Crude oil prices dipped below $60 per barrel at the start of May, sparking renewed fears of a currency crisis and a wider fiscal deficit in Nigeria.
The sharp fall, driven by a combination of global demand concerns and expanding OPEC+ output, has unsettled investors and raised questions about how Nigeria’s fiscal authorities intend to respond.
But the warnings didn’t come as a surprise to Nigeria’s top economic officials.
We are calibrating
Just weeks earlier, at the sidelines of the IMF/World Bank Spring Meetings in Washington D.C., Finance Minister Wale Edun was asked directly about the implications of falling oil prices on the Nigerian economy.
His response offered insight into how the government views the risks and what it’s doing about them.
- “As we all know, a budget is a statement of intent—you always have to calibrate and adjust to the actual realities on the ground and the funds available. That’s exactly what’s being done,” Edun told the audience, which included journalists from Nigeria
Edun explained that while Nigeria’s oil exports to the U.S. were largely unaffected by the recently announced reciprocal tariffs, the global reaction to those tariffs and the uncertainty they introduced had an immediate effect on oil markets.
- “Due to the global uncertainty and the volatility that followed in the financial markets, oil prices fell by about 20% initially. It was approaching $60 per barrel,” he said.
He added that the pause in implementation of the tariffs later helped ease pressure, with prices rebounding slightly to around $65.
“Still,” he noted, “that price is below Nigeria’s 2025 budget benchmark.”
Scenario modelling is already underway
To respond to the growing risk, Edun disclosed that the Economic Management Team (EMT), chaired by the President, had quickly set up a subcommittee involving key institutions the Ministry of Finance, Budget and Planning, the Central Bank of Nigeria, and others—to examine different oil price scenarios and develop response plans.
- “Immediately, the Economic Management Team formed a subcommittee… This subcommittee was charged with analyzing multiple scenarios under which the economy might operate if this situation persists,” Edun said.
He indicated that the work of the committee would be escalated to the EMT and then to the Federal Executive Council, where concrete policy responses could be considered.
Ramping up oil production, improving efficiency at NNPC
On the fiscal side, the drop in oil prices comes at a time when Nigeria is already struggling to meet production targets.
Edun said the newly appointed management team at NNPC had been tasked with addressing this.
- “The idea is: if the price goes down, you compensate with higher production. They’ve also been asked to cut and rationalize costs, improving operational efficiency across the board.”
The country averaged just 1.737 million barrels per day in January and 1.672 million in February—well below the 2.06 million bpd assumption in the 2025 budget.
Domestic revenue and reform at the centre of the response
Edun also noted that Nigeria’s fiscal strategy was evolving—from a past focus on external concessional financing and Eurobonds to a more robust push for domestic revenue mobilisation.
- “Initially, the focus was on concessional funding from institutions like the World Bank and bilateral agencies such as Germany, the EU, and France.
- We also attracted diaspora investments through Eurobond issuances. But that phase has run its course.”
He also said that going forward, Nigeria is relying on
- A “robust revenue assurance initiative” that digitizes and automates collections from Ministries, Departments and Agencies;
- An imminent Tax Reform Bill, expected to raise the tax-to-GDP ratio and targeted privatization efforts, which have already been included in the 2025 budget.
Meanwhile, in a troubling turn for oil-dependent economies like Nigeria, crude prices plunged further on Monday, hitting multi-year lows and deepening fears of a looming global supply glut.
The drop followed OPEC+’s surprise decision to fast-track its output hikes—an aggressive move that has rattled markets already grappling with weak demand signals and mounting economic uncertainty.
Brent crude collapsed to $60.23 per barrel, shedding $1.06 or 1.7%, while U.S. WTI tumbled to $57.13, down $1.16 or 2%.
Both benchmarks closed at their lowest levels since February 2021, underscoring just how fast the market is unraveling.
