Sopuruchi Onwuka

Nigeria’s crude oil production slipped in January, highlighting an early gap between actual performance and the more ambitious assumptions embedded in the 2026 federal budget.

An analysis of the January production performance and average oil price in January indicates the need for the petroleum industry to accelerate output and enable the government arrest widening gap in the fiscal calculations guiding government’s expenditure in the year.

According to monthly market summary for crude oil in the month, Brent reference crude oil grade averaged $64.59 per barrel ($64.59/bbl) in January. The January price average is however 4.6% higher than December 2025 average.

Market data show that prices rose further by 16.2% from the end of December to $70.73/bbl as of January 30, indicating fluctuations that ruled the market in the first month of the year.

The Brent price figures however only serve as reference price for Nigeria’s Bonny Light and other Nigerian light sweet crude grades that sell slightly above the Brent reference benchmark.

Using the Brent crude oil grade as reference for the budget, monthly price average for the month was $0.26/bbl short of the budget proposition of $64.85/bbl.

Oracle Intelligence reports that the firmer price environment offers some relief for government revenues, particularly as the 2026 budget is built on a benchmark oil price that assumes stronger market value as growing geopolitical tensions, shifting trade alignments and military confrontations continue to rule supply concerns.

Whereas price premiums on Nigeria’s premium crude oil grades match up with 2026 revenue targets, production volumes plunged by 20,000 barrels per day from 1.50 mbpd in December to 1.48 million barrels per day (mbd) in January. The January output performance leaves Nigeria below both its 1.50 mbpd quota at OPEC+ and budget projections for the year.

The 2026 federal budget projects 1.84 mbd average crude output to support revenue targets and narrow the fiscal deficit. The budget framework assumes sustained growth in production in line with expectations of improved security in the Niger Delta, stronger regulatory clarity, and rising investment in upstream operations.

OPEC+ members report only crude oil production volumes to the multilateral groups, indicating that Nigeria’s 360,000 – 400,000 barrels per day (b/d) of condensate production could be added to push total liquid hydrocarbon output to over 1.8 mbd in January.

The Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company (NNPC) Limited, Engr Bayo Ojulari, pledged at the Nigerian International Energy Summit (NIES) earlier in the month that the national oil company and its operating partners are in collaboration to deliver crude output expectations as captured in the 2026 budget.

He stated that the company is leading industry position on credible national fiscal planning, explaining that projections from the NNPC to government are the sum of production commitments by producing companies.

The nation’s upstream industry regulators have also recently activated policy moves to support stronger output projections; and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Nigeria’s oil regulator has reduced entry costs and introduced independent oversight in the ongoing licensing round to attract investors.

Commission Chief Executive (CCE), Mrs Oritsemeyin Eyesan, stated that participants at the prevailing licensing round for oil blocks that only bidders with convincing demonstration of financial and technical capacity for exploration, development and production operations would be awarded licenses.

She stated that the approach becomes necessary to weed out opportunity traders who secure oil blocks before seeking funding and operating partners. She made it clear that government’s mandate on the industry to grow production calls for quick-to-market approach in licensing administration.

Fiscal planners expect the foreign exchange rate to average N1,400 for a dollar in 2026.

To stabilize the value of the local currency at projected level by displacing import pressure coming from persistent fuel imports, Engr Ojulari declared that NNPC Limited has initiated incorporated joint venture arrangement with a Chinese firm to manage state-owned refineries that have remained largely idle despite heavy rehabilitation spending.

If successful, the rehabilitation and restreaming of the three refineries in Port Harcourt, Warri and Kaduna would unleash collective 445,000 barrels per day of refining capacity and combine with private owned Dangote Refinery to end fuel importation and reduce pressure on the country’s foreign exchange reserves.

Oracle Intelligence reports that oil and gas output remains vulnerable to pipeline disruptions, crude theft, and regulatory uncertainty following concerns over new presidential orders criticized for overriding some provisions of the Petroleum Industry Act (PIA).

At the NIES in Abuja, players had pointed at instability in the Niger Delta as a persistent downside risk, noting that even minor setbacks could quickly push production below both OPEC+ limits and budget expectations.

Whereas the current price of crude oil in the international market indicates near-term stability, crude oil-specific production is likely to hover just below budget projections in line with recent trends.

For the industry to meet the 2026 budget assumptions, analysts stated at the NIES, there must be concerted efforts at sustaining security, operational efficiency, and investor confidence. If government fails to tackle issues beyond the purview of the industry, the gap between projected and actual oil revenues could widen, placing additional strain on the nation’s fiscal balances.