costs and worsened supply bottlenecks, with spillover effects reaching import-dependent economies such as Nigeria.

According to data presented from the FDC report, diesel prices in Nigeria have risen by more than 44 per cent, while petrol prices have surged by over 68 percent.

Transport and logistics costs have also increased by about 20 per cent, adding fresh pressure to businesses already grappling with elevated operating expenses, weak consumer demand and exchange-rate volatility.

The impact is expected to be particularly severe for households, where higher transport fares and rising food prices are eroding disposable income.

Rewane said food inflation has climbed to just above 12 per cent year-on-year and is accelerating on a month-on-month basis, according to National Bureau of Statistics data. Combined with higher import costs stemming from global supply disruptions, the trend is reinforcing domestic price instability and further squeezing household spending power.

Analysts say the latest inflation risks could leave the CBN in a difficult position as it tries to balance the need to support economic growth, preserve exchange-rate stability and keep inflation expectations anchored.

A sustained rise in prices would weaken the case for monetary easing and could also complicate efforts to defend the naira, particularly if external shocks persist and foreign exchange inflows remain fragile.

Even so, Rewane said the broader economy is still expected to record modest growth in spite of the worsening inflation outlook.

He projected that gross domestic product would expand by 3.08 percent in the first quarter of 2026, suggesting that output may remain resilient even as price pressures intensify.

However, he cautioned that maintaining that growth trajectory would require deeper structural reforms, stronger fiscal buffers and more coordinated policy responses to withstand mounting external shocks.

On the foreign exchange market, Rewane said the naira is likely to trade within a relatively narrow range of N1,400 to N1,450 per dollar in the near term, supported by ongoing efforts by authorities to stabilise the currency.

Nevertheless, he warned that persistent inflation, global uncertainty and imported cost pressures could continue to weigh on the exchange rate outlook.

He also said Nigeria’s equities market, which has delivered strong gains in recent periods, may begin to lose momentum as investors react to tighter financial conditions and heightened global risk aversion. That would bring the domestic bourse more in line with broader international market trends, where uncertainty over inflation, rates and geopolitical tensions has tempered investor sentiment.

Rewane’s outlook adds to mounting concerns over the fragility of Nigeria’s recent disinflation progress, especially as renewed fuel shocks threaten to reverse earlier gains and narrow the policy options available to the central bank.

With the next MPC meeting approaching, investors, businesses and households will be watching closely to see whether mounting inflationary pressures force policymakers to put rate cuts on hold.