Bonny Light stays comfortably above FG’s 2026 benchmark of $64.85, even as supply risks and demand concerns pull prices in opposite directions….
Nigeria’s flagship crude grade is holding above the Federal Government’s 2026 budget benchmark, offering a cushion for public finances amid a volatile global oil market.
Bonny Light crude oil was last seen trading around $71 per barrel, slightly lower than Monday’s $72.30 but still comfortably above the government’s conservative 2026 budget assumption of $64.85 per barrel.
Nigerian crude, widely regarded as “light and sweet,” remains attractive to refiners due to its low sulfur content and high API gravity, which make it cheaper to process into high-value products such as diesel and gasoline.
Geopolitics drive risk premium
Oil has emerged as one of the strongest-performing asset classes this year, buoyed by rising geopolitical tensions beyond the Middle East’s traditional flashpoints.
US military forces have reportedly increased their presence around the Red Sea ahead of a third round of US-Iran nuclear talks scheduled to take place in Geneva. At the same time, Iranian naval drills in the Strait of Hormuz — a corridor through which roughly 20 million barrels of oil pass daily — have heightened fears of potential supply disruptions.
The growing risk premium has supported prices, even as broader macroeconomic uncertainties linger.
Oversupply risks loom
Despite the geopolitical tailwinds, medium-term fundamentals suggest a more balanced, or even oversupplied market could emerge.
The US Energy Information Administration projects that global inventories will rise this year, with production growth expected to outpace consumption. The agency forecasts an average build of 3.1 million barrels per day in global stockpiles, exceeding earlier projections.
If those expectations materialise, upward price momentum could face resistance as supply pressures build.
Trade tensions are also back in focus after the US administration signaled plans to introduce new national security tariffs following a Supreme Court ruling that invalidated certain earlier levies. A proposed 15 per cent global tariff has raised fresh concerns about global growth and, by extension, energy demand.
For now, the oil market appears caught between persistent supply-side risks and questions about future consumption.
Investors are also awaiting the release of the American Petroleum Institute’s weekly crude inventory data, which could offer short-term direction for prices.
Nigeria’s Oil Outlook Strengthens
Higher oil prices provide breathing space for Nigeria’s fiscal plans. The Federal Government’s 2026 budget is anchored on a benchmark crude price of $64.85 per barrel and a daily production target of 1.84 million barrels.
In January 2025, Nigeria produced about 1.48 million barrels per day, slightly below its OPEC+ quota of 1.5 million bpd underscoring the importance of both price stability and production recovery.
Nigeria has also expanded its crude slate. In February 2026, the country launched the Cawthorne crude grade (API 36.4°), adding to Utapate and Obodo grades introduced in 2024 and 2025.
A major structural shift is also underway in the downstream segment.
The Dangote Refinery, with a refining capacity exceeding 650,000 barrels per day in 2026, has reshaped Nigeria’s energy landscape. During a recent visit by the Nigerian National Petroleum Company Limited, output was reported at 661,000 bpd above its nameplate capacity.
The facility is now supplying between 60 million and 65 million litres of Premium Motor Spirit (petrol) daily to the domestic market, effectively making Nigeria self-sufficient in petrol. Surplus volume estimated at about 20 million litres per day are being exported to neighbouring markets.
Tackling losses, attracting investment
Crude theft and pipeline vandalism have historically drained billions of dollars in revenue. However, the 2025/2026 period marked the first decline in reported losses in 16 years, supported by strengthened security operations and community-based surveillance initiatives.
In a further push to revitalise the sector, the Federal Government launched a new licensing round in January 2026 covering 50 oil and gas blocks. The initiative aims to attract more than $10 billion in fresh investment to develop underexplored assets and inland basins.
With crude prices above budget assumptions, refining capacity expanding and security conditions improving, Nigeria’s oil sector is entering 2026 with renewed momentum though its trajectory will ultimately depend on how global supply, demand and geopolitics evolve in the months ahead.
About the Author
