Oil Shortfalls Threaten Budget, FX Reserves, Experts Warn

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LAGOS – Experts have warned that Nigeria’s continued inability to meet crude oil pro­duction targets could complicate fiscal planning, particularly at a time when the Federal Government is relying heavily on oil proceeds to support budget imple­mentation and foreign exchange stability.

This is coming as Nigeria’s crude oil production recorded its second consec­utive monthly increase in April 2026, of­fering fresh optimism for government revenue and foreign exchange earnings, although analysts have warned that deep-rooted structural challenges con­tinue to threaten the country’s ability to meet its production targets.

Latest figures released by the Nigerian Upstream Petroleum Regulatory Commission showed that crude oil production rose to 1.49 million barrels per day (mbpd) in April from 1.38mbpd in March.

When condensate produc­tion of about 0.17mbpd is in­cluded, total oil output increased to 1.63mbpd compared with 1.55mbpd in the previous month.

The increase marked a steady recovery from the temporary production decline recorded in February, when scheduled main­tenance activities at the Bonga deepwater field under OML 118 disrupted output.

Industry analysts said the latest production figures signal improved operational stability at some major oil assets, especially the Forcados export terminal, which played a central role in lifting national production.

Data from the regulator showed that output from the Forcados terminal surged by 42 percent month-on-month to 0.25mbpd in April.

The sharp rebound followed the resolution of disruptions along the Forcados Pipeline caused by a leak at the Keremor axis, which had affected produc­tion from several upstream assets between February 20 and March 25.

Analysts noted that the resto­ration of operations at the termi­nal helped Nigeria regain part of the output losses suffered during the first quarter of the year.

However, despite the im­provement, the country’s crude oil production excluding con­densates still fell marginally be­low Nigeria’s production quota of 1.50mbpd allocated by the Organisation of the Petroleum Exporting Countries.

More significantly, produc­tion levels remain substantially below the Federal Government’s oil production benchmark of 1.84mbpd and the broader target of 2.08mbpd contained in fiscal assumptions.

Energy analysts said the latest figures underscore the fragile na­ture of Nigeria’s oil production recovery, which remains vulnera­ble to infrastructure disruptions, security challenges, and opera­tional inefficiencies.

Analysts at investment bank­ing and research firms noted that while the Forcados recovery pro­vided a major boost, production performance across many other export terminals remained weak during the review period.

Aside from the sharp increase at Forcados and a modest 5.1 per­cent rise in output at Bonny Light terminals, most other major ter­minals reportedly recorded pro­duction declines in April.

According to analysts, this trend highlights Nigeria’s con­tinued overdependence on a few strategic export assets and the limited resilience of the country’s upstream production system.

Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane, said the mod­est rebound in output is encour­aging but insufficient to signifi­cantly strengthen fiscal buffers.

According to him, Nigeria still faces a major challenge in achiev­ing sustainable production growth because of the persistent issues surrounding pipeline se­curity, ageing infrastructure, and underinvestment in the sector.

He noted that although oil prices remain relatively support­ive, lower-than-budgeted produc­tion volumes could continue to weaken government revenue projections.

“Production growth is pos­itive, but the country is still operating below both OPEC quota and budget assumptions. Until Nigeria addresses crude theft, pipeline vandalism, and infrastructure constraints, the gains may remain temporary,” he said.

Energy analysts also stressed that many upstream operators continue to face rising operating costs due to insecurity around oil-producing areas and the need for continuous repairs on dam­aged infrastructure.

They explained that recurring attacks on pipelines and illegal crude tapping activities continue to reduce operational efficiency and discourage fresh investment in the sector.

Vice President at Veriv Afri­ca, Ayodele Oni, said Nigeria’s oil sector still requires significant re­forms and investment to achieve stable production growth.

According to him, recent output improvements demon­strate that production can re­cover quickly once operational bottlenecks are addressed, but sustaining that momentum will require stronger infrastructure protection and improved invest­ment conditions.

He noted that international oil companies and indigenous oper­ators are increasingly cautious about committing large-scale capital expenditure without clear assurances regarding asset secu­rity and regulatory stability.

Oil receipts remain a critical source of government revenue and a major contributor to Nige­ria’s foreign exchange earnings despite ongoing efforts to diver­sify the economy.

The latest production figures come amid continued volatility in the global crude oil market, where prices have remained sensitive to geopolitical develop­ments in the Middle East.

Analysts said concerns sur­rounding tighter global supply conditions and ongoing tensions affecting the Strait of Hormuz continue to influence market sentiment during the period un­der review.

The Strait of Hormuz re­mains one of the world’s most strategic oil shipping routes, and any disruption to movement through the channel has the po­tential to significantly affect glob­al oil prices.

Analysts explained that while elevated oil prices may provide temporary support for Nigeria’s revenue position, the country may not fully benefit from high­er prices if production remains below target levels.

They added that Nigeria’s inability to maximise output during periods of elevated oil prices represents a missed op­portunity for improving fiscal stability and strengthening ex­ternal reserves.

Economist and Chief Exec­utive Officer of Cowry Asset Management, Johnson Chukwu, said the country must focus on achieving consistent production growth to fully take advantage of favourable global oil market conditions.

According to him, stable pro­duction growth is essential not only for fiscal sustainability but also for exchange rate stability and investor confidence.

He noted that oil production volatility continues to pose risks to government revenue forecasts and macroeconomic planning.

Looking ahead, analysts ex­pect Nigeria’s crude oil produc­tion to continue improving grad­ually over the coming months as operations normalise at key terminals and maintenance ac­tivities conclude across several offshore assets.

However, they warned that pro­duction growth is likely to remain moderate unless there are major improvements in pipeline security, infrastructure rehabilitation, and upstream investment flows.

They also stressed the need for accelerated implementation of reforms under the Petroleum In­dustry Act to improve operational efficiency and attract long-term capital into the upstream sector.

For now, analysts believe the latest rebound offers cautious op­timism for Africa’s largest oil pro­ducer, but achieving sustainable output growth sufficient to meet fiscal and OPEC targets may still require significant structural re­forms and stronger operational discipline across the oil and gas industry.