Citigroup has forecast that Brent crude could fall to $60 per barrel as tensions in the Strait of Hormuz ease following a memorandum of understanding between the United States and Iran, a projection that lands uncomfortably close to Nigeria's 2026 budget benchmark and revives fears of a fiscal shortfall that have dogged the Tinubu administration since the year began.
Citi analysts warned that fundamentals are rapidly reasserting themselves, with shipping flows normalising, Chinese buyers remaining absent, physical crude markets weakening sharply, and inventories drawing far less than expected. Current prices for Brent crude and WTI already reflect this shift, trading at $61.95 and $58.24 per barrel, respectively.
The timing is pointed. Nigeria's 2026 federal budget, presented to the National Assembly by President Bola Tinubu in December 2025, was built on a conservative crude oil benchmark of $64.85 per barrel, a production target of 1.84 million barrels per day, and an exchange rate of ₦1,400 to the dollar. The budget carries a deficit of ₦23.85 trillion, representing 4.28% of GDP.
A sustained retreat to $60 per barrel would push Brent below that benchmark, shrinking oil revenues and further straining a budget already operating under significant pressure. Lawmakers raised concerns during budget defence in December over the federal government's inability to meet revenue targets in 2025, with a shortfall of ₦30 trillion from a projected ₦40 trillion, a gap so wide that the government carried over 70% of the capital component of the 2025 budget into 2026.
The geopolitical whiplash surrounding oil prices in 2026 has been severe. Earlier in the year, US-Israeli airstrikes on Iran pushed Brent above $80 per barrel, briefly providing Nigeria with a windfall above its budget assumption. At one point, with the Strait of Hormuz under threat of blockade, Citi raised its base-case Brent forecast to $110 per barrel for Q2 2026 and warned of a bull-case scenario that could see prices spike to $150 if the strait remained blocked through June. That scenario has since unwound as diplomacy advanced.
Under a full-year bearish scenario, Citi has assigned a 30% probability to Brent averaging $50 per barrel, driven by geopolitical dealmaking, reduced Chinese buying, and more OPEC+ supply. That outcome would be significantly more damaging for Nigeria's revenue outlook.
Nigeria's structural oil vulnerabilities compound the price risk. Crude theft, pipeline vandalism, and chronic production underperformance have historically kept actual output well below budget targets, meaning that even when prices hold, volumes often do not. With Brent hovering near the budget floor and the bearish case no longer hypothetical, the government's fiscal room is narrowing at precisely the moment it can least afford it.
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