• Nigeria suffers N2.5tr unrealised oil revenue in Q1
• Turmoil places Nigeria $11 behind budget benchmark price
• Experts warn of more borrowing, higher inflation
• Four lead revenue agencies remit N31tr to FAAC in 12 months
Nigeria risks slipping deeper into a fiscal crisis as a combination of challenges, including falling crude oil prices, tariff war, significant oil production losses, and stalled tax reforms, threaten the country’s promised improved earnings.
Over three months into the year, the country is nothing close to hitting the oil production peg (2.06 million barrels per day) even as the new leadership of the Nigerian National Petroleum Company Limited (NNPCL) may need time to work through Mele Kyari’s blueprint and stress tests template for ramping up oil production.
Fear of a global recession triggered by the global uncertainty is also fueling fear over the Federal Government’s ability to see through its ambitious fiscal plan.
Already, those familiar with the public sector said the new leadership could take as much as six months before it begins to chart its cause on its related issues such as oil theft, high production cost and idle assets, which would necessarily need to be resolved to increase the production level and earnings.
The domestic impasse is worsened by rising global uncertainty that is turbocharged by a tariff war, which has elevated the bearish trend of the international crude market.
In the past week, the market has been on the edge, plunging to a little above $64 per barrel – $11 short of the average price when Nigeria started the budgeting process late last year. The current price is also about $11 below the budget benchmark, which suggests the budget funding support is already strained.
Amidst the global turmoil, Godman Sachs, on Sunday, marked its Brent price forecast for 2026 to $58. It was the second time in three days the institution would cut its projection, citing heightened fears of recession and general uncertainty.
Other analysts are more pessimistic about the future of the oil market, suggesting that prices could drop to near $50 per barrel – a projection that could rattle the economies of countries with extremely high production costs.
Should crude fall to about $50, which is President Donald Trump’s comfort price, Nigeria would be at a $25 per dollar short of meeting its target. A $50 oil price will also see the country realising $10 net from a litre, except the new NNPCL magically brings down the cost of production below it $40 current average.
With the shortfall in production, the fiscal deficit could soar far above the N13 trillion projection and trigger a more aggressive borrowing plan by President Bola Tinubu’s administration, which is desperate to raise its performance rating ahead of the 2027 election.
Recourse to tax revenue may not save the day. The build-up to the take-off of a new tax regime that is expected to boost tax earnings is at a snail’s speed.
The House of Representatives, for instance, has rejected key components of the tax reform bills (including a staggered increase of value-added tax (VAT) and inheritance tax) that would significantly increase non-oil earnings.
The Federal Executive Council (FEC) had proposed a budget of N55 trillion for 2025 as the government hopes on a 2.06 million barrels per day (mbpd) oil production and a price tag of $75 per barrel to raise over N40 trillion in revenue – thrice its best performance.
In the first quarter of 2025 alone, Nigeria recorded over $3.6 billion (N5.4 trillion) in unrealised oil production revenue, a development that may have weakened the country’s fiscal position.
With the cost of production ($40 per barrel on average), accounting for 54 per cent of the revenue, the net revenue loss to the country is estimated at around N2.5 trillion. If the trend continues at the same pace, Nigeria may lose over N10 trillion to unreleased revenue, strictly on production shortfall consideration.
Beyond impacting government revenue, the production and price slump may also disrupt crude allocations for crude-backed loans and constrain crude supply to local refineries. This could pose challenges for Dangote Refinery, which may be forced to reconsider its crude imports from the U.S. due to the ongoing tariff crisis.
S&P Global had disclosed that Dangote sourced over 12 million barrels from the international market in the first three months of the year to power its operations.
Nigeria’s crude oil production, excluding condensate, rose to 1.54 million bpd in January 2025, marking a 3.6 per increase from December 2024 and the highest level since March 2021. The output briefly exceeded OPEC’s quota of 1.5 mbpd, but the gains were short-lived.
In February 2025, average daily production dropped to 1.46 mbpd, the lowest in three months. By March, a Bloomberg survey indicated that output stood at 1.5 mbpd, 25 per cent below the 2.06 mbpd target.
The production shortfalls have resulted in huge revenue losses. In January, Nigeria was unable to produce 500,000 barrels per day, which translated to 15.5 million barrels lost in the month. With oil prices averaging $73 per barrel, the country lost N1.13 billion in unrealised revenue. This did not include the $2 per barrel shortfall in price.
In February, when oil prices averaged $75 per barrel, Nigeria failed to meet its budgeted production by 600,000 bpd, leading to 16.8 million barrels lost and an unrealised revenue shortfall of $1.26 billion.
In March, with oil prices averaging $74 per barrel, the country struggled to produce 15.5 million barrels, leading to about $1.03 billion in revenue loss. This also discounts the loss to an unrealised price target.
