…OPEC+ pauses output increase
Nigeria’s N58.18 trillion ($41.5 billion) 2026 budget, anchored on a $64.85 per barrel crude oil benchmark, faces mounting pressure as President Donald Trump’s intervention in Venezuela threatens to unleash a flood of new crude supplies onto an already oversupplied global market.
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 sent ripples through oil-dependent economies.
For Africa’s largest oil producer, the implications could prove devastating at a time when crude prices are already trading well below budget assumptions.
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“If the U.S. control over Venezuela’s oil resources will lead to more volumes of oil pumped, the OPEC cartel’s influence will weaken more and more, even as Venezuela is an OPEC member country,” Abdulrauf Bello, a finance analyst, said.
He added, “More oil means lower oil prices. And for Nigeria, that is not news we want to exactly hear.”
Brent crude hovered around $60.75 per barrel on Sunday afternoon at 4pm, already $4 below Nigeria’s revised benchmark.
The Nigerian Senate in December slashed the oil price assumption to $60 from the government’s initial $64.85, acknowledging market realities. Even that conservative adjustment may prove optimistic if Venezuelan crude begins flowing freely.
The Venezuela factor
Venezuela holds the world’s largest proven oil reserves at 303 billion barrels, representing 17 percent of global reserves as at 2023.
While the South American nation currently produces less than one million barrels daily due to decades of underinvestment and mismanagement, analysts estimate exports could approach three million barrels in the medium term if sanctions lift and infrastructure improves.
“History shows that forced regime change rarely stabilises oil supply quickly, with Libya and Iraq offering clear and sobering precedents,” said Jorge Leon, head of geopolitical analysis at Rystad Energy and a former OPEC official.
The geopolitical calculus is stark. Trump explicitly stated that U.S. companies would “fix the badly broken infrastructure” and “start making money for the country,” signaling a long-term commitment to reviving Venezuelan output.
While industry experts caution that rebuilding could take years and require billions in investment, even the prospect of additional barrels weighs on forward price curves.
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“Right now, oil markets are being driven less by supply–demand fundamentals and more by political uncertainty,” said Leon in a note seen by BusinessDay.
On Sunday, OPEC+ kept oil output unchanged after avoiding discussions of the multiple political crises affecting the producer group’s members, from the Middle East as well as Russia, Iran and Venezuela.
The meeting, first in 2026 of eight members of OPEC+, which pumps about half the world’s oil, came after oil prices fell more than 18 percent in 2025, their steepest yearly drop since 2020, amid growing oversupply concerns.
Budget arithmetic under strain
Nigeria’s 2026 budget projects oil revenue of N60.97 trillion based on daily production of 1.84 million barrels. That calculation assumes prices hold near $64, an assumption that looked precarious before Venezuela developments and appears increasingly untenable afterwards.
By comparison, the 2025 budget assumed $75 per barrel and 2.06 million barrels daily, projections that proved wildly optimistic. Only 30 percent of the 2025 budget has been funded, leaving a N30 trillion shortfall, according to government figures.
The 2026 budget carries a N23.85 trillion deficit, equivalent to 4.28 percent of GDP. Debt servicing alone consumes N15.52 trillion, leaving little room for maneuver if oil revenues disappoint. With approximately N17.98 trillion less in projected oil revenue compared to 2025, Nigeria’s fiscal position appears increasingly fragile.
Market dynamics
The International Energy Agency forecasts a surplus of about 3.8 million barrels per day in 2026, even before accounting for potential Venezuelan increases. Global benchmark Brent fell 18 percent in 2025, posting its biggest annual decline in five years, driven by rising production from OPEC+ members, U.S. shale producers, and new sources like Guyana.
Goldman Sachs predicts Brent will average $56 in 2026, with downside to $51 if Russia and Ukraine reach a peace agreement. For Nigeria, prices in that range would blow a hole in 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 revenue despite years of diversification rhetoric. The petroleum sector remains a major revenue source, with crude exports accounting for the bulk of foreign exchange earnings.
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Nigeria was the leading African exporter of crude to the United States between January and August 2025, shipping 33.23 million barrels worth $2.57 billion. If U.S. oil companies successfully revive Venezuelan production, Nigeria could face intensified competition for American buyers, further pressuring prices and market share.
The timing compounds Nigeria’s challenges. With a presidential election scheduled for 2027, the exchange rate assumption took into account that 2026 precedes a national election year, meaning political pressures for spending will intensify even as revenue disappoints.
