Crude crash: FG’s 2025 budget jerks again, marketers anticipate price cut

The global crash in crude oil prices has put Nigeria’s 2025 budget under more threat, even as fuel marketers await a possible reduction in the prices of petroleum products.

According to experts who spoke with our correspondent, the crude oil crash occasioned by the tariffs imposed on countries by United States President, Donald Trump, 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 masses will enjoy cheaper fuel at the pumps.

Our correspondent reports that crude oil started declining over the weekend, slumping to $65 per barrel as of Saturday.

On Monday, the prices slumped further as Brent stood at $64.16 while the US WTI went down to $60.73.

According to oilprice.com, the combined effect of Trump’s import tariffs, OPEC+’s inopportune decision to speed up the unwinding of production cuts, and China’s retaliatory actions wiped off $10 per barrel from global oil prices, “with ICE Brent falling below $65 per barrel for the first time since August 2021.”

China’s retaliatory tariffs on US goods were said to have escalated a trade war that has led investors to price in a higher probability of recession.

China, the world’s top oil importer, announced it will impose additional tariffs of 34 per cent on all US goods from April 10.

According to Reuters, nations around the world have readied retaliation after Trump raised tariffs to their highest in more than a century.

Aside from the tariffs, another factor that further pressured oil prices was the Organisation of the Petroleum Exporting Countries and Allies’ decision to advance plans for output increases.

The group now aims to return 411,000 barrels per day to the market in May, up from the previously planned 135,000 bpd.

As the crude prices continue to fall, the Federal Government is faced with challenges of how to make up for the deficit that could arise from the 2025 budget.

The PUNCH recalls that the Federal Government put the price of crude oil at $75 per barrel.

Crude oil is the major source of revenue for the country.

As crude prices slipped $10 below the projected $75 per barrel, the projected revenue became unrealistic, especially with the failure of the Federal Government to ramp up daily crude oil production to two million barrels per day.

The budget is anchored on a benchmark oil price of $75 per barrel and an ambitious production target of 2.06 million barrels per day. Approximately N19.60tn, up to 56 per cent of the initially projected N34.8tn revenue, is expected to stem from oil, reflecting Nigeria’s heavy reliance on oil for fiscal sustainability.

In an interview with The PUNCH, the Executive Secretary of the Major Energies Marketers Association of Nigeria, Clement Isong, said the crude price crash is bad for the nation’s economy considering the budget projection.

Isong said it was clear that the world is currently in turmoil, and that it has never been this bad.

He said, “We have had the market crash a few times, I think in 2008, and I can’t remember what the last one was, maybe 2014. But it has never been this bad. I’m talking about globally.

“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.”

He mentioned that the low crude price is extremely bad for the budget based on the benchmark.

“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 said.

The MEMAN boss also said the low crude price may affect investments, especially with the cost of production.

“Hopefully, it will not impact too much on investments, because, as you recall, we have had insufficient investments in our upstream, leading to the decline in our crude oil output. Normally, in the world, when crude oil prices are high, those who invest in production bring out more money.

“Remember that Nigeria’s production cost is quite high because a lot of new production is deep offshore. So, because deep offshore is so expensive, you really need the cost of the crude to be as high as possible in order to generate the revenue that the country needs to fund its ambitious development programme. So, it’s both negative and positive.

Isong said the $40 production cost per barrel has gone down.

“I hope we can push it down. But $66 per barrel is not very interesting. It’s not very good for us,” he stated.

However, the energy expert maintained that the crash would also impact pump prices, bringing down the cost of fuel.

“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 submitted.

Also, the National President of the Petroleum Products Retail Outlet Owners Association of Nigeria, Billy Gillis-Harry, explained that the crude crash will affect the economy both positively and negatively.

He said Nigeria depends too much on oil sales to fund its budget, saying a crash in price can spell doom for the nation.

For retailers, he said the prices of fuel will fluctuate with no stability, saying the price of petrol is now close to N1,000 per litre.

He charged the government to look inward and develop its internal economy, saying Trump’s decision to raise tariffs from five per cent to 14 per cent should make the government think of other sources.

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.

Speaking, an energy expert, Professor Emeritus Wumi Iledare, said volatility in crude oil prices is part of the petroleum business.

He also agreed that the crash would affect government revenue and bring down fuel prices.

He asserted, “In the short run, it is bad for every petroleum-dependent economy in terms of government access to revenue and pressure on foreign reserves.

“The crash, however, could lead to higher economic activities, reduce petroleum product prices, and lead to higher economic output because of high employment in the private sector.”

Speaking, a professor of energy at the University of Lagos, Dayo Ayoade, said the fear of recession made the crude price tumble as Trump unsettled the global market.

He said the price will remain low until confidence is returned in the global market.

Ayoade regretted that Nigeria would have to borrow to fund the budget.

“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.

On Sunday, crude oil refiners said petrol could drop to N400 per litre if crude oil falls to $50 per barrel, saying, however, that the stoppage of the naira-for-crude deal would not allow that to happen.

In the same vein, the Federal Government raised concerns that the tariff by Trump could impact the economy negatively.

The Minister of Industry, Trade and Investment, Jumoke Oduwole, warned that the move could significantly impact both oil and non-oil trade flows to one of Nigeria’s key markets, the US.