Oil prices stay above Nigeria’s budget benchmark as Middle East risks support market

Global crude oil prices remained firm at the start of the week, holding above Nigeria’s oil price benchmark for its 2026 fiscal plan, as persistent supply constraints and rising geopolitical tensions in the Middle East continued to underpin the market.
Although prices edged slightly lower in early trading, they stayed comfortably above the threshold Nigeria relies on for revenue projections, offering temporary reassurance for fiscal planners even as broader risks remain. Brent crude traded just under $66 per barrel after a marginal decline, while U.S. benchmark West Texas Intermediate hovered slightly above $61 per barrel. The modest dip followed a strong rally in the previous session, during which oil prices jumped by more than two per cent. Both global benchmarks had closed the previous week with gains of nearly three per cent, reaching their highest levels in several weeks.
The oil market continues to be shaped by a combination of tightening supply and heightened geopolitical uncertainty. Production disruptions in the United States, alongside escalating tensions in the Middle East, have added a risk premium that is helping to support prices despite short-term fluctuations. Adverse weather conditions have significantly curtailed crude output in key U.S. producing regions, including shale fields in North Dakota, Oklahoma, and Texas, removing hundreds of thousands of barrels per day from the market and tightening supply at a time when global inventories remain sensitive to shocks.
Developments in the Middle East have further unsettled markets, with growing concerns about the security of major oil supply routes. The deployment of additional U.S. military assets in the region has heightened fears of potential disruptions, while strong warnings from Iranian officials over the consequences of any attack have amplified uncertainty and reinforced cautious sentiment among traders.
For Nigeria, movements in global oil prices carry significant fiscal implications. The country’s economy remains heavily dependent on crude oil earnings, which play a central role in government revenue, foreign exchange inflows, and overall economic planning. The federal government based its 2026 budget on an oil price benchmark of $64.85 per barrel and an ambitious production target of 2.6 million barrels per day, assumptions that are critical to funding public expenditure and managing the fiscal deficit.
With oil prices currently trading above the benchmark, Nigeria enjoys a short-term buffer that could ease revenue pressures. However, the margin remains narrow, and recent volatility has highlighted how quickly market conditions can shift. Only days earlier, crude prices had slipped below the benchmark, reviving concerns among policymakers and analysts about potential revenue shortfalls if weaker pricing persists.
Beyond price movements, Nigeria’s capacity to benefit from supportive market conditions continues to be undermined by longstanding structural challenges within the oil sector. Persistent issues such as pipeline vandalism, crude theft, aging infrastructure, and operational inefficiencies have repeatedly constrained output, often preventing the country from meeting its official production targets even when prices are favourable.
As a result, higher oil prices alone are insufficient to guarantee fiscal stability. Without sustained improvements in security, infrastructure integrity, and production efficiency, Nigeria risks missing out on the full revenue potential offered by elevated crude prices. While current price levels provide temporary relief, the broader outlook remains uncertain, shaped by volatile geopolitics, unpredictable supply disruptions, and unresolved domestic production constraints.