Geopolitical tensions in Venezuela and potential shifts in global oil supply could put downward pressure on crude prices, posing a significant risk to Nigeria’s ₦58.18 trillion 2026 budget. Analysts warn that the Federal Government’s revenue assumptions may be overly optimistic amid these developments.
The Venezuelan crisis, which has prompted global market reassessments, has led some observers to suggest that crude could fall to $50 per barrel, a figure previously considered unlikely. Nigeria’s 2026 budget projects oil revenue of $40.6 billion from producing 673 million barrels—approximately 1.84 million barrels per day—at a benchmark price of $64.85 per barrel, though the National Assembly has recommended lowering this to $60 per barrel.
Experts warn that if prices drop to $50 per barrel, Nigeria could face a potential revenue shortfall of $10.24 billion.
Following reports of a Venezuelan invasion and the capture of Nicolás Maduro, the Trump administration has indicated plans to invest in boosting Venezuela’s oil output. While production may not immediately reach pre-sanction levels, easing sanctions could eventually bring significant volumes back into global markets.
Before sanctions intensified in 2019, Venezuela exported around 707 million barrels annually, with the U.S. accounting for 32% of that total. After sanctions, exports fell below 200 million barrels per year in 2020–2021, later recovering to between 250–350 million barrels in 2023–2024, largely through shipments to China and India via non-traditional channels.
A full return of Venezuelan oil to mainstream markets could further weaken prices, particularly in an environment of fragile global demand.
OPEC Reassures Market Stability
On Friday, eight major producers—Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman—reaffirmed their commitment to OPEC-led market stability, citing a stable global economic outlook. Nevertheless, analysts caution that increased Venezuelan supply may still disrupt the balance.
Oil revenue is central to Nigeria’s 2026 budget, which allocates ₦15.52 trillion for debt servicing, ₦15.25 trillion for non-debt recurrent expenditure, and ₦26.08 trillion for capital projects, with a projected fiscal deficit of ₦23.85 trillion (4.28% of GDP).
However, Nigeria continues to struggle with meeting production targets due to underinvestment, pipeline vandalism, oil theft, and declining output from mature fields, raising doubts about the feasibility of current revenue projections. Should prices fall to $50 per barrel, projected gross oil revenue would decline to $33.6 billion, significantly widening the funding gap and increasing borrowing needs.
Impact on FX and the Naira
Lower oil receipts could also reduce foreign exchange inflows, putting pressure on the naira, which had appreciated by about ₦100/$ last year. With the 2027 elections approaching, fiscal pressures and FX demand are expected to rise, leaving the budget vulnerable to price swings.
Experts Weigh In
Former CIBN chairman Prof. Segun Ajibola noted that the $64.85 benchmark already strains projections. “At the current price of about $60.8 per barrel, the situation is stressed. Any price war triggered by increased Venezuelan supply will negatively affect Nigeria’s 2026 projections,” he said. Ajibola also urged the government to invest in refining capacity to reduce dependence on importing refined products.
Petroleum economist Dr. Kaase Gbakon warned that revitalised Venezuelan production could attract foreign investment away from Nigeria, slowing local oil and gas development.
Similarly, Prof. Wunmi Iledare emphasized that increased Venezuelan supply would deepen downside risks for Nigerian crude, particularly Nigeria’s medium-heavy blends. She added that production targets of 1.84mbpd remain aspirational, and budgeting should adopt more conservative assumptions and strengthen non-oil revenue mobilisation.
Economist Prof. Emmanuel Nwosu highlighted the structural risks of oil price volatility, noting that lower prices benefit consumers but create fiscal challenges for oil-dependent economies.
Even with tax reforms introduced in January 2026, experts remain uncertain whether these measures will offset potential shocks in the short term. With ₦15.52 trillion earmarked for debt servicing alone, the budget has limited capacity to absorb revenue shortfalls.
Certified financial educator Kalu Aja described the $64.85 benchmark as overly optimistic. “If U.S.-backed Venezuelan leadership increases production, global oil prices will face pressure. Nigeria should plan an austerity budget rather than an optimistic one,” he tweeted.
Similarly, Olufemi Idowu of Kreston Pedabo warned that stronger U.S.–Venezuela oil ties could diminish Nigeria’s revenue. “Higher Venezuelan output means lower prices, which will reduce Nigeria’s oil receipts,” he noted.
Without conservative fiscal planning, stronger non-oil revenue mobilisation, and tighter spending discipline, the ₦58.18 trillion 2026 budget faces serious implementation challenges.
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