Oil crash sparks fiscal alarm as Tinubu’s budget assumptions crumble

Nigeria is hurtling toward a potential fiscal crisis as Brent crude oil prices plunged to $59.25 per barrel, far below the $75 benchmark underpinning the country’s 2025 federal budget. With oil revenues set to fall drastically short, experts are warning of a cascading effect on public finances, the naira, and overall economic stability.

The federal government’s 2025 budget had been built on three optimistic assumptions: crude oil selling at $75 per barrel, daily production of 2.06 million barrels, and an exchange rate of N1,500 to the dollar. However, these targets are rapidly unraveling.

According to the Ministry of Finance, oil production in January averaged just 1.737 million barrels per day and fell further to 1.672 million in February.

Simultaneously, the naira has slid beyond N1,600/$ on both the official and parallel markets, increasing debt-servicing costs and eroding the value of oil export receipts.

Independent economic research indicates that if current oil prices and production trends persist, Nigeria could lose as much as ₦19.6 trillion in projected oil revenue in 2025.

This would more than double the federal budget’s projected fiscal deficit of ₦13 trillion, potentially pushing it to ₦30.79 trillion.

“This is a textbook case of vulnerability from overdependence on oil,” said Dr. Doyin Salami, former Chief Economic Adviser to the President.

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“We’re facing a scenario where both volume and price are underperforming, and the naira is reacting accordingly. Without immediate fiscal recalibration, this could spiral into a full-blown economic crisis.”

The Central Bank of Nigeria (CBN) recently intervened in the FX market to stabilize the naira, after the currency hit a low of N1,620/$ in April. At the IMF/World Bank Spring Meetings in Washington D.C., CBN officials disclosed that these interventions were financed through reserves stockpiled earlier in the year.

Despite a Q1 net FX inflow of $15.2 billion, analysts caution that the inflow is unlikely to be sustained if oil prices remain depressed.

“Nigeria’s ability to defend the naira depends heavily on dollar inflows,” said Bismarck Rewane, CEO of Financial Derivatives Company. “If oil earnings dwindle and foreign investors lose confidence, the CBN’s buffer will erode quickly.”

The outlook for oil prices remains bleak. OPEC+—led by Saudi Arabia, Russia, and Iraq—is set to reintroduce 2.2 million barrels per day of withheld supply by October.

Nigeria, already struggling to meet its existing quota due to pipeline vandalism, oil theft, and aging infrastructure, is unlikely to benefit from this increase.

“Nigeria is not in a position to ramp up output meaningfully,” said Lanre Akinbo, an energy analyst at Vetiva Capital. “We’re dealing with years of underinvestment and operational inefficiencies. As others flood the market with supply, we’re left watching prices fall without gaining additional volume.”