Market News

• Complicates Nigeria’s fiscal fragility, threatens naira stability 

• OPEC weighs in as eight members meet over supply cut

Geopolitical developments in Venezuela and the prospect of a major rattle in global oil supply dynamics could exert downward pressure on crude prices and ultimately stress-test the Federal Government’s N58.18 trillion 2026 spending plan.

The crisis, which has triggered a review of projections across key markets and put enormous pressure on the crude market, is subjecting key budget assumptions to scrutiny, with President Donald Trump’s targeted $50 per barrel price no longer an illusion.

The country is expected to raise about $40.6 billion by producing 673 million barrels of crude in 2026 or 1.84 million barrels per day and sell for $64.85 per barrel, though the National Assembly has proposed a reduction of the price benchmark to $60 per barrel.

Some analysts project that oil prices may dip to $50 per barrel, thereby leading to a potential loss of about $10.24 billion. Following the invasion of Venezuela by the U.S. and the capture of Nicolás Maduro, President Trump had said his administration would invest in producing oil from the North American country.

Already, eight major producers, including Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman, yesterday reaffirmed commitment to Organisation of Petroleum Exporting Countries (OPEC)-backed market stability, citing a steady global economic outlook.

With the Federal Government projecting oil revenues as a key pillar of its N58.18 trillion spending plan, stakeholders warn that a faster-than-expected return of Venezuelan oil to global markets could undermine fiscal projections, weaken foreign exchange (FX) inflows and deepen existing revenue challenges.

The concern comes at a time when Nigeria is already grappling with fiscal fragility. The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, earlier disclosed that the Federal Government recorded a revenue shortfall of about N30 trillion in 2025, highlighting the gap between budget expectations and actual inflows.

Naira, which gained N100/$ last year, the strongest in recent years, may face downward pressure in the face of weakened oil market performance.

The 2026 budget framework estimates a total expenditure of N58.18 trillion. This includes N15.52 trillion debt servicing, N15.25 trillion for non-debt recurrent expenditure and N26.08 trillion earmarked for capital spending.

The projected fiscal deficit stands at N23.85 trillion, equivalent to 4.28 per cent of GDP. Oil remains central to the revenue strategy as the government projects crude oil production of 1.84 million barrels per day (bpd) this year, translating to about 672 million barrels for the year.

The budget benchmark price is set at $64.85 per barrel, implying potential gross oil receipts of about $43.84 billion before production costs, joint venture obligations and revenue-sharing arrangements.

Nigeria has consistently struggled to meet its production targets in recent years due to under-investment, oil theft, pipeline vandalism, operational inefficiencies and declining output from mature fields.

Actual production has remained below benchmark levels, raising doubts about the realism of the 2026 assumptions even before factoring in exogenous risks.

If oil prices fall to $50 per barrel, projected gross revenue would drop to about $33.6 billion, creating a substantial gap in funding for the budget and intensifying borrowing pressures.

The capture of President Nicolás Maduro following a U.S.-backed military operation, stakeholders said, would mark a significant political shift.

While such a development may not immediately transform Venezuela’s production capacity, it could alter the country’s sanction status and compliance risk profile, which have been the primary constraints on its oil exports over the past decade.

Export data by the Kpler Risk and Compliance, visualised by MarineTraffic, shows that Venezuela exported around 707 million barrels of crude per year before 2019. During that period, the U.S. accounted for about 32 per cent of Venezuelan exports, making it the country’s largest buyer, while China and India absorbed much of the remainder.

These exports were supported by conventional trading, shipping and insurance arrangements. This structure changed sharply after U.S. sanctions were tightened in 2019. Venezuelan crude exports fell to below 200 million barrels per year between 2020 and 2021. The decline was driven less by a lack of oil reserves or production capacity than by the withdrawal of traders, shipowners, insurers and banks seeking to avoid sanctions exposure.

From 2022, exports began a partial recovery, rising to approximately 250 to 350 million barrels per year by 2023 and 2024. The recovery was largely driven by shipments to China and, to a lesser extent, India and relied on opaque trading practices such as ship-to-ship transfers, blending operations and the use of shadow tanker fleets. Despite the rebound, export volumes remained less than half of pre-2019 levels.

By 2025, Venezuelan exports appeared to be stabilising but remained structurally constrained by legal, governance and compliance risks. Western buyers and service providers have not returned in significant numbers, reflecting continued uncertainty.

Trump has said that US oil companies would spend billions of dollars to rebuild Venezuela’s oil infrastructure following the reported military operation.

He outlined a plan under which U.S. financial resources and technical expertise would be used to repair damaged facilities, with companies reimbursed for their investments.

While the plan faces uncertainties, including the willingness of major oil companies to invest in a high-risk environment, low global oil prices and the scale of reforms required, stakeholders said the direction of the U.S. policy is significant as a gradual easing of sanctions and improved legal certainty could allow Venezuelan oil to re-enter mainstream global markets over time.

