Oil Price Crash Threatens N30trn Deficit, Sinks Naira Past N1,600
Samuel Mobolaji
Nigeria faces mounting economic risks as Brent crude prices slid below $60 per barrel, casting a long shadow over the 2025 federal budget and threatening deeper fiscal and currency instability.
With oil trading at $59.25, far below the benchmark price of $75, and daily production lagging behind target at just 1.672 million barrels in February, projections for oil revenue are under severe threat.
An estimated N19.6 trillion could be wiped from expected earnings if current trends persist, raising the spectre of a budget deficit ballooning to N30.79 trillion—more than double the N13 trillion initially planned.
The budget’s assumptions, including a N1,500/$ exchange rate, have been upended as the naira breached N1,600/$ in both official and parallel markets.
Analysts warn that sustained low oil prices could severely undermine the Central Bank of Nigeria’s ability to defend the naira, especially if foreign inflows start to dry up.
Despite modest relief from Q1 net FX inflows of $15.2 billion, the pressure is mounting. While the CBN used reserves to stabilise the naira temporarily, the structural vulnerabilities in Nigeria’s oil-dependent economy remain glaring. Investors have acknowledged reform efforts like the removal of fuel subsidies and FX unification, but remain cautious amid an unfavourable external environment.
Meanwhile, Nigeria’s limited influence in the OPEC+ bloc has left it exposed. The cartel’s decision to reintroduce 2.2 million barrels per day of previously withheld supply by October, led by major producers excluding Nigeria, could suppress prices further. With output hampered by theft, vandalism, and ageing infrastructure, Nigeria is unlikely to benefit from any quota increases.
Forecasts suggest oil prices could stay below $60 through 2026, driven by expanded U.S. shale output, lifted OPEC+ supply caps, and weakening global demand. This grim outlook has spurred emergency planning within Nigeria’s Economic Management Team, which is now revising fiscal models to respond to the revenue shock.
Finance Minister Wale Edun said efforts are ongoing to raise oil production and ramp up non-oil revenues through digitisation, broader tax coverage, and aggressive plugging of leakages. However, with key economic fundamentals now far off target, Nigeria may be facing one of its most severe oil-induced crises in recent years.
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