Nigeria’s economy faces fresh risk as international crude oil prices slump by $10 per barrel, threatening the country’s already stretched fiscals and exposing deep-rooted vulnerabilities in Africa’s largest crude oil producer.
The decline, driven by US President Donald Trump’s tariffs of at least 10 percent and potential countermeasures, have deepened the selloff, sending Brent futures down $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,” said S&P Global Commodity Insights analysts in a report.
Another shocking factor is the surprise Organization of Petroleum Exporting Countries and Alliance (OPEC+) decision to accelerate production increases in May.
Eight OPEC+ member countries agreed to gradually ease voluntary output reductions totaling 2.2 million barrels per day (bpd), increasing their combined production quotas by 411,000 bpd starting in May, the cartel said in a statement following a meeting to assess global oil market dynamics.
Nigeria’s President Bola Tinubu’s 2025 budget is 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 seems unachievable.
Oil accounts for approximately 90 percent of Nigeria’s export earnings and 60 percent of government revenue. A drop in oil prices directly affects the nation’s ability to fund critical infrastructure projects and social programmes. The government may face increased pressure to borrow funds, further deepening the country’s debt crisis.
The timing could not be worse as Nigeria is grappling with inflation, persistent naira depreciation, and an over N1.2 trillion monthly petrol import bill following the removal of fuel subsidies.
Despite being the largest oil-producing country on the continent, Nigeria has struggled to ramp up production due to pipeline vandalism, oil theft, and underinvestment.
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According to OPEC data, Nigeria has consistently produced below its 1.8 million barrels per day (bpd) quota, with recent output hovering around 1.47 million bpd.
This means Nigeria is not only selling crude at a lower price, but also selling less of it, an unwelcome double blow to an economy that relies on oil for the majority of its foreign exchange earnings and over half of government revenues.