Crude Oil Price Drop Puts Nigeria’s 2025 Budget at Risk Amid Global Trade Tensions
Nigeria’s 2025 budget faces mounting pressure as crude oil prices continue to decline amid escalating global trade tensions. At the close of the global crude oil market last weekend, Bonny Light, Nigeria’s premium crude grade, dropped to $70.3 per barrel, marking a 13% decline since the budget was passed and 6.7% below the 2025 benchmark of $75 per barrel. Industry analysts warn that the downward trend could persist, heightening concerns over Nigeria’s fiscal stability.
The latest price slump was triggered by U.S. President Donald Trump’s renewed stance on maintaining trade tariffs on major economies. This coincided with the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), announcing their first oil production increase since 2022. As a result, Nigeria, which relies on oil sales for 56% of its projected federal revenue (about N20.35 trillion), faces a heightened risk of a budget deficit and may need to resort to increased borrowing.
Market reports indicate that global crude prices have declined for four consecutive sessions, driven by concerns of oversupply. U.S. crude stockpiles surged beyond expectations, adding to market volatility. At the same time, OPEC+’s decision to boost output from April and Trump’s imposition of tariffs on Canadian, Chinese, and Mexican goods further unsettled the oil market. Reports from Investopedia highlight that Trump has implemented a 25% tariff on Canadian and Mexican imports, while Chinese goods now face a 20% tariff hike, exacerbating uncertainty in the energy sector.
Meanwhile, a Reuters survey revealed that Nigeria is producing 70,000 barrels per day above its OPEC+ quota, adding pressure on global supply. In February, OPEC’s total output climbed by 170,000 barrels per day, with Iran and Nigeria recording the largest production increases. Iran pumped 3.3 million barrels per day, its highest level since 2018, while Nigeria’s boost in production was driven by higher exports and increased domestic demand from the Dangote Refinery.
Oil prices hit multi-year lows last week, with Brent crude slipping to $68.33 per barrel, its lowest level since December 2021, while U.S. crude futures fell to $65.22, the lowest since May 2023. The U.S. Energy Information Administration (EIA) attributed the slump to a sharp rise in crude stockpiles, which increased by 3.6 million barrels to 433.8 million barrels—far exceeding analyst expectations of a 341,000-barrel rise.
Analysts caution that further price declines could deepen Nigeria’s revenue shortfall, worsening economic challenges. JP Morgan analysts estimate that a 100-basis-point slowdown in U.S. GDP growth could reduce global oil demand by 180,000 barrels per day. With growing uncertainties in the global oil market, Nigeria must navigate fiscal and economic challenges while managing its budget amid declining oil revenues and increasing external economic pressures.
