As a part of Nigeria’s oil revenues, crude prices dropped below $60 per barrel this week, mirroring what occurred during the COVID-19 crisis. Brent crude dropped 5.09% to $59.62 per barrel, while U.S. West Texas Intermediate (WTI) fell by 5.54% to $56.28. This is due to China’s retaliatory tariff hike on U.S. goods, which worsened the trade tensions after the U.S. started placing steep duties on China’s imports. However, after the U.S. announced a temporary rollback of some tariffs, prices rebounded to $65.13.
With 90% of the country’s foreign exchange earnings coming from oil, Nigeria is in a tough financial situation. Their 2025 federal budget, which is expected to be set at $37 billion, with an $8 billion deficit, presumes an oil price of $75 per barrel. However, with the current market slump, this benchmark is in jeopardy. Nigeria’s longstanding efforts to diversify the economy are proving to be futile, which emphasizes the need to enhance export standards and access international markets.
According to Finance Minister Wale Edun, there are plans in place to boost non-oil revenue and assess the impact of new U.S. tariffs, which include a 14% duty on exports from Nigeria.
Despite the fact that Edun acknowledged some vulnerabilities regarding the volatility of oil prices, Nigeria’s trade surplus with the U.S. reached N5.5 trillion in 2024, with 92% attributed to oil and mineral exports. He mentioned that the Economic Management Team (EMT) will consider some scenarios to mitigate risks, focusing on increasing oil production and strategies that do not involve accruing debt.
Currently, Nigeria’s oil output is at 1.46 million barrels per day (bpd), slightly below the OPEC quota of 1.5 million bpd. Economists are warning of possible broader economic repercussions such as unstable exchange rates, inflation on imports, and decreased trade with non-oil industries. Nigerian economist Paul Alaje argued that oil overreliance makes Nigeria largely exposed, while energy expert Jide Pratt warned about the danger of foreign reserves in light of uncertainty surrounding Nigeria’s crude-for-naira deals.
As global trade shifts, Nigeria’s economy is forced to deal with two problems at once: managing oil revenue and accelerating the pace of restructuring non-oil-dependent revenue sources to serve as a buffer against external shocks.
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