The price of Nigeria’s premium crude oil, Bonny Light, has dropped by 20% to $67 per barrel in February 2025, down from $84.02 per barrel in January. This sharp decline has raised concerns about the Federal Government’s ability to meet its revenue targets for the 2025 budget, which is based on a crude oil price benchmark of $75 per barrel.
The 2025 budget, with a revenue target of N36.35 trillion, relies heavily on oil sales, which are expected to contribute 56% of total revenue. However, the current oil price represents a 10.7% shortfall from the budget benchmark, compounding the challenges posed by Nigeria’s oil production, which stands at 1.7 million barrels per day (bpd), significantly below the budget target of 2.06 million bpd.
The U.S. Energy Information Administration (EIA) attributed the decline in oil prices to rising inventories, which reached 3.6 million barrels by the end of February 2025. Additionally, the decision by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) to unwind production cuts starting in April 2025 has further pressured global oil prices.
In an interview with *Vanguard*, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the far-reaching implications of the oil price drop for Nigeria’s economy.
“This development has negative implications for the budget because our benchmark is $75 per barrel. With oil prices now below $70 per barrel, and the possibility of further declines, especially if there is a breakthrough in the Ukraine-Russia peace deal, the revenue outlook is concerning,” Yusuf stated.
He emphasized the dual impact on revenue and foreign exchange earnings, noting that a sustained drop in oil prices could lead to a larger fiscal deficit than planned. “If we stick to our expenditure profile, we may face a much higher fiscal deficit, which could destabilize macroeconomic stability. We must adjust our spending to align with the revenue outlook to avoid an unnecessarily bloated deficit,” he added.
Despite the challenges, Yusuf pointed out a silver lining: lower oil prices could reduce energy costs, benefiting businesses and easing operational expenses. “From a business perspective, particularly in terms of energy costs, this decline is a positive development,” he said.
The falling oil prices come at a critical time for Nigeria, which is already grappling with economic challenges, including inflation and currency volatility. The government’s ability to adapt its fiscal strategy in response to the evolving oil market dynamics will be crucial in mitigating the potential impact on the economy.
As global oil markets remain uncertain, stakeholders are calling for proactive measures to safeguard Nigeria’s economic stability and ensure the successful implementation of the 2025 budget.
