Nigeria is staring down the barrel of twin macroeconomic shocks as Brent crude prices plunge below $60 per barrel.
This development could destabilize the country’s fragile exchange rate regime and widen an already gaping fiscal deficit.
The sharp drop in oil prices, driven by accelerated OPEC+ supply increases and weakening global demand, has triggered anxiety in government circles and among investors.
At the core of this brewing challenge is the 2025 federal budget, which was predicated on an oil price benchmark of $75 per barrel and daily production of 2.06 million barrels.
As of March 2025, both assumptions appear grossly optimistic.
Nigeria could lose up to N19.6 trillion in projected oil revenue if current trends persist. This is due to lower-than-budgeted oil prices, underwhelming production, and a weaker exchange rate. The average daily production in Q1 2025 has lag behind budget projections, and the exchange rate has weakened. This could lead to a fiscal deficit of up to N30.79 trillion, necessitating borrowing, cost-cutting, and a shift in non-oil revenue mobilization.
Nigeria’s foreign exchange market is facing renewed pressure due to a fiscal imbalance and the naira’s weakening relationship with oil prices. In April, the naira fell beyond N1,600/$, but a modest recovery was achieved with targeted Central Bank of Nigeria (CBN) interventions. Nigeria recorded a net FX inflow of $15.2 billion in Q1 2025, reflecting early-year optimism driven by reforms and increased diaspora remittances. However, analysts warn that sustained low oil prices could undermine the CBN’s ability to defend the naira.
