Crude oil price slips below $60 per barrel on Monday, for the first time in four years. This drastic decline poses a serious threat to oil base economies like Nigeria. Nigeria projected revenue for 2025 national budget on a benchmark of $75 per barrel.
Following OPEC+ decision to accelerate crude oil output, stoking fear of oversupply at a time when US tariffs has raised concerns about demand.
OPEC+ member which consists of top oil producing countries around the globe agreed to further speed up oil production for a second consecutive month, raising output in June by 411,000 barrel per day (bpd) up from 137,000 bpd in may.
OPEC+ said in a report that the decision was made by eight members (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman) who met virtually to review global market conditions and outlook. They decided to implement a voluntary adjustment that will see to an increase of a combined 2.2million bpd amongst the eight members.
“In view of the current healthy market fundamentals, as reflected in the low oil inventories, and in accordance with the decision agreed upon on 5th December 2024 to start a gradual and flexible return of the 2.2 million barrels per day voluntary adjustments starting from 1 April 2025, the eight participating countries will implement a production adjustment of 411 thousand barrels per day in June 2025 from May 2025 required production level.” They said.
Since the announcement there’s been panic in the crude oil market as investors fear for oversupply increases. This could be seen in a sharp drop in oil prices as Brent crude tumbled to $59.25 per barrel.
At the core of this brewing challenge is the Nigeria 2025 national budget, which was predicated on an oil price benchmark of $75 per barrel, daily production of 2.06 million barrels and at an exchange rate of 1500 Naira per U.S dollar.
As of may 2025, these assumptions appear grossly optimistic.
Report from the ministry of finance shows the total 2025 budget is 54.99 trillion Naira (approximately $36.6 billion). Oil revenue is expected to fund 56% of the budget while non-oil revenue accounts for 44% funding, fiscal deficit which will be financed through borrowing will accounts for 25.1% of the total budget.
Compounding the challenge is Nigeria’s failure to meet its 2.06 million bpd oil production target as it continues to struggle with: vandalism of oil pipelines, oil theft and illegal oil refinery operations. This has made Nigeria unable to meet up with its daily production.
Revenue impact.
Mr. Chinnan Dikwal, Vice chairman of African energy council, in an interview with channels Television, expressed his fears about oil revenue and prices, he said there’s more “downside” coming and crude oil price could continue to fall, highlighting the nuclear deal discussions between America and Iran. He said if the deal finalizes president trump would put more barrels into the market causing price to fall harder.
“Seems to be a more downside coming unfortunately, president trump will put more barrels unto the market” he said. “Trump is negotiating with Iran potentially with a nuclear deal if he gets that deal that would allow them to put more barrels unto the market” he added.
He emphasized that with more barrels coming-in there will be a “mismatch” in the market and oil price will fall further.
“More barrels coming supply and demand will mismatch ultimately price will take another hit” Mr chinnan said.
However reports from Nairametric estimates that Nigeria could lose 19.6 trillion Naira in oil projected revenues if oil prices continue to fall, and if Nigeria fails to meet its 2.06 million bpd target.
“Nigeria could lose up to N19.6 trillion in projected oil revenue if these current trends persist through the year”. It noted.
Report from Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shows in the first quarter of 2025 Nigeria has not meet up with its 2.06 million bpd as projected in the budget, instead has been experiencing decrease in oil production.
NUPRC reported that in January Nigeria crude oil production was at 1.78 million bpd, February it dropped to 1.67 million bpd then march it dropped further to 1.603 million bpd.
Nairametrics further attributed the potential loss in projected budget revenue to declining oil production, fall in oil price and weaker exchange rate.
“This potential shortfall is a direct consequence of lower-than-budgeted oil prices, underwhelming production, and a weaker exchange rate.” It noted.
Navigating low oil prices.
The federal government of Nigeria acknowledged the fall in oil prices and the potential danger it poses to the 2025 national budget; Speaking with investors during the International Monetary Fund (IMF)/World Bank Spring Meetings in Washington DC, Mr Wale Edun, the minister of finance and coordinating minister of the economy said government will diversify its revenue and reduce government spending while allocating resources to key sectors in other to mitigate the impact of low oil prices.
“The Federal Government of Nigeria will pursue diversification of its revenues and adopt greater prudent resource allocation measures to mitigate the impact of low oil prices should it continue.” He noted.
Although experts are calling for the revisiting of the 2025 national budget asking the government to cut it down in the face of lower oil price.
Mr. Chinnan during the interview argued that the government needs to work on the budget again. Emphasizing on cutting costs and having a realistic budget.
“I think we need to look at that budget again and see if we can redo it.” He said. “What government struggles could we cut down-where can we save money- if we do one or two of those I can assure you that our budget will not be 55 trillion Naira, we will probably end up something very lean.” He added.
However finance minister said the government reforms has rightly positioned Nigeria to navigate any global economic crisis. Highlighting the government’s strategy to cope with lower oil prices includes: prioritizing government expenditure, expanding non-oil exports, and optimizing assets through public-private partnerships.
Mr. Edun also stated government expenditure will continues to meet the priorities of Nigerians, especially on critical infrastructure such as roads, power, and food security. While expressing that Nigeria is diversifying away from being an oil base economy.
“Nigeria is diversifying its economy away from dependence on oil prices” he said.
He also said the government is doing everything possible to provide an enabling business environment to attract private sector investment and drive economic growth.
“We will do all we can to create an enabling business environment, provide incentives, and implement structural reforms to attract private sector investment, drive growth, and generate revenue.” Mr. Edun added. The minister further explained that With a focus on prudent resource allocation and diversification, Nigeria is poised to navigate the challenges of low oil prices and achieve sustainable economic growth.
NWALI CHIDOZIE MICHEAL
