For years, OPEC+ has acted as what I like to call the “central bank of global oil,” not by adjusting interest rates, but by carefully managing oil supply to stabilize prices. Whenever the market softens, the group imposes production cuts; when demand rises, they moderate supply.
But the delicate balance they once managed has begun to unravel. Internal disagreements within the alliance, national budget pressures, and geopolitical motives caused several members to quietly increase output beyond official quotas. Instead of restricting supply, OPEC+ countries began adding more barrels to the market, at a time when global demand was already showing signs of fatigue.
For many years, OPEC+ could control supply to keep prices stable, and cut output when prices dropped too low. But recently, the group has struggled to stay disciplined. Some members, needing revenue urgently, have chosen to keep producing rather than cut back. This has left more oil on the market than buyers can absorb.
Meanwhile, non-OPEC countries are pumping more oil than ever. The United States, thanks to its shale boom, keeps adding millions of barrels each day. Brazil and Canada are also increasing production, and new oil projects in Guyana and other emerging regions are further boosting supply. These countries had no obligation to coordinate with OPEC+, and they seized the opportunity to grow their market share, especially with higher-cost projects already funded and now coming onstream.
As non-OPEC countries pushed more barrels into the market, OPEC+ members faced pressure not only to protect their share but also to prevent competitors from undercutting them. The result was an unprecedented surge in global supply, even as demand growth slowed due to economic headwinds in major economies and structural shifts toward renewable energy.
The combination of these factors created a classic global oil glut. The logic behind oversupplying the oil market is straightforward: by pumping more crude, producers push prices down, putting pressure on competitors, especially those with higher production costs. When prices drop, high-cost producers must either cut output and lose market share or sell at a loss just to stay in the game.
Meanwhile, low-cost producers can endure lower prices longer, allowing them to maintain or even expand their market position.
This is where the OPEC+ and non-OPEC divide matters.
Many OPEC+ members, particularly in the Middle East, enjoy some of the lowest production costs globally averaging $6-$12 per barrel, while non- OPEC producers like U.S. shale, Canadian oil sands, and some offshore projects face significantly higher costs ranging between $30-$60 per barrel.
In an oversupplied market, those high-cost producers feel the squeeze first.
As both OPEC+ and non-OPEC countries increase output, each trying to protect or grow their share of the market becomes a contest of endurance. The players with the lowest costs can keep pumping and preserve dominance, while higher-cost producers are eventually forced to scale back, lose buyers, or concede market share.
Oil wars. Nigeria’s woes.
Nigeria’s role in this dynamic is complex. As a member of OPEC, it must adhere to the group’s collective decisions, yet its production costs are higher than those of the Gulf states.
While Nigeria can produce oil more cheaply than shale or tar sands, it lacks the ultra-low cost advantage that enables Saudi Arabia to dominate price wars. Consequently, when OPEC+ opts to maintain high output to protect market share, Nigeria experiences the same revenue collapse as non-OPEC producers.
Conversely, when OPEC+ cuts production to stabilize prices, Nigeria’s quota is reduced, limiting its capacity to earn foreign exchange.
Oil remains the primary source of Nigeria’s foreign currency inflows and is central to government budgeting. A decline in global prices results in fewer dollars entering the economy, tighter fiscal space, and increased pressure on the Central Bank to support the naira.
As a result, foreign reserves deplete rapidly, making it harder to defend the currency or finance imports.
The slow bleed into economy and budgetary mistakes
Oil still powers the vast majority of Nigeria’s foreign exchange inflows and remains the backbone of government budgeting. So when global prices slide, the shockwaves hit Abuja long before they reach Wall Street.
A drop in crude prices immediately means fewer dollars entering the system, a tighter fiscal environment, and even greater pressure on the Central Bank to stabilize the naira.
To the credit of the current CBN leadership, they’ve shown remarkable agility deploying deep, sophisticated monetary tools to navigate an economy strained not by monetary failure, but by repeated fiscal miscalculations.
Still, even the smartest monetary strategy faces limits when foreign reserves thin out and the country struggles to defend the currency or finance essential imports.
This vulnerability has been years in the making.
In 2023, Nigeria’s budget rested on a crude benchmark of $75 per barrel and a production target of 1.8m b/d, condensates included.
Reality told a different story: production hovered at roughly 1.4m b/d. Even when prices rallied briefly, Nigeria could not harvest the full benefits because its output simply wasn’t there. The revenue shortfall was baked in from the beginning.
2024 carried forward the same optimism, with a benchmark of $77.96 per barrel and a production target of 1.78m b/d. Policymakers argued that the assumptions were “realistic,” and to be fair, the security environment in the Niger Delta was improving.
