Venezuela Crisis May Affect Nigeria, Creating $10b Hole in FG’s N58tr Spending Plan
- Global oil markets faced fresh uncertainty as Venezuela’s political upheaval threatened to reshape supply dynamics
- Analysts warned that Nigeria’s N58.18 trillion 2026 budget, built on ambitious oil benchmarks, could come under severe strain
- With crude prices projected to dip towards $50 per barrel, fears mounted over revenue shortfalls, foreign exchange pressures and rising fiscal risks
Geopolitical developments in Venezuela have raised concerns about global oil supply dynamics, with analysts warning that Nigeria’s N58.18 trillion 2026 spending plan could face severe stress. The crisis has already triggered a review of projections across key markets, putting enormous pressure on crude prices.
According to Guardian, President Donald Trump’s targeted $50 per barrel price is no longer seen as unrealistic, according to industry watchers.
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Nigeria’s budget framework is built on crude oil production of 1.84 million barrels per day (bpd), translating to about 673 million barrels in 2026, at a benchmark price of $64.85 per barrel.
This projection implies gross oil receipts of about $43.84 billion before costs and obligations. However, the National Assembly has proposed lowering the benchmark to $60 per barrel amid fears of a price slump.
Venezuela’s return to global oil markets
The U.S. invasion of Venezuela and the capture of President Nicolás Maduro marked a significant political shift. President Trump announced plans for U.S. oil companies to invest billions in rebuilding Venezuela’s oil infrastructure.
Analysts said that while Venezuela’s production capacity may not rebound immediately, easing sanctions could allow its crude to re-enter mainstream markets, intensifying competition.
Export data showed Venezuela shipped around 707 million barrels annually before 2019, with the U.S. as its largest buyer. Sanctions reduced exports to below 200 million barrels per year between 2020 and 2021.
By 2023 and 2024, exports partially recovered to 250–350 million barrels annually, largely through opaque trading practices. Experts warned that a full rehabilitation could flood the market with additional barrels, pushing prices lower.
Fiscal fragility and revenue risks
Nigeria’s Minister of Finance, Wale Edun, disclosed that the government recorded a revenue shortfall of about N30 trillion in 2025. With debt servicing already consuming N15.52 trillion—over a quarter of total expenditure—stakeholders said the country has limited room to absorb further shocks. The projected fiscal deficit of N23.85 trillion, equivalent to 4.28 per cent of GDP, underscores the fragility.
Prof. Segun Ajibola, former chairman of the Chartered Institute of Bankers of Nigeria, warned:
“At the current price of about $60.8 per barrel compared with Tinubu’s proposed $64.85, the situation is already becoming stressed. If a price war ensues, as could be triggered by increased supply from Venezuela, it will affect Nigeria’s projections for 2026.”
Pressure on the naira and foreign exchange
The naira, which gained N100/$ in 2025, may face downward pressure if oil receipts weaken. Crude sales remain Nigeria’s main source of foreign exchange inflows. Analysts said reduced dollar supply would complicate efforts to stabilise the FX market, particularly as political activities ahead of the 2027 elections increase demand.
Expert warnings on oil benchmarks
Prof. Wunmi Iledare, a petroleum economist, described the $64.85 per barrel benchmark as “achievable” but noted that the 1.84 mbpd target was aspirational given structural constraints. He said:
“The real risk is budgeting on best-case oil outcomes in a global market where prices are increasingly managed. Prudence demands more conservative assumptions and stronger non-oil revenues.”
Dr Kaase Gbakon, an oil policy expert, added that a derisked Venezuelan environment could divert investment capital away from Nigeria.
“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,” he said.
Calls for austerity and refining capacity
Financial analyst Kalu Aja tweeted:
“If a new U.S.-backed Venezuelan leadership decides to pump more oil, global prices will come under pressure. If Russia also reaches a ceasefire in Ukraine, prices could fall further. Nigeria should be preparing an austerity budget, not an optimistic one.”
Experts also urged Nigeria to resolve refinery challenges and support private refining capacity. Ajibola stressed that it was “increasingly uneconomic for Nigeria to export crude only to import refined products.”
Outlook for 2026
With OPEC members reaffirming commitment to market stability, stakeholders said Nigeria must adopt more conservative budgeting and accelerate tax reforms to reduce dependence on oil.
Partner at Kreston Pedabo, Olufemi Idowu, warned that Venezuela and Nigeria compete in similar markets. “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,” he said.
As Nigeria actively seeks buyers for its 2026 crude cargoes, analysts cautioned that the country’s fiscal outlook remains vulnerable. Without stronger non-oil revenue mobilisation and tighter spending discipline, the N58.18 trillion budget could face significant implementation challenges.
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Source: Legit.ng
