Bonny Light Crude Oil Prices Plummet, Raising Concerns Over Nigeria’s 2025 Budget Projections
The price of Bonny Light, Nigeria’s leading crude oil, has seen a significant decline of 20 percent, dropping from $84.02 per barrel to $67 per barrel as of January 2025. This sharp downturn has heightened concerns regarding the Federal Government’s ability to meet its revenue targets set for the 2025 budget.
The 2025 budget assumes a crude oil price benchmark of $75 per barrel, with projected oil production at 2.06 million barrels per day (bpd) and a total revenue target of N36.35 trillion, with oil sales contributing 56 percent of this figure. The recent drop in crude prices translates to a potential 10.7 percent shortfall in expected oil revenue, particularly concerning as current production levels stand at only 1.7 million bpd—well below the budgetary threshold.
According to the U.S. Energy Information Administration, the current market conditions are largely due to increasing inventories, which reached 3.6 million barrels by the end of February 2025. Additionally, the Organization of the Petroleum Exporting Countries (OPEC+) is set to commence unwinding its production cuts starting in April 2025, impacting supply dynamics.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), expressed serious concerns during an interview with Vanguard regarding the implications of falling oil prices on the national budget and the overall economy. He stated, “The current situation poses negative ramifications for our budget, given that our benchmark is $75 per barrel. Now, we are witnessing prices below $70 per barrel, with forecasts suggesting that they may not improve, especially if President Donald Trump successfully negotiates peace in Ukraine.”
He further articulated the broader implications for economic management, noting the potential for increased fiscal deficits if spending remains unchanged. “Sticking to our current expenditure plans could lead to a significantly larger fiscal deficit than anticipated, which is not advisable as it negatively impacts macroeconomic stability. These deficits can have severe systemic implications, and we risk incurring substantial costs due to an unstable macroeconomic environment.”
Dr. Yusuf emphasized the importance of adjusting spending based on realistic revenue projections to avoid unnecessary budget bloating. However, he noted a silver lining in the situation. “On the positive side, the decline in oil prices could lead to lower energy costs, which would benefit businesses, especially in terms of energy expenditures.”
Overall, the evolving situation calls for a reevaluation of Nigeria’s budgetary strategies in light of fluctuating oil prices, ensuring that the government can navigate the economic landscape more effectively.
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