Oil theft and vandalism the longstanding enemies of Nigeria’s production capacity had begun to ease thanks to tighter surveillance and more coordinated security interventions.
However, despite these improvements, the underlying structural challenges of underinvestment, aging infrastructure, and upstream constraints continued to hold output below expectations. Once again, the gap between projected and actual volumes widened, forcing the government to depend more heavily on borrowing.
By 2025, the disconnect had become entrenched. The budget projected a crude benchmark of $75 per barrel and an even more ambitious production target of 2.06m b/d. But actual production slipped below 1. 7m b/d so far, while global prices have averaged around $68.80 so far well below the benchmark Nigeria was banking on.
This double shock of weak prices and underperformance in output placed extraordinary strain on the budget, dragging revenue projections far off course and exposing the persistent fragility in Nigeria’s fiscal assumptions.
The consequences of these repeated misalignments are profound. With oil still accounting for more than eighty percent of Nigeria’s export earnings, every missed benchmark tightens pressure across the entire economy.
Dollar inflows shrink, the naira weakens, and import costs climb. Inflation accelerates, households lose purchasing power, and businesses struggle to stay afloat. Government borrowing rises as deficits widen, adding more weight to an already heavy debt burden.
In the end, falling oil prices do more than unsettle budget numbers, they expose how tightly Nigeria’s economic health is tied to a single commodity.
Nigeria’s Production failure lies not only in the volatility of global oil markets but in its refusal to build budgets on conservative, realistic assumptions. By overestimating prices and production, and by ignoring OPEC+ quota constraints, the government has repeatedly set itself up for fiscal disappointment. The result is a cycle of deficits, rising debt, and economic vulnerability that leaves Nigeria exposed to every twist in the global oil wars.
Falling oil prices squeeze Nigeria but ease the pump
While falling global oil prices squeeze government revenues and weaken Nigeria’s foreign exchange inflows, they create a very different effect for consumers especially as the Dangote Refinery ramps up production. Lower crude prices reduce feedstock costs for the refinery, enabling it to process cheaper oil and offer refined products at more competitive rates.
For Nigerians, this often translates into lower pump prices or at least a slowdown in the sharp increases that usually follow global oil shocks. Dangote’s growing output is introducing a stabilizing force in the domestic market, cutting Nigeria’s reliance on costly imported fuel and paving the way for more predictable pricing.
This, however, sets up an economic paradox: households may enjoy relief at the pump precisely when the government is earning less from crude exports and facing mounting fiscal pressure.
Cheaper refined products improve affordability for consumers, but they do little to offset the broader macroeconomic strain caused by shrinking foreign exchange earnings.
In essence, Nigerians experience short-term comfort while the nation wrestles with long-term financial tightening, a stark reminder of the dual reality of oil dependence in an economy where crude exports and refined imports pull in opposite directions.
The big picture and road ahead
Until Nigeria diversifies its revenue streams and adopts more cautious budget planning, its economy will remain vulnerable to the unpredictable tug-of-war between OPEC+ and non-OPEC producers.
The message is clear: optimism without realism is expensive and for Nigeria, it has repeatedly left the national purse exposed.
What may seem like a distant geopolitical chess match between oil giants translates directly into everyday realities: the price of rice in the market, the strength of the naira in your pocket, and the government’s ability to fund schools and hospitals.
Falling oil prices expose the fragility of Nigeria’s oil-dependent economic model. Every price crash sends the same warning: diversification is no longer a buzzword, it’s a survival strategy. In short, global oil wars hit home in the Nigerian wallet.
Encouragingly, Nigeria’s non‐oil sector is beginning to assert itself as a true engine of growth. In Q3 2025, the non‐oil economy expanded by 3.91% in real terms, contributing roughly 96.56% of GDP.
Driving this growth are key sectors like services, agriculture, manufacturing, finance, construction, trade, and telecommunications, signalling that the country’s economic resilience is gradually emerging beyond crude. The next step is deliberate action: targeted investment in infrastructure, manufacturing, agriculture, digital services, and gas, alongside policies that support small businesses, boost export-oriented industries, and deepen financial markets.
Only then can the non‐oil sector move from being a fallback to a strong, consistent driver of Nigeria’s prosperity.
Meanwhile, all signs suggest that Brent crude will hover between $58 and $65 per barrel next year, according to multiple surveys from DFI’s, international banks, economists and investment managers assuming, of course, that other conditions remain constant.
The hope is that Nigeria’s budget planners adopt realistic price and production assumptions this time, avoiding the overly optimistic projections that have repeatedly strained public finances.
Grounded expectations are the first step toward building an economy capable of weathering global oil swings. With a diversified and resilient non-oil base, Nigeria can finally move beyond being hostage to global crude markets and stand firmly on a foundation built by its own people, industries, and innovation.