…As FG pushes for more production to mitigate revenue loss
Nigeria’s economic managers are frantically exploring ways to contain the fallout from the crude oil market rout after prices of the commodity plunged to a record low in April, Business Hallmark’s findings have revealed.
The latest oil market shock saw the price of Brent grade slip below the $60 mark for the first time in four years on April 9, 2025, further piling pressure on Nigeria’s fragile economy, which is still recovering from the impacts of the recent fuel subsidy removal and unification of multiple foreign exchange windows by the administration of President Bola Tinubu.
Prices of crude oil in the international market have crashed by about 25% from a high of $81.01 a barrel for Brent futures and $78.82 for U.S. West Texas Intermediate (WTI) recorded on January 13, 2025, after the Organisation of Petroleum Exporting Countries (OPEC) and its allies on April 4 announced plans to increase oil production by 411,000 barrels per day in May 2025 and amid fears of a global economic recession following a tariffs war by the President of the United States, Donald Trump.
At the close of market on Friday, April 11, 2025, a barrel of Brent futures sold for $64.76, while a barrel of U.S. West Texas Intermediate (WTI) closed at $61.50.
Meanwhile, Nigeria’s premium grades of Bonny Light, Qua Iboe, and Brass River all closed at $70.03, $66.99, and $66.64 respectively on the international oil market on April 11.
Despite the three grades’ relative price advantage against other international grades, they are still trading below the Federal Government’s budget benchmark of $75 in 2025.
Budget Shortfall
The shortfall on Friday, April 11, 2025 alone is $5 on average, about $10 million (N3.2 billion) daily loss using the 2025 budget estimates of 2.06 million barrels per day at $75.
On Friday, February 28, 2025, President Bola Tinubu signed the N54.99 trillion 2025 Appropriation Bill into law.
The budget, a 99.96 percent increase from the 2024 budget of N27.5 trillion, was initially passed by the two chambers of the National Assembly, the Senate and the House of Representatives, on Thursday, February 13.
Based on BH’s analysis, apart from targeted revenues from tax proceeds, customs and excise duties earnings, and deficit funding of N13.39 trillion from debt (69%), loans (28%) and asset sales (2%), the 2025 budget largely rests on an ambitious crude oil production target of 2.06 million barrels per day, a $75 oil benchmark and an exchange rate of N1500/$1.
However, checks revealed that while the Federal Government had been able to meet and surpass some of its revenue thresholds through FX gains and enhanced tax collections, it has failed to increase crude oil output to 2.06 million barrels per day as projected, and the price of the projected output has considerably fallen below the budget benchmark just three and a half months into the budget year.
For instance, Nigeria’s lowest and peak combined crude oil and condensate production in March were 1.46 million barrels per day and 1.76 million barrels per day respectively, according to a report released on Friday by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) titled: ‘Crude Oil and Condensate Production March 2025’.
The Commission further noted that Nigeria’s daily average crude oil production in March was 1,400,783 barrels per day, while condensate stood at 202,993 barrels per day in the same month under review.
Output had declined by five percent in February 2025 to an average of 1.67 million barrels per day from an average of 1.73 million barrels per day in January 2025.
The fall in the nation’s crude oil output, sources in the petroleum industry informed our correspondent, was largely caused by multiple pipeline sabotage and scheduled maintenance of oil and gas infrastructure.
Rescue Measures
Meanwhile, in order to minimize the negative impacts of the oil price drop, the Federal Government has embarked on several measures, our correspondent gathered at the weekend.
Some of the measures, a source in government disclosed, include aggressive ramping up of crude oil and gas production; expanding tax collection and debt financing (loans) to fund the budget.
“The latest oil market rout has created a huge fiscal challenge, not only to Nigeria, but to other oil-producing countries that depend heavily on oil proceeds. However, I can assure you that we are working hard to contain the expected impacts from the oil price plunge. One of the measures we have taken is the ramping up of oil and gas production. Producers, both local and international, have been incentivized to ramp up production. While we intend to cross the 2 million barrels per day mark by the end of the third quarter of 2025, Nigerians will start seeing the results of our efforts towards that goal very soon.
We have also enhanced the processes of collecting taxes. Not that the government is introducing more taxes. What we have done basically is to widen the tax net in order to bring in more contributors. Holes in revenue drain are also being blocked,” the government source stated.
More Borrowing
BH also learnt that the government may resort to more borrowings to meet funding targets.
Commenting on the matter, the Chief Operating Officer (COO) of Aiona and Country Manager of Tradegrid, Africa’s leading large-ticket SMB trading and financing platform, Jide Pratt, said the drop in oil prices means lower revenues and lower foreign reserves for Nigeria.
“We’ve seen an increase in foreign exchange (FX) rates, which does not help monetary or fiscal policies. Personally, I believe it does show that the benchmark for our budget leaves a lot to be desired. More importantly, we are on the road to a supplementary budget and loans. We need to sell off some assets to the private sector and enable growth in our economy to buffer low crude oil prices,” Pratt said.
He also advised the government to quickly diversify the economy in order to escape the constant negative effects of oil price shocks and low production.
Also speaking on the development, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, on Monday, admitted that the oil price plunge will negatively affect Nigeria.
He, however, assured that efforts are ongoing to ramp up crude oil production to curtail any price effect.
“We are also focusing on non-oil revenue mobilisation by FIRS and Customs. Also, there will be budget adjustment and prioritization, where possible, as well as innovative non-debt financing strategies,” the minister assured.
SOURCE: Hallmarknews