Escalating conflicts in the Middle East have driven oil prices to $115 per barrel this month. However, Nigeria's anticipated budget windfall is significantly offset by crucial "leaks," even though the 2026 budget was constructed on a $64.85 benchmark.

A substantial portion of Nigeria’s current oil production does not generate new revenue because it was pledged years ago to pay off debts. Nigeria agreed to supply about 125,000 barrels per day until 2028 under these crude-backed loan agreements.

Consequently, the West African economy struggles to keep production above 1.4 million barrels per day, despite a target of 2.06 million barrels per day for this year. Nigeria’s oil output fell to 1.31 million barrels per day last month, mainly due to Shell shutting down a major 225,000 bpd facility for maintenance.

The federal government recently shortened permit approval times for restarting idle wells from weeks to hours to benefit from the over $100+ price environment. Nigeria was projected to produce about 57 million barrels in January and 51.5 million barrels in February, totaling approximately 108.6 million barrels for the period, according to the government’s benchmark in the 2026 budget.

There are fewer “unencumbered barrels” available at spot prices because much of Nigeria’s crude is pre-committed to refinery obligations and crude-backed loans, even though higher prices should boost the fiscal surplus. The Nigerian energy market has shifted from an “export-only” model to a “domestic-first” approach thanks to the 650,000 bpd Dangote Refinery.

The refinery received only about 27% of the needed crude from NNPC between October 2025 and March 2026, resulting in a shortfall of 79.5 million barrels. Price transmission has caused domestic petrol prices to jump above N1,250 per liter as the refinery passes global crude costs, converted to foreign exchange, onto the local market.

Nigerian Crude Near $100 a Barrel Amidst Middle East Conflict

Nigerian crude remained largely volatile as the United States and Iran disagreed on terms that could end the Middle East conflict. Bonny Light, a major Nigerian crude, last traded at $98 a barrel on Wednesday.

• The US-Israel-Iran conflict and disruptions in the Strait of Hormuz have created a significant “Risk Premium” for West African crude.
• Brent crude reached $101 per barrel before dropping back to $97 a barrel as President Donald Trump expressed optimism about the prospect of a deal.
• The US government deployed thousands of troops to the region amid mixed signals about negotiations, raising fears that Trump could be preparing for a risky ground invasion he previously opposed. In efforts to end the nearly four-week-long conflict, Trump has advocated for negotiations with Iran.

According to the White House, the US has engaged in productive discussions with Iran over the past three days and has developed a plan requiring Iran to dismantle its main nuclear facilities and restrict its missile arsenal to self-defense.