By Prof Uche Uwaleke
Context: Why the UAE is Leaving
The UAE has been a member of OPEC since 1967 (via Abu Dhabi) and continued after the federation’s formation in 1971. It has actively contributed to market stability but has long expressed frustration with production quotas that it views as constraining its growing capacity.
The country has invested heavily to expand its oil production capacity toward 5 million barrels per day (bpd) by 2027, significantly above previous OPEC+ limits (often capping actual output around 3-3.5 million bpd). The UAE views staying in OPEC as sacrificing its industrial advantage (refining and petrochemicals) to support the fiscal budgets of higher-cost producers.
Global Implications for the Oil Market
In the short term, the exit has limited immediate effect due to ongoing Hormuz disruptions, which have already driven Brent crude prices significantly higher (recently trading well above USD100 per barrel).
Over the medium to long term, greater UAE flexibility could add supply, exerting downward pressure on prices and increasing volatility as coordinated cuts become harder to enforce. OPEC loses its second-largest spare capacity holder. The cartel’s ability to manage prices via supply cuts is significantly crippled. The market knows that if Saudi Arabia cuts, UAE might fill the gap independently.
It is estimated that the UAE could increase output by 200,000 to 1 million+ bpd over the next year. If Hormuz shipping lanes normalize, this surge could depress prices toward the $60-65 range.
The departure could encourage other members with excess capacity (e.g., Iraq, Kazakhstan) to reconsider compliance, further weakening OPEC+. It is widely viewed as a blow to OPEC+ unity, and potentially encouraging further fragmentation, as seen with Qatar’s earlier exit in January 2019.
Direct Implications for the Nigerian Economy
Nigeria, as an OPEC member and major African oil exporter, relies heavily on crude oil for government revenue, foreign exchange, and budget financing. The 2026 budget was predicated on a conservative oil reference price of about USD60 per barrel and a production target around 1.84 million bpd. Projected revenues stand significantly below expenditures, resulting in a deficit exceeding N31 trillion to be financed largely through borrowing.
The current high prices (fueled by the Middle East crisis) are masking fiscal weaknesses. The UAE exit removes the safety net of OPEC production coordination that usually protects prices from falling too low. If the UAE gradually increases output post-exit, combined with any resolution of Hormuz disruptions, global supply could loosen, risking a price correction toward or below the USD60 benchmark. This would directly erode the revenue upside currently supporting the deficit-plagued budget.
Furthermore, UAE and Nigeria both compete for the same light, sweet crude buyers in India and China. Free from quotas, Abu Dhabi will likely discount its crude to maximize refinery runs in Asia. As a result, Nigeria may struggle to sell its 1.7 million bpd quota even if demand is high. The country risks losing market share permanently to UAE oil, which is cheaper to produce.
Conclusion & Recommendations
While the current Middle East crisis keeps prices high for now, the medium-term trajectory is toward lower prices and fierce competition. Hence, the FG is advised to:
Establish a dedicated desk in the Ministry of Finance to model oil price scenarios and their direct impact on 2026 revenue and deficit financing.
Prepare alternative financing or expenditure prioritization options for downside price risks.
Use the current oil revenue windfall to build reserves and reduce debt exposure.
Prof. Uche Uwaleke, is President Capital Market Academics of Nigeria
