The price of Bonny Light, Nigeria’s premium crude, has fallen by 20% to $67 per barrel, down from $84.02 in January 2025. This significant drop raises concerns about the achievement of the Federal Government’s 2025 revenue target.
The 2025 Budget is based on a crude oil price benchmark of $75 per barrel, with an oil production target of 2.06 million barrels per day (bpd) and a revenue goal of N36.35 trillion, 56% of which is expected from oil sales.
This decline in oil prices could potentially reduce the government’s oil revenue target by 10.7%, especially as current production levels, at 1.7 million bpd, are well below the budget’s 2.06 million bpd target.
The U.S. Energy Information Administration (EIA), in its latest data, attributed the market downturn to rising inventories, which stood at 3.6 million barrels as of February 2025. The situation was also impacted by the decision of the Organization of Petroleum Exporting Countries (OPEC+) to begin unwinding its production cuts in April 2025.
In an interview with Vanguard, Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), warned of the implications for Nigeria’s 2025 budget and broader economic stability. He stated, “This development has negative implications for the budget because our benchmark is $75 per barrel, and now we have oil prices below $70 per barrel. The outlook suggests that prices may stay low, or even fall further, particularly if diplomatic efforts, such as a potential peace deal between Ukraine and Russia, succeed.”
He added that the price drop has significant effects on both revenue and foreign exchange, key areas of concern for Nigeria’s economic management. “If the government maintains its current expenditure levels, it will likely face a much higher fiscal deficit than planned, which could destabilize the macroeconomy,” he said. Yusuf emphasized the need for adjustments in government spending to avoid a bloated deficit.
However, there is a silver lining to the situation. “On the positive side, lower oil prices could lead to reduced energy costs, which would benefit businesses,” Yusuf noted.
The government and economic experts will continue to monitor these developments closely to manage the potential impacts on Nigeria’s fiscal health.
