Nigeria’s economic outlook for 2025 has come under increasing strain as tumbling global oil prices and a shortfall in crude oil production threaten the revenue projections underpinning the nation’s budget.
An analysis of data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that within the first two months of this year, Nigeria was unable to produce its 2.06 million barrels per day 2025 crude oil budget benchmark, which would cumulatively amount to 123.6 million barrels for the two months.
Instead, the country was only able to produce 52 million barrels in January, including crude oil and condensate, while in February, total oil output was 50 million, totalling 102 million barrels for the first two months of 2025.
Further analysis shows that for both months, Nigeria underproduced by as much as 21.6 million barrels. Generally, oil accounts for roughly 65 per cent of government revenue.
With the 21.6 million barrels hole in the 2025 budget in just two months, Nigeria may have lost a gross sum of $1.62 billion, further putting the Bola Tinubu administration’s aspiration to fix the economy in jeopardy.
In January, Nigeria produced 1.737 million bpd of crude oil and condensate, while in February this slumped to 1.67 million bpd. In total, while over 52 million barrels were produced in January, about 50 million barrels was pumped in February, resulting in approximately 102 million barrels produced in the first two months of this year.
The 2025 budget, passed late last year, was built on an optimistic benchmark of $75 per barrel for crude oil and a production target of 2.06 million bpd. However, as of early April, Brent crude prices have slumped to approximately $65 per barrel, the lowest in four years.
This occurrence has been driven by a combination of increased Organisation of Petroleum Exporting Countries (OPEC) output and heightened trade tensions, following President Donald Trump’s recent reciprocal tariff announcements.
Goldman Sachs recently cut its 2025 oil price forecast by 5.5 per cent for Brent, Nigeria’s oil benchmark, citing the OPEC decision to phase out production cuts and add 411,000 bpd starting in May.
Compounding the price decline, Nigeria’s oil output has fallen short of expectations. Although the data for March has not been released, secondary sources have reported that production dropped by about 50,000 bpd, leaving the country well below its budgeted target.
Although March’s crude production slump was immediately blamed on the attacks on major pipelines, following the political crisis in Rivers state, the prolonged reason for Nigeria’s inability to significantly raise output has been attributed to aging infrastructure, pipeline vandalism and outright oil theft in the Niger Delta as well as years of inadequate investment.
The revenue gap is expected to widen the budget deficit beyond initial projections, forcing the government to either slash public spending or increase borrowing.
Last month, the Minister of Finance, Wale Edun, said that as a result of the current turbulence in the oil market, Nigeria cannot afford to be overly dependent on oil revenues.
“The recent global shifts in energy policies, declining oil demand, and fluctuating crude prices have jointly made it abundantly clear that we cannot afford to be overly dependent on oil revenues.
“We must, therefore, embrace a diversified economic approach that taps into the immense potential of non-oil sectors such as agriculture, solid minerals, manufacturing, tourism, digital economy, and creative industries,” the minister, who was represented by the Permanent Secretary, Federal Ministry of Finance, Lydia Jafiya, said.
The timing couldn’t be worse for the Tinubu administration, which has staked much of its credibility on revitalising the oil sector. With OPEC+ showing no signs of reversing its output hikes and global demand uncertainties persisting, the 2025 budget’s ambitious goals may prove increasingly elusive.
Meanwhile on Monday, oil prices extended last week’s losses, with WTI falling more than 4 per cent, as escalating trade tensions between the United States and China stoked fears of a recession that would reduce demand for crude.
Brent futures declined $2.54, or 3.9 per cent, to $63.04 a barrel at 07.45 in the morning, while U.S. West Texas Intermediate crude futures lost $2.5, or 4.03 per cent, to $59.49. Both benchmarks dropped to their lowest since April 2021. Last week, Brent lost 10.9 per cent, while WTI dropped 10.6 per cent.
Nigeria’s 2025 budget, officially approved at approximately N54.99 trillion, dubbed the “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” represents a significant increase from the 2024 budget of N28.7 trillion, nearly doubling the previous year’s allocation.
