Nigeria may be heading for tough times again as the price of oil dropped below $60 per barrel, raising concerns over the country’s heavy reliance on oil exports for income.
On Wednesday, Brent crude, the global oil benchmark, fell by 5.09 percent to $59.62 per barrel, while US West Texas Intermediate dropped to $56.28 per barrel. This is the lowest oil has fallen since the COVID-19 crisis. However, on Thursday morning, prices climbed back up to $65.13 after the US paused some trade tariffs.
The fall in oil prices followed a trade fight between China and the United States, where both countries placed high tariffs on each other’s goods. These actions affected global markets and oil prices.
Nigeria earns about 90 percent of its foreign exchange from oil, and the drop in price means the government may struggle to fund its 2025 budget of $37 billion, which was planned with oil selling at $75 per barrel.
Speaking on the situation, Minister of Finance, Wale Edun, said the government is already working to reduce the impact.
“It is our job to look at the various scenarios that might play out,” Edun said. “There’s global uncertainty at a huge level… We are intensifying efforts to ramp up crude oil production to curtail any price effect.”
He also said the government is focusing on non-oil revenues like taxes and customs, and considering other ways to raise funds without borrowing.
Nigeria’s oil production dropped to 1.46 million barrels per day in February, below the 1.5 million quota set by OPEC.
On the trade side, Nigeria’s exports to the US were N1.8 trillion in 2022, N2.6 trillion in 2023, and N5.5 trillion in 2024 — but 92% of that came from oil and minerals.
“The tariff effect on exports is negligible if we sustain our oil and minerals export volume,” Edun added.
However, economist Paul Alaje warned that the new US tariff policy under President Donald Trump may still affect Nigeria badly.
“We’ve started feeling the impact from exchange rates. It will affect us… not just from crude oil, but other exports too,” Alaje said.
Jide Pratt, COO of Aiona and country manager of Tradegrid, also raised concerns over Nigeria’s foreign reserves.
“The recent drop in oil prices means lower revenues and lower foreign reserves for Nigeria, especially with the uncertainty of the naira-for-crude deal,” he said.
This latest development has once again highlighted the need for Nigeria to diversify its economy and reduce its dependence on oil, something many past governments have promised but failed to fully achieve.
