Nigeria’s 2025 budget deficit may increase as oil price bleeds from $75 per barrel to $67

March 6, 2025

Nigeria’s 2025 budget deficit may increase as oil price bleed scrambles macroeconomic conditions

By Jeph Ajobaju, Chief Copy Editor

Nigeria’s 2025 budget oil price benchmark at $75 per barrel (pb), with estimated production at 2.06 million barrels per day (mbpd), is under threat as the price of Bonny Light, its premium crude, has bled 20 per cent to $67 pb from $84.02 in January.

Abuja anticipates N36.35 trillion revenue with 56 per cent coming from oil sales.

However, the price dip sign-posts a 10.7 per cent potential decline in oil revenue, if current production remains at 1.7 mbpd – significantly below the budget target of 2.06 mbpd.

Data released by the United States Energy Information Administration (EIA) shows the price reduction is due to rising crude inventories which reached 3.6 million barrels at the end of February.

The Organisation of Petroleum Exporting Countries (OPEC+) has also announced plans to unwind its production cuts starting in April 2025, further influencing market trends.

Centre for the Promotion of Private Enterprise (CPPE) Chief Executive Officer, Muda Yusuf, said with oil prices below $70 pb, revenue projections could suffer, potentially leading to a larger fiscal deficit, per Vanguard.

His words: “This development has negative implications for the budget because our budget benchmark is $75 per barrel.

“Now, we are having oil price below $70 per barrel and the prognosis is that it may remain at this level or possibly even lower, especially if [US] President Donald Trump is able to achieve a breakthrough with the peace deal between Ukraine and Russia.

“It has implications for the budget from a revenue point of view. It also has implications from a foreign exchange point of view. These are the two major implications that it has as far as our economic management is concerned.

“If we still stick to our expenditure profile, then it means that we’ll be looking at a much higher fiscal deficit than we have planned but that will not be advisable because deficits have a way of affecting macroeconomic stability.

“This often has a very strong systemic impact on us paying a heavy price for unstable macroeconomic environment. I think as we progress, we need to adjust our spending again, depending on the revenue outlook.

“It is very important that we take all of this into account so that we don’t resort to an unnecessarily bloated deficit at the end of the day.

“However, the good news about this is that it’s going to bring down energy prices and that is good for business. From a business point of view, particularly from the energy cost perspective, this is something that is a positive.”