Nigeria Faces Budget Crisis as Crude Oil Prices Collapse
Nigeria is facing serious economic headwinds as Brent crude prices fall below $60 per barrel, far below the $75 benchmark used for the 2025 federal budget.
With daily oil production also underperforming—averaging just 1.7 million barrels per day versus the budgeted 2.06 million—revenue projections are now in jeopardy.
The implications are stark. Nairametrics estimates Nigeria could lose up to N19.6 trillion in oil revenue if current trends persist. That loss could balloon the fiscal deficit from the planned N13 trillion to over N30 trillion.
Meanwhile, the naira has weakened past N1,600/$, overshooting the N1,500/$ rate used in the budget. As oil revenues decline, so does Nigeria’s capacity to stabilize its currency and balance its books.
The Central Bank of Nigeria (CBN) has intervened in FX markets using dollar reserves accumulated earlier this year, offering temporary relief. At the IMF/World Bank Spring Meetings, officials revealed Nigeria recorded $15.2 billion in net FX inflows in Q1, driven by reforms, diaspora remittances, and investor interest. Still, analysts warn that weak oil prices could limit the CBN’s ability to defend the naira going forward.
International observers are watching closely. JPMorgan’s Joyce Chang praised Nigeria’s reforms but warned that oil price volatility and rising global trade tensions, including new U.S. tariffs, pose renewed risks.
Nigeria’s limited influence in OPEC+ further complicates matters. Recent decisions to raise oil supply were led by Saudi Arabia and Russia, leaving Nigeria—already below quota due to infrastructure issues—on the sidelines.
Finance Minister Wale Edun has acknowledged the risks and confirmed that the government is adjusting its fiscal strategy. A task force is revising revenue assumptions, while NNPC has been instructed to increase output. Efforts to expand non-oil income through tax reform and digital revenue tracking are also underway.
Nigeria now faces a critical test of its fiscal resilience.
📝: @nairametrics
