Low Crude Production, Price Crash May Threaten 2025 Budget, Local Refineries

• Nigeria’s 2025 budget may be threatened as crude oil prices drop below the projected $75 per barrel.

• The country’s average daily crude oil production also declined from 1.7 million barrels per day (mbpd) in January to 1.6 mbpd in February.

• Experts warn that the drop in crude production may hinder crude supply to local refineries, forcing them to import crude oil or shut down.

Nigeria’s 2025 budget may be under threat as crude oil prices have slipped below the projected $75 per barrel.

This decline, coupled with the recent drop in average daily crude oil production, may also affect local refineries like Dangote and others.

It was gathered that benchmark Brent crude stood at $70.73 on Wednesday, while the West Texas Intermediate crude oil was $67.57. Reuters reports that these were the lowest closes for Brent and WTI since December 2024.

The Organisation of Petroleum Exporting Countries and allies like Russia, known as OPEC+, decided to proceed with a planned April oil output increase.

Though the fall in crude prices is good news to an average Nigerian who knows this could lead to cheaper petrol and diesel, it might be giving the Federal Government sleepless nights as it threatens the 2025 budget revenue projections.

In the 2025 budget, the Federal Government puts the price of crude at a minimum of $75 per barrel. But this has not been the case in the past few weeks, though crude prices rose above $80 at a point in January.

The budget is anchored on a benchmark oil price of $75 per barrel and an ambitious production target of 2.06 million barrels per day.

Approximately N19.60tn, up to 56 per cent of the initially projected N34.8tn revenue, is expected to stem from oil, reflecting Nigeria’s heavy reliance on oil for fiscal sustainability.

However, with the fall in crude prices and the fact that the country’s average daily crude and condensates production slipped from 1.7mbpd in January to 1.6mbpd in February, the revenue projection may not be realistic at the moment.

Energy Professor at the Lagos State University, Dayo Ayoade, said the drop in crude production prices will affect the budget adversely, though it will bring down fuel prices.

Ayoade also posited that the government must do its best to achieve two million barrels per day or the refineries will have to resort to imports, which may impact the fuel prices.

READ ALSO: NNPCL Refutes Ending Naira-for-Crude Deal with Dangote Refinery

Professor Adeola Adenikinju of the Department of Economics, University of Ibadan, argued that the decline in crude oil prices is like a two-edged sword. He said it would lower the prices of refined products like PMS.

“But macroeconomically, it’s going to have implications, especially for government revenue, simply because the two critical assumptions, you know, that would change the budget were the oil price and oil volume.”

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, said Nigeria can achieve the production of three million barrels of oil per day in 2025. Lokpobiri said this would include crude and condensates, adding that the country would raise production without having issues with the Organisation of the Petroleum Exporting Countries.

NNPC Suspension of Naira-for-Crude Oil Deal with Dangote, Others, Spells Price Hike

The recent move by the Nigerian National Petroleum Company (NNPC) Limited to suspend the naira-for-crude oil deal with refineries like the Dangote refinery, BUA refinery and other domestic refineries has sparked nationwide controversy.

Most analysts have warned that the suspension could trigger high importation and high fuel costs.

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