Nigeria is facing a mounting economic crisis as Brent crude prices fall below $60 per barrel, threatening the country’s fragile fiscal balance and exposing the naira to renewed foreign exchange volatility.
The sharp downturn in oil markets, driven by a combination of expanded OPEC+ supply and declining global demand, has rattled policymakers and investors alike.
The 2025 federal budget, anchored on an oil price benchmark of $75 per barrel and a daily production target of 2.06 million barrels, now appears dangerously optimistic.
As of March, Brent crude hovered at $59.25 per barrel, while Nigeria’s daily output has lagged at just 1.737 million barrels in January and 1.672 million in February, according to Ministry of Finance data.
These shortfalls could cost the country as much as N19.6 trillion in lost oil revenues if current conditions persist.
Compounding the fiscal challenge is a weakening exchange rate, which has slipped beyond N1,600/$, exceeding the budget assumption of N1,500/$. Oil exports, Nigeria’s primary source of government revenue, are now delivering significantly less value in naira terms.
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As a result, the country’s projected fiscal deficit—initially set at N13 trillion—could balloon to N30.79 trillion, barring urgent corrective measures. Experts say bridging this gap would demand a combination of domestic borrowing, drastic cost-cutting, and a rapid scale-up in non-oil revenue mobilization.
However, the broader concern lies in Nigeria’s external vulnerabilities. The naira, historically tied to oil price movements, has come under fresh pressure. In April, it breached the N1,600/$ threshold on both official and parallel markets, prompting intervention by the Central Bank of Nigeria (CBN).
At the recent IMF/World Bank Spring Meetings in Washington D.C., CBN officials revealed that recent interventions were financed through dollar reserves accumulated earlier in the year.
Despite recording a net FX inflow of $15.2 billion in Q1 2025—buoyed by reform optimism and diaspora remittances—analysts caution that sustained low oil prices could erode the CBN’s ability to defend the naira, especially if foreign capital inflows slow.
JPMorgan’s Global Research Chair, Joyce Chang, acknowledged Nigeria’s bold reform steps—including fuel subsidy removal, FX liberalization, and rate unification—but warned that deteriorating global conditions, including new U.S. tariffs, are amplifying fiscal stress. “Nigeria has made strides, but oil price volatility remains a key risk,” she said.
The recent decision to release 2.2 million barrels per day of previously withheld output by October was driven by larger producers like Saudi Arabia and Russia. Nigeria, grappling with oil theft, pipeline vandalism, and aging infrastructure, is unlikely to meet its current quota, let alone benefit from expanded production rights.
Forecasts are bleak: Barclays expects Brent to average $66 in 2025 and $60 in 2026. A separate survey by Haynes Boone LLP suggests most global banks expect prices to remain below $60 into the heart of a potential second Trump presidency. Unless Middle East tensions escalate drastically and disrupt supply, oil-dependent economies like Nigeria may be in for a prolonged low-price environment.
Acknowledging the economic headwinds, Nigeria’s Finance Minister Wale Edun said the government is recalibrating its fiscal strategy. “The oil price drop is below the 2025 budget, and the government is adjusting to the actual realities on ground,” Edun stated.
He revealed that a subcommittee within the Economic Management Team—comprising the Ministries of Finance, Budget and Planning, and the CBN—is conducting scenario modeling to revise fiscal projections and develop response plans.
Efforts are also underway to boost oil output, with new directives issued to the NNPC to improve efficiency and reduce production bottlenecks.
Simultaneously, the government is rolling out a “robust revenue assurance initiative” to digitize revenue collection across Ministries, Departments, and Agencies (MDAs), plug systemic leakages, and broaden the tax base as part of its drive to strengthen non-oil income.