Nigeria Records N5.1trn Oil Revenue Shortfall in Six Months

Despite windfalls recorded by many oil-producing nations in recent months following the tension in the Middle East, Nigeria lost an estimated N5.1 trillion in expected oil revenue in six months.

The 2026 federal budget has a target of 1.84 million barrels per day (bpd), but the data published by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reflects significant shortfalls from the target across the months.

A Missed Boom: High Prices, Low Yield

While global oil markets sizzled over geopolitical friction, driving crude prices well past benchmark projections, Africa’s largest economy found itself unable to cash in on the surge.

Rather than reaping bumper revenues to bolster fiscal reserves and stabilize the naira, the nation’s treasury is left grappling with a massive hole in its half-year balance sheet.

Pinnacle Daily’s analysis shows that out of 333.04 million barrels of expected production for six months, in line with the 1.84 million barrels per day target, the country recorded approximately 294.1 million barrels of crude oil and condensate production, reflecting a shortfall of 38.94 million barrels between January and June 2026.

According to the NUPRC data, crude oil and condensate production was 1.62 million bpd in January. It dropped to 1.48 million bpd in February, rose to 1.54 million bpd in March, 1.66 million bpd in April, 1.7 million bpd in May and 1.74 million bpd in June. Despite the sustained increase in output in the second quarter of the year and meeting OPEC crude oil production quota for two consecutive months (May and June), the country still did not hit the target in the national budget for 2026.

The average daily output, as seen in the NUPRC data, means that the country produced 50.2 million barrels of crude oil and condensate in January. It dropped to 41.44 million barrels in February, rose to 47.74 million barrels in March, and 49.8 million barrels in April. It further rose to 52.7 million barrels in May and stood at 52.2 million barrels in June, leading to a cumulative output of 294.1 million barrels for the six months.

Based on the federal government’s production target in the 2026 budget, the country was expected to produce 57.04 million barrels in January, 51.52 million barrels in February, 57.04 million barrels in March, 55.2 million barrels in April, 57.04 million barrels in May and 55.2 million barrels in June to reach 333.04 million barrels in the period under review.

The production gap is coming at a time when global oil prices have experienced a significant increase, allowing oil-producing countries to earn more revenue. While Nigeria has a benchmark price of $64.85 per barrel, crude oil had reached a peak of $120 a barrel in recent months due to supply chain disruption caused by the closure of the Strait of Hormuz.

The conflict between the United States, Israel and Iran, which started in late February, has significantly affected global shipping of products, including energy. The Strait of Hormuz is a vital sea route where about 20 per cent of the world’s oil and gas products pass daily to other parts of the world.

Before the hostilities started, crude oil prices were hovering around $70 per barrel.

With Nigeria’s 2026 budget anchored on a crude oil price benchmark of $64.85 per barrel, the country was expected to benefit from the windfall.

However, the inability to increase production in line with rising prices made it unable to maximise revenue.

The Revenue Shortfall

The production shortfall led to expected revenue surging above N5 trillion in the first half of the year.

Data from the Central Bank of Nigeria (CBN) show that crude oil prices, specifically the Bonny Light (a Nigerian crude oil grade), were $68.05 per barrel in January and $72.33 per barrel in February. It rose to $106.09 per barrel in March and $126.71 per barrel in April 2026.  It, however, declined in May to $112.63 per barrel and further dropped to $88.24 per barrel in June, following the brief easing of tension in the Middle East when the US and Iran reached a ceasefire that collapsed recently.

Taking a six-month average price will amount to $95.7 per barrel in the first six months of 2026. At an average price of $95.7, the 38.94 million barrels shortfall means the country lost about $3.73 billion. At the current exchange rate of ₦1,362 per dollar, this translates to approximately ₦5.1 trillion.

The revenue shortfall exposes once again the fragile foundation of an economy that continues to rely heavily on crude oil earnings despite years of promises to diversify.

At a time when government spending is expanding, debt servicing obligations remain high, and millions of Nigerians grapple with rising living costs, the revenue gap has become more than a fiscal statistic—it is a reflection of the country’s enduring struggle to translate its vast oil wealth into economic stability.

The revenue shortfall also comes at a critical period when the Federal Government is pursuing ambitious economic reforms, financing major infrastructure projects, and attempting to stabilize the naira amid persistent foreign exchange pressures.

Missing Targets Despite High Expectations

Oil revenue remains the single most important source of foreign exchange for Nigeria and contributes a significant portion of government earnings. Every annual budget is built around assumptions on crude oil production, benchmark oil prices, and exchange rates.

However, meeting those projections has increasingly become difficult.

Although international crude oil prices have remained relatively supportive for much of the period, Nigeria has consistently struggled to produce enough crude to maximize the benefits of favourable prices. Production disruptions, pipeline vandalism, operational shutdowns, deferred investments, and crude theft have, according to analysts, combined to reduce government earnings.

The result is a widening gap between projected revenues and actual collections.

Economists, energy analysts, and industry stakeholders have continued to warn that unless Nigeria addresses the challenge of crude production, such as oil theft, infrastructure deficiencies, and global market uncertainties, the country may continue to face recurring revenue disappointments that undermine national development.

For a government already facing limited fiscal space, every trillion-naira revenue loss translates into difficult choices—whether to borrow more, increase taxes, reduce expenditure, or delay critical capital projects.

Already, the country is having a deficit of N23.85 trillion in the 2026 budget.

Oil and gas expert, Dr Wisdom Enang, said the only way Nigeria could reap from the oil windfall created by the Iran war is to ramp up production.

Enang dismissed speculations that Nigeria may have recorded excess earnings due to global oil prices surging above the country’s benchmark price.

“I think there should be something done with the excess money that is coming in, but the question is, looking at the budget, we know that we typically have a deficit and really need to be thinking, is there really any excess money coming in in the real sense, not hypothetical sense,” he asked.

He further stated that even if there is excess earnings, the government should direct it to infrastructural projects in the oil and gas sector that would help shield the country in times of oil price volatility. Such projects, according to him, include building strategic reserves to store crude and supply to domestic refineries in times of volatility and minimize the impact on local prices of refined petroleum products.

Meanwhile, the Federal Government has set a target of raising the output to three million barrels by 2030.  Speaking at the Commercial Bid Conference in Abuja on Tuesday, July 21, Chief Executive of NUPRC, Oritsemeyiwa Eyesan, said the 2025 licensing round and the one proposed for 2026 are part of efforts to attract more investments in the upstream oil and gas sector and ramp up production to achieve that target.

Eyesan said the successful assets are expected to add about 500 million barrels to the nation’s hydrocarbon reserves, approximately two trillion cubic feet of natural gas, and increase Nigeria’s crude production by 300,000 barrels per day, with about 100,000 barrels per day projected within the next three years.

While NUPRC announced that 31 companies emerged winners of 37 oil blocks out of 50 offered in the 2025 Licensing Round, analysts and industry stakeholders have raised concerns about the remaining 13 blocks shunned by investors.

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However, Eyesan expressed optimism that the 13 oil blocks, largely located in frontier basins, would attract investors’ interest after more geological work has been done to de-risk the assets.

Restoring Investor Confidence

International investors continue to monitor Nigeria’s petroleum sector closely.

Although reforms introduced under the Petroleum Industry Act have improved the regulatory framework, investors still seek greater certainty regarding fiscal terms, contract enforcement, security, and ease of operations.

Analysts believe that restoring investor confidence could unlock billions of dollars in fresh upstream investment, leading to increased production and higher government revenues over the medium term.