Nigeria’s premium crude, Bonny Light, has plunged by 20% to $67 per barrel from $84.02 in January 2025, raising concerns over the Federal Government’s ability to meet its 2025 budget revenue projections.
The 2025 budget is based on a crude oil price benchmark of $75 per barrel, an oil production target of 2.06 million barrels per day (bpd), and a total revenue projection of N36.35 trillion—56% of which is expected to come from oil sales.
However, the decline in oil prices poses a significant risk, potentially cutting federal oil revenue by 10.7%, while production remains below target at 1.7 million bpd.
According to the latest data from the U.S. Energy Information Administration, rising global crude inventories—standing at 3.6 million barrels as of February 2025—have contributed to the price slump. Additionally, the Organization of Petroleum Exporting Countries (OPEC+) plans to unwind production cuts starting in April 2025, further affecting market stability.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the far-reaching economic consequences of the price drop.
“This development has negative implications for the budget because our benchmark is set at $75 per barrel. With oil now trading below $70, and projections suggesting it could decline further—especially if President Donald Trump brokers a peace deal between Ukraine and Russia—the government’s revenue and foreign exchange earnings will be impacted,” he stated.
Yusuf warned that if government spending is not adjusted accordingly, Nigeria could face a wider fiscal deficit, leading to macroeconomic instability.
“If we maintain our current expenditure levels, we risk an unsustainable deficit, which could have systemic consequences on the economy. It is crucial to reassess spending plans in line with revenue realities to prevent unnecessary fiscal strain,” he added.
Despite the fiscal concerns, Yusuf pointed out a potential upside for businesses, noting that lower crude prices could reduce energy costs.
“For businesses, particularly those reliant on energy, the drop in oil prices could translate to lower operational costs, which is a positive development,” he remarked.
As Nigeria navigates these economic uncertainties, policymakers may need to adopt strategic adjustments to safeguard macroeconomic stability and mitigate potential risks to the 2025 budget.
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