Nigeria’s 2026 budget under threat as Citi forecasts Brent crude could slide to $60

NIGERIA’S 2026 budget may come under renewed pressure after global financial services firm Citi projected that Brent crude prices could decline to about $60 per barrel by the end of the year, raising concerns over government revenue and fiscal stability.

The forecast suggests Nigeria could face a significant revenue shortfall if crude prices weaken further, especially as oil production continues to lag expectations. Lower earnings from crude exports would likely widen the fiscal deficit, forcing the government to rely more heavily on borrowing or reduce planned public expenditure.

Brent crude, which climbed to a high of $115 per barrel on May 1, 2026, has since retreated sharply and was trading at around $71.71 per barrel on Friday.

Nigeria based its 2026 budget on an oil benchmark of $64.85 per barrel and production of 1.84 million barrels per day. However, the country’s long-standing struggle to consistently meet that production target means any sustained decline in oil prices would further weaken foreign exchange (FX) inflows. With geopolitical risk premiums fading, Nigeria also has fewer opportunities to boost external reserves through elevated crude prices.

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The Nigerian government’s proposed N23.85 trillion budget deficit is expected to be financed largely through domestic and external borrowing, a move that could further increase the country’s debt servicing burden.

Earlier this year, oil prices surged amid heightened military tensions and disruptions to shipping through the Strait of Hormuz. However, the ceasefire brokered between the United States and Iran has restored normal maritime traffic, easing concerns over supply disruptions.

As geopolitical tensions subside, analysts say the market’s attention has shifted back to underlying fundamentals, including weaker Chinese demand and growing global supply. Citi believes these factors could drag Brent prices from above $80 per barrel to around $60 by year-end, reinforcing bearish sentiment across the oil market.

The easing of hostilities has significantly reduced the risk premium that previously supported crude prices. Even during the height of the disruption, European nations were reportedly prepared to pay transit fees to ensure vessels could continue using the Strait of Hormuz. Since then, Brent crude has fallen roughly 30 percent, wiping out gains recorded during the conflict.

“Fundamentals are rapidly reasserting themselves,” Citigroup strategists led by Francesco Martoccia said in a research note.

According to the analysts, shipping flows are returning to normal, with Chinese demand remaining subdued. Physical crude markets have weakened considerably, and global inventories have declined less than expected. They also noted that some European countries now recognise they may need to pay transit fees to Iran and Oman to maintain access to the Strait of Hormuz.

Shipping activity through the narrow waterway linking the Persian Gulf to the Gulf of Oman has increased following assurances of safe passage for commercial vessels. Analysts say the return of normal shipping patterns signals that operators now view the risks as manageable, allowing supplies to flow more freely into global markets.

“The initial period is expected to be volatile given that shipping lines rebalance and insurance markets react while working through any residual capacity constraints,” Citi said.

“The fact that orderly transit, increased volumes and the re-establishment of normal shipping patterns appear to be resuming implies that operators consider the current risk level more manageable than unmanageable.”

Other major investment banks share a similarly cautious outlook. Goldman Sachs recently warned that the global oil market could return to a supply glut following the end of the Iran conflict and the reopening of the Strait of Hormuz, while Morgan Stanley has lowered its oil price outlook twice this week on expectations of oversupply.

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Brent crude was trading slightly above $71 per barrel on Friday, having last traded below $60 in January. Citi said it continues to recommend selling into any summer price rallies, maintaining its expectation that Brent will end the year within a $60-$65 per barrel range.

The conflict between Iran and the United States, which began in late February, ended after both sides agreed to a memorandum of understanding to halt hostilities while negotiations continue toward a longer-term agreement. The Strait of Hormuz, a vital route linking Persian Gulf oil producers with international markets, experienced disruptions during the confrontation before normal operations resumed.