'Seun Ibukun-Oni, Abuja
'Declining crude oil prices and fluctuating forex dynamics raise concerns over Nigeria’s N36.35 trillion revenue target, while experts call for pro-market reforms to stabilize the economy.'
DAILY COURIER - The Federal Government’s ambitious Budget 2025, anchored on a crude oil price benchmark of $75 per barrel and a daily production target of 2.06 million barrels, is facing significant headwinds as global oil prices plummet to $73.53 per barrel. This 10.6% decline from January’s $84.02 per barrel has sparked fears of a potential revenue shortfall, with oil sales expected to contribute 56% of the N36.35 trillion budget.
According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), crude oil production in January 2025 stood at 1.737 million barrels per day (bpd), falling short of the budget benchmark. This shortfall, coupled with the dip in oil prices, could result in a 6.6% decline in oil revenue, further straining the government’s fiscal plans.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), noted that while lower oil prices may negatively impact government revenue, they could benefit businesses by reducing the cost of petroleum products such as petrol, diesel, and jet fuel. Similarly, Mazi Colman Obasi, National President of the Oil and Gas Services Providers Association of Nigeria (OGSPAN), highlighted that reduced refining costs could lead to lower prices for petroleum products, offering some relief to consumers.
Naira Rally Tightens Noose on Forex Speculators
Meanwhile, the naira’s sustained appreciation against major currencies has left foreign exchange speculators reeling. The local currency strengthened by 8.5% month-on-month to 1,490/$ on the parallel market in February, despite a 3.2% dip in Nigeria’s external reserves to $38.46 billion. Analysts estimate that speculators lost approximately N10 billion last month as the Central Bank of Nigeria (CBN) implemented measures to stabilize the forex market.
The introduction of the Nigerian Foreign Exchange Code and the Electronic Foreign Exchange Matching System (EFEMS) has enhanced transparency and reduced speculative activities. Forex analyst Michael Nwadike warned that dollar savers could incur further losses as the naira continues to rally, urging authorities to adopt pro-market strategies to attract long-term capital and stabilize the economy.
Experts Call for Economic Reforms
Retired CBN Director Prof. Jonathan Aremu emphasized the need for increased production to sustain the naira’s gains, urging the apex bank to focus on boosting productive activities. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria, commended the CBN’s efforts to manage forex demand and supply challenges, noting that recent policies have increased foreign exchange inflows.
CBN Governor Olayemi Cardoso highlighted the benefits of the exchange rate unification policy, which has doubled monthly remittances from $300 million in 2023 to nearly $600 million in August 2024. He stressed the importance of integrating the Nigerian diaspora into the financial system and developing products to support savings and investments in Nigeria.
Inflation and Economic Stability
Despite these positive developments, Nigeria’s inflation rate remains a concern. The rebasing of the Consumer Price Index to 2024 has lowered inflation figures to 24.48% in January, but experts warn that sustained efforts are needed to achieve price stability. The launch of the Dangote Refinery is expected to reduce energy price volatility by expanding local refining capacity, thereby lowering production and transportation costs.
As the Monetary Policy Committee (MPC) maintains its benchmark interest rate at 27.50%, the focus remains on taming inflation and sustaining exchange rate stability. With global economic uncertainties and the declining role of the US dollar in central bank reserves, Nigeria’s economic outlook hinges on implementing robust reforms and fostering a stable investment climate.
The dual challenges of declining oil prices and forex market volatility underscore the fragility of Nigeria’s economic recovery. While the naira’s rally offers a glimmer of hope, achieving the Budget 2025 revenue target will require strategic interventions to boost oil production, attract foreign investment, and stabilize the economy. As experts call for pro-market reforms, the government’s ability to navigate these complexities will determine the nation’s fiscal trajectory in the coming year.
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