The price of Bonny Light, Nigeria’s premium crude, has dropped by 20%, falling to $67 per barrel from $84.02 in January 2025.
This decline has sparked concerns over the Federal Government’s ability to meet its revenue projections for the 2025 budget.
The budget was structured around a crude oil price benchmark of $75 per barrel and a projected daily production of 2.06 million barrels.
However, with oil prices lower than expected and production currently at 1.7 million barrels per day—falling short of the target—there is growing uncertainty about revenue generation.
Nigeria’s 2025 budget anticipates total revenue of N36.35 trillion, with 56% expected to come from oil sales. The recent price drop could result in a 10.7% decline in oil revenue, potentially widening the fiscal deficit.
According to the U.S. Energy Information Administration, the fall in oil prices is linked to a buildup in crude inventories, which increased by 3.6 million barrels by the end of February.
Additionally, the Organisation of Petroleum Exporting Countries (OPEC+) has announced plans to gradually ease production cuts starting in April 2025, further influencing market trends.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), emphasized the broader economic impact of falling oil prices.
He cautioned that with prices below $70 per barrel, revenue shortfalls could lead to a larger fiscal deficit, potentially affecting macroeconomic stability. He advised the government to reassess its expenditure plans in light of the changing revenue outlook.
Despite these challenges, Yusuf pointed out a potential benefit: lower oil prices could translate to reduced energy costs, making business operations more affordable.