Nigeria’s economic stability is facing fresh uncertainties as crude oil prices declined sharply on Tuesday, raising concerns over the country’s revenue projections and naira stability.
The price dip follows the U.S. government’s implementation of fresh tariffs, exacerbating global trade tensions and their potential impact on fuel demand.
Brent Crude fell to $70.5 per barrel, while West Texas Intermediate (WTI) dropped to $67.56. Nigeria’s flagship crude, Qua Iboe, declined by 1.9 per cent to $74 per barrel, while Brass River saw a similar decline to $73 per barrel.
Brent Crude, the international benchmark, was down 1.40 per cent, trading at $73.00, marking its first weekly loss in a month and its first monthly decline since November 2024.
The latest slump in oil prices is attributed to multiple factors, including global trade disputes, uncertainty in OPEC+ production strategies, and ongoing geopolitical developments such as the prospect of peace talks to end the war in Ukraine.
Analysts warn that these combined risks could put Nigeria’s revenue streams and economic stability under significant strain.
An energy analyst Dr. Chijioke Akabogu, described the crude price drop as a serious risk to Nigeria’s budget implementation.
“The government based its 2025 budget on an oil benchmark of $75 per barrel and a production target of 2 million barrels per day (mbpd). With current crude prices falling below this threshold, there could be major shortfalls in revenue, forcing the government to increase borrowing or cut expenditure,” he warned.
Similarly, financial expert, Dr. Funmi Odetayo, highlighted the potential impact on Nigeria’s foreign exchange market.
“Nigeria’s foreign reserves depend largely on crude oil exports. If oil prices remain low, the country could struggle with dollar liquidity, leading to renewed pressure on the naira,” she noted.
The naira had strengthened in February from N1,600/$1 to N1,500/$1 but depreciated slightly to N1,515/$1 on Tuesday following the oil price decline.
Despite the ongoing volatility, the Central Bank of Nigeria (CBN) maintains a positive outlook, citing improvements in crude oil production, which rose to 1.54 mbpd as of January 2025.
The CBN believes that this will help improve Nigeria’s current account position and strengthen external reserves. However, if oil prices remain depressed, this optimism could be challenged.
Dr. Adekunle Balogun, an economist at Lagos Business School, emphasized that Nigeria needs to explore alternative revenue sources.
“We need urgent diversification efforts. The government should focus on expanding non-oil exports and improving domestic revenue mobilisation to mitigate the impact of oil price fluctuations,” he advised.
With global trade tensions rising and OPEC+ yet to finalize production decisions, Nigeria faces increasing risks in navigating an unpredictable oil market.