Oil price soars 72% above Nigeria’s 2026 budget benchmark

Nigeria’s oil revenue could receive a significant boost as Brent crude, the international benchmark, surged to $111.20 per barrel on Thursday, about 71.5 per cent above the 2026 budget benchmark of $64.85, following renewed attacks in the Middle East and mounting fears of global supply disruptions.

The price rally comes as the Federal Government targets crude oil production of 1.84 million barrels per day (bpd) this year, a level the country has yet to consistently achieve.

Nigeria’s ability to translate higher international prices into increased revenue will therefore depend not only on the price rally but also on its capacity to raise production and sustain export volumes.

Brent crude rose by 2.15 per cent to $111.20 per barrel as of 6:30 a.m. West Africa Time, while US West Texas Intermediate gained 1.92 per cent to $99.02 per barrel.

The surge in prices offers Nigeria the prospect of earning more from each barrel exported than envisaged in its budget assumptions.

However, the actual fiscal benefit will depend on production performance, export volumes, the cost of production and the volume of crude available to the government after contractual obligations and other deductions.

The rally followed renewed Houthi attacks on Saudi Arabia, including reported strikes targeting an oilfield and civilian infrastructure. The attacks, alongside maritime security incidents in the Persian Gulf, have heightened concerns about the safety of energy facilities and crude shipments from the Middle East. Of particular concern to oil market participants is the Strait of Hormuz, a strategic shipping corridor through which a substantial share of global oil supplies normally passes. Any prolonged disruption to shipments through the route could tighten global supply, increase freight and insurance costs and push crude prices higher.

The latest gains also reflect uncertainty over efforts to ease the conflict involving Iran and the United States, with limited signs of diplomatic progress raising concerns that supply risks could persist.

Falling United States crude inventories have provided additional support for prices. Market sources citing data from the American Petroleum Institute said US crude stocks fell by 4.9 million barrels in the week ended October 16, alongside declines in petrol and distillate inventories. Traders were awaiting official figures from the US Energy Information Administration for further indications of supply conditions.

For Nigeria, where oil earnings remain an important source of government revenue and foreign exchange, sustained prices above the budget benchmark could ease some fiscal pressures.

The current market rallyis a potential source of additional revenue if output and exports hold up.

However, production remains a critical constraint. Failure to meet the budgeted volume could limit the benefits of higher prices, particularly if operational disruptions, crude theft, pipeline vandalism or other challenges prevent the country from maximising its export capacity.

The price rally could also have implications for Nigeria’s downstream petroleum market, particularly if international crude and refined-product prices continue to rise. Refiners, depot operators and fuel marketers will be monitoring global product prices, freight charges, foreign exchange movements and replacement costs in determining their selling prices.

Although higher crude prices can increase feedstock costs for refiners, the impact on petrol and diesel prices in Nigeria will depend on domestic refining supply, import requirements, the naira-dollar exchange rate and competition among suppliers.

Consequently, the latest rally does not automatically translate into higher pump prices, just as stronger international crude prices do not guarantee a corresponding increase in government revenue.

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