Kemi Adeosun Last week someone said to me, with visible relief, “This war is good for Nigeria. Oil will reach $100..” It was not a cynical remark. It was hopeful. In Nigeria, hope often arrives disguised as oil prices. One of the things I like about economics is that—unlike law, medicine, or engineering— everyone can have a go. There is no licensing authority before you offer an opinion. No board exams before you pronounce on inflation, interest rates, or the future of oil prices. Economics invites participation. It is like answering those exam questions that say: “Critically discuss, giving reasons for your answer.” Everyone has a view. Everyone has a theory. But experience teaches you that the oil price conversation must always be anchored in reality. When the Floor Fell Out In 2016 I sat in a very uncomfortable seat when oil prices collapsed to about $28 per barrel. At the time, Nigeria’s production costs were roughly $21 per barrel, and 33 states could not pay salaries. Workers went months without pay. Government finances were stretched to the limit. Every conversation about oil prices suddenly moved from theory to survival. I say this not to elicit sympathy. It is simply context. Even when prices later began to recover, the experience left a deep imprint. The crisis had exposed how fragile the system was. The relief of higher prices did not erase the memory of salary arrears, emergency meetings, and the constant fear that the federation might simply run out of cash. My team spent many nights with the Chairman of Governor’s Forum, H.E Abdulaziz Yari trying to work out creative solutions to steer the nation through recession. Perhaps that is why, when recovery came, many of us remained cautious—even slightly traumatised by the scarcity we had just lived through. Building the Buffers The Excess Crude Account had been established in 2004 to manage exactly the type of fluctuations we were seeing. At its height it held over $20bn and helped the nation through the 2008 global crisis. By 2015 we inherited a balance of $2.04bn, and as soon as oil prices recovered we resumed contributions. In addition to building it to $2.45bn by the time I exited, we developed a system to smooth FAAC revenues. The idea was simple: stability mattered more than windfalls. In months when oil revenues exceeded expectations, we quietly saved a portion. In leaner months, we released those buffers to keep FAAC allocations steady and ensure states could meet their most basic obligations—especially salaries. At one point, a Governor arrived armed with the constitution and proof that what we were doing was not following the constitution strictly in the way the savings mechanism operated. It was a fair legal observation. We noted it but continued. Not out of disregard for the law, but because we understood the alternative. The federation had just experienced what happens when oil revenue collapses and there are no buffers. Institutional perfection was less urgent than fiscal survival. The governors understood that as well. Across political parties and regions, there was broad agreement that stable allocations were better than volatile windfalls. It is worth recalling that moment today. Because discussions about oil prices in Nigeria often drift into fantasy. When prices rise, we assume prosperity will follow. When prices fall, we assume disaster is inevitable. In reality, the relationship between oil prices and Nigeria’s economic fortunes has always been far more complicated. The Fantasy We Keep Returning To Today the optimism has returned. The war in the Middle East has pushed crude prices upward again, and the familiar prediction is back: If oil reaches $100 per barrel, Nigeria will finally breathe. But that assumption deserves a more sober examination. Higher oil prices can create opportunities for Nigeria, but they do not automatically translate into prosperity. Revenue depends not just on price, but on production. Fiscal relief depends not just on earnings, but on discipline. And in a fully deregulated energy market, rising crude prices can just as easily translate into higher petrol prices for Nigerian households. Reality One: Production Nigeria’s budget assumptions often tell a more optimistic story than reality. Government plans may assume output approaching two million barrels per day, but actual production has struggled to reach those levels in recent years due to oil theft, pipeline vandalism, and years of underinvestment in upstream infrastructure. If a country produces fewer barrels than planned, higher prices cannot fully compensate for that shortfall. Price multiplied by low output does not produce a windfall. It produces improvement. Reality Two: The Refinery Changes the Equation — But Not Everything For decades Nigeria lived with an extraordinary paradox: a major crude oil producer that imported most of its refined petroleum products. That system meant that when global oil prices rose, Nigeria paid twice—earning more from crude exports but spending heavily to import expensive refined fuel. The emergence of large-scale domestic refining, particularly the Dangote refinery, is beginning to change that equation — and that deserves acknowledgement. Nigeria now has the capacity to refine significant volumes of its own crude domestically, reducing dependence on imported petrol and lowering the demand for scarce foreign exchange. That is a major structural shift for the economy. But it has also created a new misunderstanding. Many Nigerians assume that domestic refining will shield them from global oil price shocks. It will not. In a deregulated market, the price of refined fuel still reflects the price of crude. If crude rises sharply, the cost of producing petrol rises as well. Refineries—whether in Rotterdam, Houston, or Lekki—must price their products based on replacement costs and global market dynamics. The removal of fuel subsidies means there is no longer a government buffer absorbing those increases. When crude prices rise, pump prices rise. Domestic refining still delivers important benefits. It keeps more economic activity within the country, reduces foreign exchange pressures from fuel imports, and strengthens parts of the industrial base. But it does not disconnect Nigeria from global oil markets. What the Realists Know The realists understand this. Oil may reach $100. It may even go higher depending on how geopolitical tensions evolve. But Nigeria’s prosperity will still depend on the same fundamentals it always has: producing more oil, managing revenue prudently, and resisting the temptation to treat every price spike as permanent. Because the real lesson of the $28 crisis was not how painful low prices can be. It was how dangerous it is to build an economy that only works when oil is expensive. PS But if the windfall does come, I have a view about where it should go first: public transport. The daily friction of commuting is an invisible tax on every working Nigerian, falling hardest on those who can least afford it. A serious public transport investment, using an oil windfall as seed capital for long-term infrastructure, connects workers to jobs, reduces the cost of living for households without cars, and — unlike recurrent spending — leaves something behind when the windfall is gone. That is what discipline looks like. Not distributing the surplus. Building something with it. Kemi Adeosun – A former Minister for Finance writes from Lagos