…OPEC+ halted production growth
Nigeria's N58.18 trillion ($41.5 billion) 2026 budget, based on a benchmark crude oil price of $64.85 per barrel, is facing increasing pressure as President Donald Trump's intervention in Venezuela threatens to flood an already oversupplied global market with new crude supplies.
Trump's announcement Saturday that U.S. oil companies would invest billions to rebuild Venezuela's energy infrastructure following the capture of President Nicolas Maduro has roiled oil-dependent economies.
For Africa's largest oil producer, the effects could prove devastating at a time when crude prices are already trading well below budget estimates.
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Finance analyst Abdulrauf Bello said, “If US control over Venezuela's oil resources would lead to greater amounts of oil being pumped in, the influence of the OPEC cartel would be further weakened, even though Venezuela is an OPEC member country.”
He added, “More oil means lower oil prices. And for Nigeria, that's not news we really want to hear.”
Brent crude stood at around $60.75 a barrel at 4pm on Sunday, already $4 lower than Nigeria's revised benchmark.
In December the Nigerian Senate acknowledged market realities and lowered the government's oil price forecast to $60 from $64.85 initially. Even that conservative adjustment may prove optimistic if Venezuelan crude starts flowing freely.
Venezuelan factor
Venezuela has the world's largest proven oil reserves at 303 billion barrels, representing 17 percent of global reserves by 2023.
While the South American nation currently produces less than a million barrels a day due to decades of underinvestment and mismanagement, analysts estimate exports could reach three million barrels in the medium term if sanctions are lifted and infrastructure improves.
“History shows that forced regime change rarely stabilizes oil supplies rapidly, with Libya and Iraq offering clear and serious examples,” said George Lyon, head of geopolitical analysis at Rystad Energy and a former OPEC official.
The geopolitical calculations are stark. Trump bluntly said that American companies would “fix the badly broken infrastructure” and “start making money for the country”, indicating a long-term commitment to reviving Venezuelan production.
While industry experts warn that rebuilding could take years and require billions of investments, even the prospect of additional barrels has an impact on forward price curves.
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“At the moment, oil markets are being driven less by supply-demand fundamentals and more by political uncertainty,” Lyon said in a note seen by BusinessDay.
On Sunday, OPEC+ left oil output unchanged after avoiding discussion of several political crises affecting the Middle East as well as producing group members Russia, Iran and Venezuela.
The first meeting in 2026 of the eight members of OPEC+, which pumps nearly half the world's oil, comes after oil prices fell more than 18 percent in 2025, their biggest annual decline since 2020 amid growing oversupply concerns.
Budget arithmetic is under stress
Nigeria's 2026 budget projects oil revenues of N60.97 trillion based on daily production of 1.84 million barrels. This calculation assumes prices remain near $64, an assumption that looked uncertain before the Venezuelan developments and appears increasingly untenable afterward.
By comparison, the budget's 2025 forecast of $75 per barrel and 2.06 million barrels per day proved extremely optimistic. According to government data, only 30 per cent of the 2025 budget has been funded, leaving a shortfall of N30 trillion.
The 2026 budget has a deficit of N23.85 trillion, equivalent to 4.28 percent of GDP. Debt service alone consumes N15.52 trillion, leaving little room for maneuver if oil revenues disappoint. With approximately N17.98 trillion less in oil revenues than expected by 2025, Nigeria's fiscal position is becoming increasingly fragile.
market dynamics
The International Energy Agency projects a surplus of about 3.8 million barrels per day in 2026, even accounting for Venezuela's potential increase. Global benchmark Brent fell 18 percent in 2025, its biggest annual decline in five years, due to rising production from OPEC+ members, US shale producers and new sources such as Guyana.
Goldman Sachs estimates Brent will average $56 in 2026, falling to $51 if Russia and Ukraine reach a peace deal. For Nigeria, prices in that range would blow a hole in the budget arithmetic, potentially forcing painful spending cuts or dangerous increases in borrowing.
limited policy options
Nigeria's vulnerability stems from its stubborn dependence on oil revenues despite years of diversification rhetoric. The petroleum sector remains a major revenue source, with crude oil exports accounting for the bulk of foreign exchange earnings.
Also read: Nigeria's oil production fell 6% to 1.6 mbpd in November – NUPRC
Nigeria was the leading African exporter of crude oil to the United States between January and August 2025, shipping 33.23 million barrels worth $2.57 billion. If US oil companies successfully revive Venezuelan production, Nigeria could face intense competition for US buyers, putting further pressure on prices and market share.
Time has magnified Nigeria's challenges. With the presidential election scheduled for 2027, the exchange rate assumption took into account that 2026 is before a national election year, meaning political pressure for spending will intensify even if revenues are disappointing.
