The latest signals from the global crude oil market suggest a rocky road for Nigeria’s 2025 budget as Brent oil price falls to $60 per barrel over a United States-triggered trade war.
Last Thursday, US President Donald Trump announced higher-than-expected tariffs across the board, with tariffs on China the highest. Nigeria, which exports a limited number of goods to the US, including crude oil, was hit with a 14 per cent increase in tariffs.
Since then, President Trump has announced additional tariffs on China, which are 104 per cent as of Wednesday, April 9, the day that the tariffs on all other countries, including the members of the EU, took effect.
China, on Wednesday, hit back at the 104 per cent US tariffs and hiked additional duties on American products to 84 per cent. The Asian country vowed to continue responding to Mr Trump’s tariffs as investors now see a trade war and recession as almost unavoidable.
The global markets have reacted with oil plummeting amid concerns of a recession and reduced demand for oil.
Nigeria is not exempt as it faces a higher shortfall from revenues amid dwindling oil prices, a development that will make it difficult to back the N54.99 trillion budget.
In the budget, the oil price benchmark was put at $75 per barrel with a crude production target of 2.06 million barrels and an exchange rate projection of N1,400 per Dollar.
Analysts expressed concerns regarding the feasibility of these assumptions – particularly the oil production target which currently stands around 1.5 million barrels per day and exchange rate around N1,600 per Dollar.
Calculations show that based on current realities, at the current $60 per barrel, Nigeria daily deficit will fall to around N85 billion even at an exchange rate of N1,400 based on the 2025 budget assumptions.
This will likely impact the revenue that will be remitted as the entire revenue doesn’t go into the coffers of the Nigerian government which receives only taxes and royalties and get other revenues from flaring penalties and Production Sharing Contract (PSC) profits.
Over the weekend, the Central Bank of Nigeria (CBN) admitted that oil prices had weakened to around $65 at the time and noted that this presented challenge to oil exporters like Nigeria.
“Crude oil prices have also weakened – declining by over 12% to approximately US$65.50 per barrel – presenting new dynamics for oil-exporting countries such as Nigeria,” the CBN statement added.
In light of this development, with prices now weaker, financing Nigeria’s budget will one of President Bola Tinubu’s pressing challenges.