Nigeria faces twin economic threats as Brent crude falls below $60, risking currency instability and a wider fiscal deficit. The price drop, fueled by rising OPEC+ supply and weak demand, has alarmed officials and investors.Nigeria’s 2025 budget, based on $75 oil and 2.06 million barrels/day, is under threat as Brent falls to $59.25 and output lags. With continued trends, the country could face a N19.6 trillion oil revenue shortfall due to low prices, weak production, and a fragile naira.
Nigeria’s oil production and exchange rate have underperformed 2025 budget assumptions, with output lagging and the naira weakening to N1,600/$, above the projected N1,500/$. These setbacks threaten oil revenues, potentially pushing the fiscal deficit from N13 trillion to N30.79 trillion. Addressing the gap will require borrowing, spending cuts, and boosting non-oil revenues. Meanwhile, falling oil prices are pressuring the naira, which dipped sharply in April before a modest rebound helped by CBN interventions funded from earlier reserve buildup.Nigeria saw a net FX inflow of $15.2 billion in Q1 2025, boosted by reforms and remittances.
However, analysts warn that sustained low oil prices could strain the CBN’s ability to support the naira if inflows decline. Despite reform efforts like subsidy removal and FX liberalization, investors remain cautious. JPMorgan’s Joyce Chang praised Nigeria’s progress but highlighted global headwinds and oil price volatility as major risks.Nigeria’s outlook is worsened by its limited influence in OPEC+, as major producers like Saudi Arabia and Russia increase supply. With OPEC+ reintroducing 2.2 million barrels/day and Nigeria struggling with pipeline issues, the country faces revenue losses without the benefit of higher output.
Market forecasts suggest low oil prices will persist, with Brent projected at $66 in 2025 and $60 in 2026, due to oversupply from OPEC+, U.S. shale, and weak demand.Nigeria is preparing for a prolonged low oil price environment, with Finance Minister Wale Edun acknowledging the risks. The government is adjusting its approach, with a subcommittee tasked with revising fiscal projections and responding to challenges. Efforts include increasing oil production, improving NNPC efficiency, and boosting non-oil revenue through digital tax reforms and tackling revenue leakages.
