- Crude oil prices have continued to fall due to the United States’ tariff imposition, China’s retaliatory tariff action, and OPEC+'s increased output
- Nigeria’s 2025 budget faces a new hurdle as crude oil prices are below its set benchmark
- Stakeholders say the situation should spur the government to develop its internal economy and think of other revenue sources away from oil
Nigeria’s 2025 budget is faced with a new threat following the slump of global crude oil prices below its $75 per barrel benchmark.
The decline in oil prices began over the weekend, crashing to $65 per barrel as of Saturday, April 5. The price of Brent crude further crashed to $64.16 while the US West Texas Intermediate (WTI) crude fell to $60.73 as of Monday, April 7.
The fall in prices followed the imposition of tariffs on countries by United States President, Donald Trump, with Nigeria being slammed with a 14 per cent tariff.
The tariff imposition, like a double-edged sword, has both positive and negative impacts on the Nigerian economy. While the Federal Government will be counting losses due to its inability to make enough revenue from crude oil, the citizens will enjoy reduced prices of petroleum products.
How US tariffs, OPEC+ output increases led to crash of oil prices
According to oilprice.com, the combined impact of US import tariffs, the sudden Organisation of Petroleum Exporting Countries and Allies (OPEC+) output increase, and China’s retaliatory tariff action, erased $10 per barrel from global benchmarks, “with ICE Brent falling below $65 per barrel for the first time since August 2021.”
The US tariffs imposition led to China’s retaliatory tariffs on US goods, escalating a trade war that has led investors to price in a higher probability of recession.
China, the world’s top oil importer, said it will impose additional tariffs of 34 per cent on all US goods from April 10, even as nations around the world have readied tariff retaliation, following in China’s steps, according to Reuters.
Another factor that further pressured oil prices was the OPEC+’s decision to advance plans for output increases.
OPEC+ announced on Thursday, April 3, that it would increase production to 411,000 barrels per day (bpd) in May, up from the previously planned 135,000 bpd.
It said the move follows eight member countries’ decision, after a virtual meeting, to phase out oil output cuts.
The countries are Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman.
Following the production boost, the price of Brent crude fell by 6.8 per cent to $69.85 a barrel while US WTI crude declined by 7.08 per cent to $66.63, at 10 pm WAT.
2025 budget in the face of global oil price slump
With the continued fall of crude oil prices, the Federal Government would have to contend with the possible deficits and device measures to ensure the scalability of the 2025 budget.
The N54.99 trillion 2025 budget was based on a $75 per barrel oil price benchmark and a crude oil production target of 2.06 million barrels per day (bpd).
Following the slump of oil prices below the $75 per barrel benchmark, the projected revenue in the budget becomes a tall dream, given Nigeria’s huge reliance on oil revenue for its fiscal sustainability.
This is further compounded by the failure of the Federal Government to ramp up daily crude oil production to two million barrels per day.
As of February 205, Nigeria’s daily average crude oil production stood at 1,465,006 barrels per day (bpd), about five per cent decline compared to the 1,538,697 bpd recorded in January when it exceeded OPEC’s production quota of 1.5 million bpd as its oil production, including crude and condensate, increased to 1.74 million bpd from 1.6 million bpd in December 2024.
Stakeholders’ take on oil price slump and the 2025 budget
Stakeholders agree that the crash in oil prices below the 2025 budget benchmark poses a challenge to Nigeria’s economy, especially in terms of proposed revenue.
They also highlighted that on the positive aspect, the situation portended lower prices for petroleum products, offering a relief to consumers.
The Executive Secretary of the Major Energies Marketers Association of Nigeria (MEMAN), Clement Isong, said the situation might be reversed since the price crash is man-made.
“Fortunately, this is man-made. It is because one person stood up and did something. So, it also means that if he can compromise, or they can work out some compromises, it might be reversed. But is there a negative impact on my country? Yes, as usual, it’s a negative and positive impact.
“The extremely low price of crude oil at $65 per barrel is really bad based on the benchmark that was used for the budget for this year.
“So, if it should last, it means that the deficit would be even worse than what was anticipated. It’s really bad news for the expected revenues for the country,” Isong told The Punch.
“With respect to prices at the pump, over time, I guess, they will go down. If the crash is continuous, fuel prices will go down, and that will provide some relief to commuters and transporters of goods. So, it has a dual impact,” he added.
The National President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, noted that the US tariff imposition, which led to oil price slump, should spur the government to develop its internal economy and think of other revenue sources away from oil.
Gillis-Harry said retail outlets should expect a reduction in pump price because the feedstock is coming down in price.
“Fuel reduction should normally be expected because the cost of the feedstock is part of the cost of production. If the crude price reduces, it will affect the price. But we don’t know when the price cut can happen,” he said.
Also, a professor of energy at the University of Lagos, Dayo Ayoade, regretted Nigeria’s heavy reliance on borrowings to fund its budget and urged the government to take advantage of the country’s population to create prosperity.
“Crude price crash is bad for Nigeria because our budget is fixed on certain prices, and if we don’t meet those prices, we won’t be able to fund the budget. We will have to go and borrow. Nigeria has over-borrowed; we are struggling with a lot of economic challenges based on huge debts and funding those debts.
“We should learn to rely on ourselves and focus on internal growth. We should use our big population to create prosperity.
“We should go back to the farm. People should not be hungry with the kind of land and weather God has blessed us with. We should look inwards,” he said.
Nigeria considers review of N54.99 trn budget amid US tariff dispute
Meanwhile, TheRadar earlier reported that the Nigerian government indicated that it may review its 2025 budget of N54.99 trillion in response to recent tariff actions by the President of the United States, Donald Trump, which have caused turmoil in global trade.
Wale Edun, Nigeria’s Minister of Finance, made the announcement during a press conference at the inaugural Corporate Governance Forum in Abuja, organised by the Ministry of Finance Incorporated.
