Geopolitical developments in Venezuela and the possibility of a major shift in global oil supply dynamics could exert downward pressure on crude prices, posing significant risks to the Federal Government’s ₦58.18 trillion 2026 budget plan.
The crisis, which has triggered reassessments across key markets and exerted pressure on the crude market, has put critical assumptions underpinning the budget under scrutiny. President Donald Trump’s target of $50 per barrel is no longer seen as far‑fetched by some analysts.
Nigeria expects to generate about $40.6 billion from oil in 2026 by producing 673 million barrels, roughly 1.84 million barrels per day, and selling crude at a benchmark price of $64.85 per barrel. The National Assembly has proposed lowering this benchmark to $60 per barrel.
However, some analysts who spoke with the Guardian project that oil prices could dip to $50 per barrel, resulting in a potential revenue loss of about $10.24 billion.
Following the reported invasion of Venezuela and the capture of Nicolás Maduro, Trump’s administration has indicated plans to invest in boosting Venezuelan oil production. Although it may not immediately restore Venezuela’s output to pre‑sanction levels, easing sanctions could eventually bring significant volumes back to global markets.
Before sanctions tightened in 2019, Venezuela exported around 707 million barrels annually, with the United States accounting for about 32 per cent of that volume. After sanctions, exports plunged to under 200 million barrels per year between 2020 and 2021.
Exports later partially recovered to between 250 and 350 million barrels by 2023 and 2024, mainly through shipments to China and India using non‑standard trading practices.
A full return of Venezuelan production to mainstream markets could increase supply in an already fragile demand environment, further weakening prices.
OPEC Producers Reaffirm Market Stability
On Friday, eight major producers, Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman, reiterated their commitment to OPEC‑led market stability, citing a steady global economic outlook. Despite this, analysts warn that increased supply from Venezuela could still tilt the balance.
Oil remains central to the 2026 budget. The plan allocates ₦15.52 trillion for debt servicing, ₦15.25 trillion for non‑debt recurrent expenditure, and ₦26.08 trillion for capital projects. The projected fiscal deficit stands at ₦23.85 trillion, or 4.28 per cent of GDP.
But Nigeria has struggled to meet production targets due to underinvestment, oil theft, pipeline vandalism and declining output from mature fields, raising doubts about meeting even current benchmarks.
If prices fall to $50 per barrel, projected gross oil revenue would drop to about $33.6 billion, creating a substantial funding gap and heightening borrowing needs.
Impact On Foreign Exchange, Naira
Lower oil receipts could also reduce foreign exchange (FX) inflows, putting renewed pressure on the naira, which had strengthened by about ₦100/$ last year, its best performance in recent history.
The budget’s dependency on oil revenues leaves it vulnerable to price volatility, particularly with the 2027 general elections on the horizon, when fiscal pressures and FX demand are expected to rise.
A former chairman of the Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, warned that the $64.85 benchmark already strains projections.
“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 urged the government to address the high cost of exporting crude only to import refined products by revitalising refineries and boosting private refining.
Petroleum economist Dr Kaase Gbakon said a derisked Venezuelan oil sector could attract capital away from Nigeria, slowing local oil and gas development.
“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,” he noted.
Another expert, Prof. Wunmi Iledare, stressed that increased Venezuelan supply would deepen downside risks for oil prices.
“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,” Iledare said.
He cautioned that Nigeria’s production target of 1.84mbpd remains aspirational given structural constraints, and that budgeting should adopt more conservative assumptions and bolster non‑oil revenues.
Economist Professor, Emmanuel Nwosu noted the structural risk of oil price volatility on oil‑dependent budgets.
“While lower oil prices can benefit consumers through reduced fuel and transport costs, they pose fiscal challenges for producing countries that anchor budgets on oil benchmarks,” he said, urging close monitoring of OPEC interventions and geopolitical alignments.
Though tax reforms began in January 2026 to improve revenue mobilisation, experts remain uncertain if these can sufficiently buffer against shocks in the short term. With ₦15.52 trillion earmarked for debt servicing alone, the room to absorb revenue shortfalls is limited.
Certified financial educator Kalu Aja described the $64.85 benchmark as too generous.
“If a new U.S.‑backed Venezuelan leadership decides to pump more oil, global prices will come under pressure… Nigeria should be preparing an austerity budget, not an optimistic one,” he tweeted.
Similarly, Olufemi Idowu, partner at Kreston Pedabo, warned that strengthened U.S.–Venezuela oil ties could reduce Nigeria’s revenue.
“While the United States is not Nigeria’s largest buyer today, it remains an important market… 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 underperforming and debt obligations rising, stakeholders insist that without more conservative fiscal assumptions, stronger non‑oil revenue mobilisation and tighter spending discipline, the N58.18 trillion 2026 budget faces significant implementation challenges.