Nigeria’s Fiscal Deficit May Widen As Crude Oil Price Drops Below $60 Per Barrel
Nigeria’s fiscal deficit may widen as crude oil prices dropped to below $60 per barrel on Monday, causing anxiety among government officials.
The sharp drop in oil prices, driven by accelerated OPEC+ supply increases and weakening global demand, has triggered anxiety in government circles and among investors.
The 2025 federal budget was predicated on an oil price benchmark of $75 per barrel and daily production of 2.06 million barrels.
Brent has tumbled to $59.25 per barrel, and Nigeria’s production averaged just 1.737 million barrels per day in January and 1.672 million in February.
The lower-than-budgeted oil price benchmark could result in a drop in revenue and foreign exchange earnings, a development that may weaken the naira.
The exchange rate has weakened to around N1,600/$, surpassing the N1,500/$ assumption used in budget calculations.
Recent decisions to ramp up production were led by Saudi Arabia, Russia, Iraq, and others—excluding Nigeria.
The bloc plans to reintroduce 2.2 million barrels per day of previously withheld supply by October, a move that could further suppress prices.
Market signals point to prolonged low oil prices.
Forecasts from Barclays project Brent at $66 per barrel in 2025 and $60 in 2026.
With OPEC+ lifting supply caps, U.S. shale producers expanding, and global demand softening, the market appears oversupplied.
For Nigeria, which gets about 90 percent of its foreign exchange earnings from oil exports, that amounts to a significant lost income.
Paul Alaje, an economist, cautioned that US President Donald Trump’s proposed tariff policy could significantly disrupt Nigeria’s economy-not in abstract terms but through specific economic disruptions.
These include rising import inflation, worsening exchange rate volatility, and reduced trade flows beyond crude oil.
Alaje explained that although Nigeria may appear shielded because of its crude oil exports, the broader economy remains highly exposed.
He said, “I’ve heard some government officials say the Nigerian economy is protected against the policy that President Trump is making.
“Well, I would say to the extent of selling off crude, the person that spoke may be correct, but when you look at the economy at large, we have started feeling the impact from exchange rates. It will affect us.
“Beyond that, it will also affect us when it comes to the commodity we are selling abroad, other than crude and agriculture.”
Nigeria’s Minister of Finance, Wale Edun, acknowledged these risks at the IMF Spring Meetings but maintained that the government is already responding.
“The oil price drop is below the 2025 budget, and the government is adjusting to the actual realities on ground,” he stated.
Edun disclosed that a subcommittee under the Economic Management Team (EMT)—comprising the Ministry of Budget and Planning, the Central Bank, and other key agencies had been tasked with scenario modeling to revise fiscal projections and recommend appropriate responses.
ENDS
Nigeria’s Fiscal Deficit May Widen As Crude Oil Price Drops Below $60 Per Barrel is first published on The Whistler Newspaper
