The price of Nigeria’s Bonny Light crude oil has plunged by 10.6% to $73.53 per barrel, down from $84.02 per barrel on January 15, raising concerns over the Federal Government’s ability to meet its 2025 budget revenue target.
Budget 2025 at Risk Amid Falling Oil Prices
The 2025 budget was formulated based on a crude oil price benchmark of $75 per barrel and an oil production target of 2.06 million barrels per day (bpd). The revenue target stands at N36.35 trillion, with 56% of it dependent on oil sales.
However, the decline in oil prices signals a potential 6.6% drop in oil revenue, compounded by oil production falling short of the 2.06 million bpd benchmark.
Crude Oil Output Below Benchmark
Data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shows that Nigeria’s crude oil output stood at 1.737 million bpd in January 2025, a slight increase from 1.667 million bpd recorded in December 2024, but still significantly below the target.
Experts Weigh In
Commenting on the situation, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), stated:
“If energy prices fall, of course, that has implications for our revenue. So it’s likely to negatively impact our oil revenue. However, it may be positive for businesses, as a reduction in global crude oil prices typically lowers the cost of petroleum products such as Premium Motor Spirit (PMS), diesel, and jet fuel.”
Similarly, Mazi Colman Obasi, National President of the Oil and Gas Services Providers Association of Nigeria (OGSPAN), emphasized:
“Besides impacting negatively on the execution of Nigeria’s 2025 budget, it should be noted that low crude oil prices would result in lower petroleum product prices. This is possible as refiners’ costs of refining are expected to drop.”
Potential Economic Implications
The continued decline in oil prices could have far-reaching consequences on Nigeria’s economy, affecting government spending, foreign exchange reserves, and the value of the naira. Policymakers may need to explore alternative revenue sources to cushion the impact of fluctuating oil prices.