For oil-producing countries such as Nigeria, the concern is not necessarily an immediate displacement of exports, but the broader effect on global supply and prices as additional barrels entering the market would increase supply in an already-fragile demand environment, particularly if global economic growth remains subdued.

Some analysts are already projecting oil prices to hover around $50 per barrel in 2026. A faster recovery in Venezuelan exports could reinforce this trend.

Nigeria is already actively seeking buyers for its 2026 crude cargoes. The U.S., India and China remain important customers and a key influence on global oil pricing.

If U.S. demand shifts towards Venezuelan crude, Nigeria could face stiffer competition in selling its medium and light sweet grades. A former chairman of the Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, said increased U.S. involvement in Venezuela’s oil sector could affect Nigeria’s ability to meet its 2026 projections. As one of Nigeria’s top oil buyers, any reduction in U.S. demand could have knock-on effects for export volumes and prices, he noted.

“At the current price of about $60.8 per barrel compared with Tinubu’s proposed $64.85, the situation is already becoming stressed. If a price war ensues, as could be triggered by increased supply from Venezuela, it will affect Nigeria’s projections for 2026,” he said.

Ajibola said it is increasingly uneconomic for Nigeria to export crude only to import refined products. He urged the government to resolve longstanding issues around moribund refineries, support private refining capacity and divert more crude to domestic processing for local use and export of refined products.

Oil price weakness would also affect Nigeria’s foreign exchange position. Crude oil sales remain the main source of FX inflows. Lower oil receipts would reduce dollar supply, putting renewed pressure on the naira and complicating efforts to stabilise the foreign exchange market.

This risk is particularly acute given the political calendar. With general elections scheduled for 2027, stakeholders expect increased fiscal pressures and higher demand for foreign exchange as political activities intensify.

Beyond price effects, Venezuela’s rehabilitation could intensify competition for global investment capital as Petroleum Economics, Management and Policy expert, Dr Kaase Gbakon, said a derisked Venezuelan operating environment could divert capital away from Nigeria and other African producers.

“Assuming the U.S.-backed action sufficiently reduces above-ground risks, investment will begin to flow to Venezuela. This could slow Nigeria’s oil and gas development, especially at a time when the country needs fresh capital to arrest production decline,” Gbakon noted.

A renowned petroleum economist, Prof. Wunmi Iledare, said Venezuela’s return would add barrels to a market already struggling to balance supply and demand.

“The immediate implication for Nigeria is not loss of market share, but greater downside risk to oil prices. Venezuelan crude will compete directly with Nigeria’s medium-heavy blends,” he said.

He described the $64.85 per barrel benchmark as achievable but noted that the 1.84 mbpd production target remains aspirational given persistent structural constraints.

Iledare said: “The real risk is budgeting on best-case oil outcomes in a global market where prices are increasingly managed. Prudence demands more conservative assumptions and stronger non-oil revenues.”

An economist at the University of Nigeria, Prof. Emmanuel Nwosu, also urged caution, noting that oil price volatility remains a structural risk for oil-dependent budgets.

While lower oil prices can benefit consumers through reduced fuel and transportation costs, he said, they pose fiscal challenges for producing countries that anchor budgets on oil benchmarks.

He added that while OPEC interventions could stabilise prices, evolving geopolitical alignments, particularly between the U.S. and Saudi Arabia, should be closely monitored.

While Nigeria began implementing its tax reform programme in January 2026, aimed at improving revenue mobilisation and reducing dependence on oil, experts are uncertain whether the reforms can deliver meaningful buffers in the short term.

Structural tax reforms typically take time to yield results, and enforcement challenges persist. With debt servicing already consuming N15.52 trillion over a quarter of total expenditure, the scope for absorbing revenue shocks remains limited.

A certified financial education instructor, Kalu Aja, said the oil price benchmark in the 2026 budget now appears generous. “If a new U.S.-backed Venezuelan leadership decides to pump more oil, global prices will come under pressure. If Russia also reaches a ceasefire in Ukraine, prices could fall further. Nigeria should be preparing an austerity budget, not an optimistic one,” he tweeted over the weekend.

Partner at Kreston Pedabo, Olufemi Idowu, said the new U.S.–Venezuela relationship may affect Nigeria’s revenue projections by putting pressure on both oil prices and Nigeria’s ability to sell its crude. According to him, Venezuela and Nigeria both sell crude oil to similar markets, which makes them competitors.

“While the United States is not Nigeria’s largest buyer today, it remains an important market and plays a major role in influencing global oil prices. If the U.S. strengthens its oil ties with Venezuela and supports increased production there, global supply will likely rise. In most cases, higher supply leads to lower prices, and this could reduce Nigeria’s oil revenue,” Idowu said.

With revenues already underperforming and debt obligations rising, the stakeholders insisted that Nigeria has limited room to absorb further shocks, warning that without more conservative budgeting, stronger non-oil revenue mobilisation and tighter spending discipline, the N58.18 trillion 2026 budget could face significant implementation challenges.