Nigeria Faces Revenue Risk As OPEC Cuts 2026 Oil Demand Growth 5th Time

Nigeria’s oil-funded budget faces fresh pressure after the Organisation of the Petroleum Exporting Countries (OPEC) cut its 2026 global oil demand growth forecast for the fifth consecutive month.

In its latest monthly report, OPEC reduced its global oil demand growth forecast for 2026 by more than 70 per cent, from 1.4 million barrels per day (bpd) to 400,000 bpd, reflecting weaker-than-anticipated demand growth during the year.

The revised outlook was disclosed on Monday by OPEC secretary-general Haitham Al Ghais during a ministerial session titled Perspectives on Global Oil and Gas Markets at the 25th WPC Energy Congress in Riyadh, Saudi Arabia.

The cumulative cut since April is about one million bpd, from nearly 1.4 million bpd. That is a fall of more than 70 per cent in five months.

The weakness is concentrated in the richer economies. OPEC expects demand in OECD countries to shrink by about 110,000 bpd this year, while non-member economies grow by about 490,000 bpd.

The group linked the repeated downgrades to the Middle East conflict, which continues to change energy consumption patterns.

Weaker demand tends to hold down crude prices, and Nigeria’s budget depends on both price and output.

The N68.32 trillion 2026 Appropriation Act kept an oil benchmark of $64.85 per barrel and a production target of 1.84 million bpd.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) data showed that crude oil production averaged 1.626 million bpd between January and June, leaving a shortfall of 38.4 million barrels and a potential revenue gap of about $2.49 billion.

June output was still about 104,600 bpd, or 5.7 per cent, below target.

Secondly, the price of Brent fell from a peak of $115 on May 1 to about $72 in early July, and Citi has warned it could fall to $60 by year-end, below the benchmark.

Analysts warned that lower volumes and prices would reduce foreign exchange earnings and could widen the budget deficit, forcing more borrowing and a higher debt service bill.

For the government, a revenue shortfall can mean smaller allocations to the three tiers of government from the Federation Account Allocation Committee (FAAC), delayed capital releases and more borrowing.

Also, for the naira, it means fewer dollar inflows to support reserves.

However, while the OPEC outlook is lower for this year, it raised its 2027 demand growth forecast to about 2.4 million bpd, up from 2.2 million bpd.

OPEC said it expects non-OECD countries to contribute about two million bpd of that. The gain will only help Nigeria if the country produces enough to sell into it.