CardinalStone’s central case—an average oil price of about $55 per barrel in 2026—is materially below the Federal Government’s 2026 budget oil benchmark of $64.85 per barrel, as reported by Nairametrics. The gap is not cosmetic. It is wide enough to turn the 2026 budget from “tight but plausible” into another year of heavy borrowing and likely under-delivery on capital spending, unless Nigeria materially overperforms on crude production, non-oil revenue mobilisation, or foreign-exchange inflows.
What follows is a structured scrutiny of the 2026 budget through a $55 oil-price lens.
1) The 2026 budget, in one page
The President’s 2026 Budget Speech sets out an ambitious fiscal framework. Total revenue is projected at ₦34.33 trillion, against total expenditure of ₦58.18 trillion, leaving a deficit of ₦23.85 trillion, equivalent to 4.28 per cent of GDP, according to figures released by the State House Abuja. Debt-service costs alone account for ₦15.52 trillion, while recurrent non-debt spending is budgeted at ₦15.25 trillion. Capital expenditure stands out at ₦26.08 trillion, signalling a stated commitment to growth-oriented spending.
The budget is anchored on three key macro assumptions: an oil price benchmark of $64.85 per barrel, average crude production of 1.84 million barrels per day, and an average exchange rate of ₦1,400 to the dollar, all officially presented by the State House Abuja. This framework is the baseline that a $55 oil scenario must now stress-test.
2) The price shock: $64.85 vs $55 is not a rounding error
CardinalStone projects that oil prices will average $55.08 per barrel in 2026, according to reporting by Nairametrics, compared with the government’s benchmark of $64.85 per barrel. The implied downside of $9.77 per barrel is large enough to matter materially for fiscal outcomes.
Using only the budget’s production assumption of 1.84 million barrels per day, annual crude output would amount to roughly 671.6 million barrels. A price shortfall of $9.77 per barrel on that volume implies a gross oil-value gap of approximately $6.6 billion. Converted at the budget exchange rate of ₦1,400 per dollar, this equates to about ₦9.2 trillion in gross-value terms.
This figure should not be misread as a direct revenue loss to the Treasury. The budget does not receive the full headline value of crude sales. Government take is diluted by production costs, joint-venture and production-sharing arrangements, NNPC cash-call dynamics, swap contracts, timing differences in remittances, and crude losses. Even so, if only a fraction of this gap transmits into fiscal revenues, a $55 oil price still implies a multi-trillion-naira hole relative to the budget benchmark.
The bottom line is clear: the oil-price assumption is doing heavy lifting in the 2026 budget arithmetic. A sustained $55 environment pushes the fiscal adjustment toward larger borrowing, the accumulation of arrears, or renewed under-execution of capital spending—the familiar silent adjustment.
3) The production assumption is ambitious—and CardinalStone’s is lower
The 2026 budget assumes average crude production of 1.84 million barrels per day, according to the State House Abuja. CardinalStone, however, expects output to rise only to around 1.75 million barrels per day in 2026, as reported by Nairametrics.
If production averages closer to 1.75 million barrels per day, the gap to the budget assumption—about 0.09 million barrels per day—translates into roughly 32.85 million barrels over the year. At an oil price of around $55 per barrel, that volume difference is worth approximately $1.8 billion, even before adjusting for fiscal take.
Under this combined “CardinalStone world” of lower prices and slightly lower volumes, the budget is hit on two oil levers simultaneously: price and production.
4) The exchange-rate assumption: ₦1,400/$ vs market reality
The budget assumes an average exchange rate of ₦1,400 per dollar, as stated by the State House Abuja. However, data published by the Central Bank of Nigeria in early January shows the official window trading closer to ₦1,418–₦1,420 per dollar.
This divergence matters in opposing ways. A weaker naira increases the naira value of dollar-denominated oil receipts, provided those receipts are captured transparently and remitted promptly. At the same time, it raises the naira cost of FX-linked spending, imports, and external debt service, while amplifying inflation-linked pressures in recurrent expenditure.
As a result, naira weakness is not a clean fiscal benefit. It inflates revenues and obligations simultaneously, often increasing political pressure for higher recurrent spending just as fiscal space narrows.
5) The spending structure: capital looks large, but Nigeria’s adjustment usually happens there
One striking feature of the 2026 budget is that capital expenditure of ₦26.08 trillion exceeds recurrent non-debt spending of ₦15.25 trillion, according to the State House Abuja. On paper, this is a strongly pro-growth posture.
In practice, Nigeria’s fiscal history suggests that when revenues underperform, adjustment rarely occurs through explicit cuts. Instead, it tends to emerge through delayed releases, procurement bottlenecks, cash rationing, and the rollover of capital projects. The Budget Speech itself acknowledges weak capital releases during 2025 execution, while promising stronger discipline in 2026.
A $55 oil environment materially increases the probability that, unless non-oil revenues outperform, the effective adjustment once again falls on capital spending rather than recurrent outlays.
6) The deficit: ₦23.85tn is already large—$55 makes financing more consequential
Even before oil-price stress, the deficit of ₦23.85 trillion, or 4.28 per cent of GDP, leaves little margin for error. With oil at $55, deficit pressure intensifies, shifting attention squarely to financing strategy and cost.
Reporting by Punch Newspapers indicates that the government plans to raise approximately ₦17.89 trillion in new loans, with about ₦14.31 trillion, or roughly 80 per cent, sourced domestically, and ₦3.58 trillion externally. In a lower oil-price environment, heavier domestic borrowing risks pushing yields higher, tightening financial conditions and crowding out private-sector credit.
Debt service is already projected at ₦15.52 trillion, according to the State House Abuja. Additional borrowing at elevated rates tends to lock the budget into a higher debt-service path. If markets resist absorbing the planned issuance at acceptable pricing, the adjustment is unlikely to be explicit; it would more likely reappear through cash rationing and capital under-execution.
7) What could partially offset a $55 oil world
A $55 oil price does not automatically imply fiscal crisis. Nigeria can still manage the adjustment if several offsets materialise. One is stronger non-oil revenue performance. The government is explicitly relying on improved tax administration and recently enacted tax laws to lift collections, as emphasised by the State House Abuja.
Another offset lies in oil-sector efficiency. CardinalStone argues that crude losses from theft and operational disruptions have declined materially, supporting greater output stability, according to Nairametrics.
There is also cautious optimism around refined-product exports and FX buffers. Market commentary reported by Nairametrics suggests that refined-product exports and improvements in FX market structure could support external balances even with lower crude prices, though durability depends on volumes, pricing, and remittance discipline.
8) What $55 oil would likely mean, in practical budget terms
If Brent crude averages around $55 in 2026 and Nigeria does not exceed the budget’s production and non-oil revenue assumptions, the adjustment path is predictable. Domestic borrowing would become more aggressive than currently planned, or yields would rise to clear the market, as highlighted by Punch Newspapers.
Capital spending would likely face renewed pressure through under-release rather than formal revision, consistent with patterns acknowledged by the State House Abuja. Exchange-rate sensitivity would also increase, as any slippage in FX stability raises the naira cost of imports, externally priced obligations, and debt service, complicating inflation management overseen by the Central Bank of Nigeria.
9) Four indicators to watch monthly in 2026 (the early warning system)
The fiscal reality of a $55 oil environment will ultimately be revealed through a small set of monthly indicators. These include actual average crude production, including condensates, relative to the 1.84 million barrels per day budget assumption; realised oil prices relative to the $64.85 benchmark; federal government revenue performance against the run-rate required to achieve ₦34.33 trillion; and the pace and pricing of domestic borrowing, which will signal whether deficit financing is tightening financial conditions.