The financial strain worsened last week as Brent crude prices plummeted to $65 per barrel, marking a $10 per barrel loss compared to the price level considered when the government created its N55 trillion budget. The sharp decline raises concerns about the government’s ability to finance critical projects and maintain foreign exchange reserves.
In the last 10 years, while the country has been unable to produce its crude oil targets stated in the budget, the gap in 2025 is almost of double of the previous year when production target was 1.7 million bpd and actual output was about 1.4 million bpd leaving the deficit in the past years at an average of 300,000 bpd.
Losing on the price side due to the tariff war could reduce cost of petroleum products, about 50 per cent of which is imported from Europe, but it would make things difficult for upstream operators who may need reasonable price to support final investment decisions (FIDs) due to high cost of oil production which hovers $40 per barrel.
At $65 to a barrel, the country and oil operators would only be making an average of $25 from every barrel.
A global energy research body, Wood Mackenzie, had earlier said that crude oil prices would average $73 per barrel in 2025, considering various geopolitical and economic factors, including potential peace talks between Russia and the U.S. regarding the Ukraine conflict and ongoing tariffs and sanctions against Iran.
In the oil sector, the NLNG where government should have gotten over N700 billion dividend has struggled to operate optimally with vandalism crippling gas availability, which also relies largely on improved oil production.
It was reported that major revenue agencies, including the NNPCL, FIRS and the NCS, may need to magically increase revenue by over 200 per cent for the 2025 budget to scale past damage of poor revenue projections witnessed in the last two decades.
This year’s revenue target is N9 trillion higher than the total amount realised from four lead revenue agencies – NNPCL, the Nigeria Customs Service (NCS), the Federal Inland Revenue Service (FIRS) and Nigerian Upstream Petroleum Regulatory Commission (NUPRC) formally Department of Petroleum Resources (DPR) for disbursement among the three tiers of government last year.
According to a document exclusively obtained, the four agencies that the Federal Government is counting on to fund the equity component of its budget brought a total of N31.06 trillion into the Federal Account Allocation Committee (FAAC) last year.
FIRS, the lead contributor, remitted N19.78 trillion or 63.7 per cent of the total sum while the NUPRC came second with N7.22 trillion or 23.25 per cent. Customs remitted N3.36 trillion while NNPCL came last with 2.28 per cent (N 707.7 billion).
Apart from the windfalls from the lead agencies, the Federal Government’s other sources of equity funding are other government-owned enterprises (GOEs), where it earns dividends. Some of the GOEs’ operations and profitability have been threatened by poor economic performance and macro headwinds.
President of the Nigerian Economic Society (NES), Prof. Adeola Adenikinju, highlighted the widening gap between projected and actual oil output, noting that below $70 oil price is a crisis.
“The current global economic turmoil, including the trade war initiated by the U.S., threatens globalisation and could force policymakers to reassess the budget,” Adenikinju said.
He cautioned that if the economic disruptions persist, Nigeria’s budget framework may become impractical, impacting investment flows, commodity prices, inflation and overall financial stability.
The economist urged the government to take swift action, including cutting wasteful expenditure and adjusting fiscal plans to reflect the new realities.
“Waiting too long could worsen the economic downturn. Proactive adjustments are necessary to navigate the rest of the fiscal year effectively,” he added.
Echoing these concerns, former president of the Chartered Institute of Bankers of Nigeria and an economics professor at Babcock University, Segun Ajibola, described Nigeria’s overreliance on oil as a major vulnerability.
“The Nigerian economy remains largely monolithic, with government revenue, foreign exchange earnings, and budget performance all tied to developments in the global oil market,” Ajibola said.
He pointed out that the 2025 fiscal budget, based on an oil output of 2.02 million barrels per day (mbd) and a crude price benchmark of $75 per barrel, is already under pressure due to falling output and declining prices.
“The immediate hope is that NNPCL will ramp up production. But the long-term solution lies in economic diversification,” Ajibola added, stressing that sectors like agriculture, solid minerals, manufacturing and tourism must be prioritised to stabilise revenue and foreign exchange earnings.
An energy lawyer and former Shell manager, Ameh Madaki, took a more critical stance, arguing that Nigeria’s budgeting process is deeply flawed.
“This government is already used to excessive borrowing, so they will not hesitate to borrow to cover any shortfalls in the 2025 budget, which is over-bloated anyway,” Madaki said.
He called for a drastic budget reduction to realistic levels, arguing that the current system is wasteful and lacks fiscal discipline.
“There is zero budgetary discipline in Nigeria, and the budgets have no real impact on the lives of citizens. The debates around oil output and benchmark prices are based on nothing empirical. Nigeria needs to stop treating budgeting like a jamboree and overhaul its fraudulent and opaque system,” he added.
