Nigeria’s economy is facing a fresh round of challenges as international crude oil prices have slumped by $10 per barrel, creating significant pressure on the country’s already strained fiscal situation and exposing deep-rooted vulnerabilities in Africa’s largest crude oil producer.
The substantial price decline has been primarily driven by US President Donald Trump’s implementation of tariffs of at least 10 percent and the potential for retaliatory countermeasures from trading partners. These factors have deepened the ongoing selloff in global oil markets, sending Brent futures down by $10.05 to settle at $64.9 per barrel on Friday.
“We see this level of tariffs and a looming trade war as bearish for the global economy and oil demand and thus bearish for Platts Dated Brent,” stated S&P Global Commodity Insights analysts in a recent comprehensive report analyzing market conditions.
Adding to the market pressure is the surprising decision by the Organization of Petroleum Exporting Countries and Alliance (OPEC+) to accelerate production increases beginning in May. Eight OPEC+ member countries have agreed to gradually ease voluntary output reductions totaling 2.2 million barrels per day (bpd), which will increase their combined production quotas by 411,000 bpd starting in May, according to a statement released by the cartel following a meeting convened to assess global oil market dynamics.
This price drop creates significant problems for Nigeria’s 2025 budget, which President Bola Tinubu’s administration anchored on a benchmark oil price of $75 per barrel and an ambitious production target of 2.06 million barrels per day—a target that now appears increasingly unattainable given current market conditions.
Oil remains a critical component of Nigeria’s economy, accounting for approximately 90 percent of the country’s export earnings and 60 percent of government revenue. The substantial drop in oil prices directly impacts the nation’s ability to fund vital infrastructure projects and essential social programs. As a result, the government may face mounting pressure to increase borrowing, potentially deepening Nigeria’s existing debt crisis.
The timing of this price decline is particularly unfortunate as Nigeria simultaneously grapples with high inflation rates, persistent depreciation of the naira, and an enormous monthly petrol import bill exceeding N1.2 trillion following the controversial removal of fuel subsidies.
Despite being the largest oil-producing nation on the African continent, Nigeria has consistently struggled to increase production due to persistent challenges including pipeline vandalism, rampant oil theft, and chronic underinvestment in infrastructure and exploration.
According to official OPEC data, Nigeria has consistently produced below its allocated quota of 1.8 million barrels per day (bpd), with recent output hovering around 1.47 million bpd. This production shortfall means Nigeria is not only selling crude oil at lower prices but is also selling less of it—an unwelcome double blow to an economy that heavily relies on oil for the majority of its foreign exchange earnings and more than half of government revenues.
Source: businessday.ng
