Nigeria’s fragile fiscal outlook is facing new pressures as the country’s crude oil grades slumped below $68 per barrel this week, sparking renewed fears over the government’s ability to finance its 2025 budget.
With global oil market volatility and domestic production shortfalls persisting, analysts warn that the development could trigger wider fiscal gaps, threaten revenue projections, and complicate debt servicing obligations.
The decline in Nigeria’s crude oil benchmarks, including Bonny Light and Qua Iboe, comes amid a global oil supply glut and slowing demand from key markets in Asia and Europe.
According to traders, recent cargoes of Nigerian crude oil were sold at discounts, with average prices sliding below the critical $68 mark.
This is significantly lower than the 2025 budget benchmark price of $77.96 per barrel approved by the National Assembly in June.
Crude oil revenue accounts for more than 70 percent of Nigeria’s foreign exchange earnings and nearly half of government revenues.
The slide in crude oil prices therefore threatens to blow a hole in government finances, particularly at a time when Nigeria is grappling with rising debt service costs and an ambitious infrastructure agenda.
Economists warn that if crude oil prices remain subdued, Nigeria could face a shortfall of at least ₦3 trillion in projected revenues this fiscal year.
“The government benchmark is nearly $10 higher than current spot prices.
Unless the market recovers or production improves, the risk of widening budget deficits is real,” said energy analyst, Dr. Emmanuel Adeniran.
Already, the Federal Government is spending a substantial portion of its earnings on fuel subsidies disguised as under-recoveries, despite the June 2023 subsidy removal policy.
The latest price weakness may further squeeze the Nigerian National Petroleum Company Limited (NNPC Ltd.), which remits a significant share of oil proceeds to the Federation Account.
Nigeria’s rising debt burden adds another layer of concern.
Data from the Debt Management Office (DMO) show that the country’s total public debt hit ₦121 trillion by mid-2025, with debt servicing gulping over 45 percent of government revenues.
Lower oil receipts could force Nigeria to borrow more, worsening its fiscal vulnerabilities.
Financial expert, Dr. Grace Okon, noted: “Nigeria is walking a tightrope.
Lower crude oil prices mean less dollar inflow, weaker reserves, and potential exchange rate instability.
This situation could undermine investor confidence and fuel inflationary pressures.”
The weakness in Nigerian crude oil grades is tied to broader global market conditions.
Analysts attribute the slump to OPEC’s oversupply, a slowdown in Chinese industrial activity, and rising U.S. shale production.
Additionally, European refiners have been diversifying away from African crude oil due to shipping disruptions and competitiveness of alternative grades.
While OPEC+ has been working to stabilize prices through production cuts, Nigeria has struggled to meet its allocated quotas due to oil theft, pipeline vandalism, and underinvestment in upstream infrastructure.
Nigeria’s average daily production has hovered around 1.4 million barrels per day, below the OPEC quota of 1.7 million.
Experts argue that Nigeria must urgently diversify its revenue base and invest in non-oil sectors to reduce vulnerability to crude price shocks.
The agricultural, manufacturing, and technology sectors have been identified as potential growth drivers.
In the short term, the government may consider revising its budget benchmark to reflect market realities.
“Nigeria should plan conservatively and assume crude at $65 per barrel to avoid overestimating revenue.
Any upside can be saved in the stabilization fund,” suggested policy consultant, Mr. Akin Fagbemi.
As Nigeria’s crude grades struggle below $68, the Tinubu administration faces a critical test in fiscal management.
Ensuring prudent spending, improving oil production efficiency, curbing leakages in the petroleum sector, and accelerating tax reforms will be key to navigating the current turbulence.
For ordinary Nigerians, the risk of reduced government spending could translate into slower delivery of public projects and possible cuts in social programs.
The government’s ability to stabilize the economy will therefore be under intense scrutiny in the coming months.