How UAE’s OPEC Exit Threatens Nigeria’s Economy

The exit of the United Arab Emirates (UAE) from the Organisation of Petroleum Exporting Countries (OPEC) has raised concerns about its impact on global energy markets, especially for oil-dependent economies like Nigeria.

While the UAE’s move is largely informed by its shift toward expanding production capacity and diversifying its economy, analysts say the implications could be far-reaching for countries like Nigeria, whose fiscal strength remains heavily attached to crude oil exports.

A Shift in OPEC Dynamics

For decades, OPEC has functioned as a group regulating oil supply to influence global prices. Experts noted that the UAE’s exit signals potential cracks within the group, especially among members seeking greater autonomy over production decisions.

As one of OPEC’s major producers, the UAE had been pushing for a higher output quota. Before its exit, which took effect on May 1, 2026, the UAE had a production quota of 3.3 million barrels per day. The country’s current production capacity is put at 4.8 million bpd, with it targets 5 million barrels per day by 2027.

Besides the UAE, five other countries, including Angola, Ecuador, Qatar, and Indonesia, have left OPEC within the last three decades. Now OPEC is left with 11 members, which include Iran, Iraq, Kuwait, Venezuela, Algeria, Libya, Saudi Arabia, Nigeria, Equatorial Guinea, Gabon and Congo.

Energy expert, Kelving Emmanuel, said OPEC is losing its influence on global oil supply and prices, adding that the UAE’s departure could embolden other countries to rethink their commitments.

For Nigeria, which has historically struggled to meet its assigned quotas due to infrastructure challenges and oil theft, a weakened OPEC may present both relief and risk.

While OPEC quota for Nigeria has in recent years been pegged at 1.5 million bpd, the country has struggled to produce between 1.3 and 1.4 million bpd. This is below the 2026 production target of 1.84 million bpd. While oil prices have remained high, due to Middle East tensions, lower output has made the country unable to gain much from the windfall.

Threat to Oil Price Stability

One of the most immediate concerns is the potential volatility in global oil prices. There are concerns that without strict adherence to production quotas, an increase in supply from countries like the UAE could exert downward pressure on prices.

In an exclusive interview with Pinnacle Daily, a Professor of Political Economy, Pat Utomi, warned that if the move leads to an increase in production and oversupply, oil prices would go down in the global market and that could significantly affect Nigeria’s foreign exchange earnings and ability to manage its debts.

“Assuming that it unravels very quickly, with everybody pumping from everywhere, oil prices would go down significantly. In the short run, it will affect Nigeria’s management of its debt and the fact that it has committed so much in pre-selling some of its crude mortgaging is crude,” Utomi stated.

He said such an outcome would force the country to review its crude oil business strategies to maximize revenues and wriggle itself out of the financial doldrums.

Utomi recalled that OPEC was formed in 1960 as a force to redress the balance of economic power on oil. According to him, OPEC helped to put a check on oil price volatility, influenced by the game played by major oil companies aligned with America to the detriment of oil-producing nations.

He said that with the move, the UAE seems to have shifted from a tradition that had promoted egalitarianism in global finance.

Utomi said there have been several attempts over the years to weaken the organisation, but it managed to hold together. However, with the current price pressures across the world, he said opposition forces may become stronger this time and weaken the cartel’s influence, leading to intense competition to the detriment of lower oil-producing nations.

The founder of the Centre for Values in Leadership (CVL) maintained that OPEC’s mission has been accomplished, even if its influence drops completely after operating for more than six decades.

Chinnan Dikwal, vice chair, African Energy Council, said the UAE’s exit from OPEC is a move that could expose high-cost producers like Nigeria to low prices.

The energy expert pointed out that with a target of producing 5 million barrels per day, the UAE may put an additional 1.5 million barrels per day onto the market between this year and 2027, potentially causing oversupply. This, according to him, could lead to lower prices.

Dikwal also argued that OPEC is increasingly becoming weaker and losing its influence on the global oil market.

“OPEC as a bloc is particularly weaker right now. The OPEC you and I used to know three years ago, ten years ago, is not the same OPEC of today. It’s incredibly weaker,” Dikwal stated in an interview on TVC News.

He said OPEC’s share of the market in February this year was around 48 per cent of the total global crude and dropped to 44 per cent in March because of the Iranian crisis that caused a blockade of the Strait of Hormuz. According to him, OPEC controlled about 85 per cent of the total global oil market share 30 years ago.

Energy expert, Dr Wisdom Enang, said that after the issues that led to the blockade of the Strait of Hormuz are resolved and normal global oil and gas supply is restored, oil prices could drop significantly as a result of increased production and competition. This, he said, may affect Nigeria, whose major revenue is still coming from oil.

He stressed the need for an increase in production capacity to act as a buffer when oil prices fall.

“If we have a decline in oil prices and we do not have increased production to be able to make up a buffer for that decline, then Nigeria is going to be in a serious challenge,” Dr Enang, who is the managing director of SeaTech Energy Services Nigeria Limited, stated in an interview on Channels Television’s Business Morning.

He said Nigeria has no reason to exit OPEC yet, since it has not even hit the production quota yet.

Another Energy expert and founder of Energy Business Analytics, Kaase Gbakon, argued that the UAE, which joined OPEC in 1961, played a significant role in the organisation, hence its exit would create a shift in global oil supply and price dynamics.

Gbakon stressed that there is going to be an increase in supply by the UAE, independent of  OPEC’s control, through quotas.

The energy economist noted that going forward, there will be more competition for oil supply in the global market, leading to lower prices. For Nigeria, he said, this may have an impact on revenue, hence the need to remain a member of OPEC.

“For other producers like Nigeria, where the cost of production is still significant, there is a benefit to be had for being a member of that coordinating group so as to provide a floor for oil prices and support various national programmes that member countries have to deliver at their own respective national levels,” Gbakon stated.

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For Nigeria, the situation poses a fiscal dilemma. The country’s budget benchmarks are heavily reliant on oil price assumptions. Nigeria’s oil price benchmark for 2026 is pegged at $64 per barrel, with a target of 1.84 million bpd production. 

Sustained drop in prices could widen budget deficits, weaken the naira, and constrain government spending.

Gbakon stated that if other countries exit OPEC, there is a tendency for oil prices to fluctuate downwards with the attendant pressure on other economies, especially the oil-dependent ones.    

Production Opportunities or Competitive Pressure?

Dikwal stated that Nigeria, which already faces high production costs, could find itself squeezed out of premium markets as competition ensues.

Crude grades such as Bonny Light may face stiffer competition from more competitively priced alternatives.

However, some analysts argue that Nigeria could benefit from increased flexibility if OPEC’s grip loosens. The country may gain more room to adjust output based on domestic needs rather than external quotas, provided it can address long-standing production inefficiencies.

Mr Emmanuel, who is the managing partner, Energy Consulting Practice, called on African nations, including Nigeria, to review their position in OPEC and prioritise ramping up production to boost crude oil supply to domestic refineries.

He said restricting production to the OPEC quota may no longer align with the national interest of boosting domestic energy security through increased local refining capacity.

The energy economist also urged the country to work towards building strategic petroleum reserves to help shield the country from global price shocks in times of large-scale supply disruptions, as currently experienced due to the Middle East tensions.

Utomi advised that Nigeria must not wait for oil prices to crash before it can rethink and redesign its strategies for economic diversification. 

He said the problem is that the political class is “too lazy” to focus on doing the needful to save the economy.