Manny Ita
Global oil markets were thrown into turmoil this weekend as Brent crude prices plummeted to $60.56 per barrel, officially sliding beneath the $64.85 benchmark established in Nigeria’s N58.18 trillion 2026 Federal Budget. The downturn, largely triggered by a massive influx of supply following a landmark deal for the United States to import up to $2 billion in Venezuelan crude, has left the Nigerian government facing an immediate revenue shortfall only days into the new fiscal year. Financial analysts warn that if the price remains depressed through the first quarter, the Presidency may be forced to initiate a supplementary budget or implement drastic spending cuts to bridge the gap.
The global slump has simultaneously ignited a fierce price war within Nigeria’s domestic downstream sector, as the landed cost of imported petrol at Apapa dropped to approximately ₦696 per litre. This shift has disrupted local supply chains, leading to the reported collapse of a major supply agreement between the Dangote Refinery and twenty major marketers. With the refinery’s gantry prices previously hovering between ₦699 and ₦828, many independent marketers are now bypassing local refining in favor of cheaper imports. “Marketers are opting to import fuel rather than buy locally because it is currently cheaper due to the global crude dip,” industry sources confirmed, noting that the economic incentive to support local production has been weakened by the price disparity.
Despite the drop in international costs, Nigerian motorists have yet to see significant relief at the pump, where prices remain anchored between ₦739 and ₦815 per litre. This stickiness is attributed to marketers clearing high-cost inventory and the federal government’s reliance on fuel-related taxes to offset the dip in crude revenue. Aliko Dangote has issued a stark warning regarding the sustainability of this trend, stating that without consistent local refining, petrol could hit “₦1,400 per litre” should international prices rebound or the Naira face further devaluation.
The fiscal pressure is compounded by Nigeria’s massive 2026 debt servicing obligations, which are projected to exceed ₦15 trillion. With production goals of 1.84 million barrels per day already under threat from persistent security challenges and crude theft, the $4-per-barrel deficit below the budget benchmark creates a “perfect storm” for the national economy. Former National Bureau of Statistics chief Yemi Kale noted that while ICT and energy remain long-term drivers, the immediate fiscal stability of the nation hinges on how the government navigates this price volatility and manages its debt-to-revenue ratio in the coming months.
The sharp decline in global crude oil prices has cast a shadow over the stability of the Nigerian Naira, creating a divergence between government optimism and market reality as of January 2026. While the Central Bank of Nigeria (CBN) recently projected a steady rise in external reserves to $51.04 billion this year, the dip in Brent crude to $60.56 per barrel threatens the very inflows required to achieve that target. Economists warn that because oil remains Nigeria’s primary source of foreign exchange, any sustained drop below the $64.85 budget benchmark directly limits the CBN’s “firepower” to intervene in the currency market and maintain the Naira’s value.
In the immediate term, the Naira has shown localized resilience, recently hitting a high of ₦1,418.26 in the official market following the rollout of the Electronic Foreign Exchange Matching System (EFEMS). However, analysts at Citigroup and CardinalStone suggest this strength is fragile. “If crude prices decline as expected, we would expect some modest pressure on the naira as 2026 progresses,” noted Citi’s African economist David Cowan, who suggests the currency could weaken toward ₦1,700 per dollar by mid-year. This potential depreciation is linked to a possible “monetary easing cycle” by the CBN, where lowering interest rates to stimulate the economy could inadvertently lead to capital flight if oil revenues aren’t there to provide a buffer.
The role of the Dangote Refinery remains a critical variable in this exchange rate equation. By expanding its capacity toward 700,000 barrels per day, the refinery is expected to significantly reduce the demand for US dollars typically used for fuel imports. “Structural pressures on foreign exchange demand have eased, driven largely by the full operation of the Dangote Refinery,” according to recent reports from the Nigerian Foreign Exchange Market. However, the current price war between local refining and cheaper imports means this benefit is not yet fully realized. If marketers continue to favor imported petrol due to the global oil slump, the anticipated “FX savings” from local refining may stall, leaving the Naira vulnerable to further external shocks.
Looking toward the second half of 2026, the outlook remains “cautiously optimistic” but highly dependent on fiscal discipline. Renowned economist Bismarck Rewane has emphasized that “every dollar reduction in the price of crude increases our fiscal deficit,” which often forces the government to borrow more, further devaluing the currency. While the CBN baseline scenario sees the Naira trading between ₦1,350 and ₦1,450, a worst-case scenario involving persistent sub-$60 oil prices could see the local currency slide beyond ₦1,650 as reserves are drained to cover essential imports and debt servicing.
