In The Letters of J.R.R. Tolkien he says:
Their peril is almost entirely due to the unreasoning fear they
inspire (like ghosts). They have no great physical power against the
fearless; but what they have, and the fear that they inspire, is
enormously increased in darkness. The Witch-king, their leader, is
more powerful in all ways than the others; [Letter 210]
What is clear at this point in the history is that the Nazgûl are not near what they could be if Sauron had the Ring.
they are only shadows yet of the power and terror they would possess
if the Ruling Ring was on their master's hand again. [A Journey in the
Dark]
The Balrog of Moria is a Maia, a peer of Sauron and of Gandalf. The Witch-king would not be their peers. I would not put them in the same league. Gandalf faced the Nine on Weathertop at night when they were at their strongest [that is, without their master having the One].
I was besieged on the hilltop, in the old ring of Amon Sûl. I was hard
put to it indeed: such light and flame cannot have been seen on
Weathertop since the war-beacons of old. [The Council of Elrond]
As a group, when all nine are together, they could take out Glorfindel and Aragorn.
On foot even Glorfindel and Aragorn together could not withstand all
the Nine at once. [Many Meetings]
They do have weaknesses. Fire is one of them as Aragorn explains to the Hobbits, "Sauron can put fire to his evil uses, as he can all things, but these Riders do not love it, and fear those who wield it." [A Knife in the Dark]
There is also sunlight and water which they were averse to.
All except the Witch-king were apt to stray when alone by daylight;
and all, again save the Witch-king, feared water, and were unwilling,
except in dire need, to enter it or to cross streams unless dryshod by
a bridge. [The Hunt for the Ring]
Their chief weapon is terror, "In dark and loneliness they are strongest... their power is in terror" [Strider], and also "their chief weapon was terror" [The Hunt for the Ring] This is not to be under-estimated. They hounded Minas Tirith with terror throughout the night, taking the fight out of the people. Its effects on others is clear, whether Men or animals.
the Witch-king himself appeared, black-robed and black-masked upon a
black horse. Fear fell upon all who beheld him; but he singled out the
Captain of Gondor for the fullness of his hatred, and with a terrible
cry he rode straight upon him. Eärnur would have withstood him; but
his horse could not endure that onset, and it swerved and bore him far
away before he could master it. [Gondor and the Heirs of Anárion]
and:
even though they were not yet assembled a rumour of dread spread about
them, and the creatures of the wild hid themselves, and lonely men
fled away. [The Hunt for the Ring]
also:
"I suddenly felt afraid"...
Terror overcame Pippin and Merry... Frodo was hardly less terrified
than his companions, he was quaking as if he was bitter cold [A Knife
in the Dark]
There are those like Eärnur who are strong willed and can withstand this fear and the Eldar do not fear them.
They do not fear the Ringwraiths, for those who have dwelt in the
Blessed Realm live at once in both worlds, and against both the Seen
and the Unseen they have great power. [Many Meetings]
Gríma nearly died from fear of them.
In that hour the Wormtongue came near to death by terror; [Unfinished
Tales; The Hunt for the Ring]
Some of their abilities which Merry was a victim of is the Black Breath. It knocked him senseless:
"I fell over"...
"He seemed to be asleep. 'I thought I had fallen into deep water,' he
says to me, when I shook him."...
"I had an ugly dream, which I can't remember. I went to pieces. I
don't know what came over me."
"I do," said Strider. "The Black Breath." [Strider]
With Frodo there is the use of a Morgul blade to turn him into a wraith to become their slave.
They tried to pierce your heart with a Morgul-knife which remains in
the wound. If they had succeeded, you would have become like they are,
only weaker and under their command. You would have become a wraith
under the dominion of the Dark Lord. [Many Meetings]
They were able to exert some control over Frodo even before he became a wraith.
"Ride forward! Ride!" cried Glorfindel to Frodo.
He did not obey at once, for a strange reluctance seized him... The
Riders seemed to sit upon their great steeds like threatening statues
upon a hill, dark and solid, while all the woods and land about them
receded as if into a mist. Suddenly he knew in his heart that they
were silently commanding him to wait. [Flight to the Ford]
When Minas Tirith was under siege the Witch-king made his sword alight in flame "he lifted high his sword and flames ran down the blade" [The Siege of Gondor] and it appears that with his help through some incantation Grond was able to break the gates of Minas Tirith.
Then the Black Captain rose in his stirrups and cried aloud in a
dreadful voice, speaking in some forgotten tongue words of power and
terror to rend both heart and stone.
Thrice he cried. Thrice the great ram boomed. And suddenly upon the
last stroke of Gate of Gondor broke. As if stricken by some blasting
spell it broke asunder: there was a flash of searing lughtning, and
the doors tumbled in riven fragments to the ground. [The Siege of
Gondor]
The Witch-king does have some physical prowess and extensive battle experience. When he hit Éowyn with his mace "her shield was shivered in many pieces, and her arm was broken;" [The Battle of the Pelennor Fields] and also his terror still went before him as Merry
crawled on all fours like a dazed beast, and such horror was on him
that he was blind and sick.
I do not think the Witch-king would be the equal or better of Gandalf. He did destroy the North Kingdom (this took hundreds of years) and killed the last king of Gondor.
