Goldman Sachs Warns Oil Could Sink Below $40 — Nigeria Faces Renewed Budget & Economic Crisis

The prospect of global oil prices tumbling to below $40 per barrel has triggered alarm far beyond Wall Street, with fresh fears mounting in Nigeria over the fate of its fragile economy.

In a Monday note that underscores the vulnerability of oil-dependent nations, analysts at Goldman Sachs warned that Brent crude — the international benchmark, could fall under $40 by late 2026 in a worst-case scenario marked by a global slowdown and the collapse of OPEC+ production cuts.

For Nigeria, this is more than a market forecast. It’s a direct threat to the foundation of its economic planning and a signal that the government’s 2025 budget, already under pressure, could unravel.

Goldman Sachs’s current base-case outlook pegs Brent at $55 per barrel by December 2026. But the analysts outlined a darker possibility: should there be a full unwinding of OPEC+ production restraints coupled with a global recession, prices could dive to levels not seen since the COVID-19-triggered crash of 2020. A slump of that magnitude would deal a crushing blow to Nigeria’s finances.

Nigeria’s Budget Math Doesn’t Add Up Anymore

At the center of the looming crisis is the Nigerian government’s 2025 fiscal blueprint, which is built around a $75 per barrel oil benchmark. The country, still heavily reliant on crude oil exports for revenue, has projected an N14 trillion oil revenue target for 2025 — a figure that becomes a fantasy if Brent prices slide anywhere near the $40 mark.

Nigeria typically earns over 70% of its foreign exchange and about half of its government revenue from oil. With production volumes struggling to exceed 1.3 million barrels per day, well below OPEC quotas, the only way Nigeria has managed to keep its books somewhat balanced is through the elevated oil prices seen in recent years.

A price collapse now would leave gaping holes in its revenue projections and force another round of emergency borrowing or austerity. Already, the country is spending more than 60% of its revenue on debt servicing, with limited fiscal space to respond to new shocks.

Economists warn that such a scenario would widen Nigeria’s fiscal deficit significantly. Last year, the National Assembly approved the extension of the 2024 Budget’s lifespan to June 2025, a decision aimed at ensuring the continuity of fiscal operations and the uninterrupted execution of critical government projects. This situation is expected to repeat itself if oil prices linger below Nigeria’s budget benchmark in 2025.

OPEC+ Uncertainty and Trump’s Tariffs Compound the Threat

Goldman Sachs’s bleak forecast comes on the back of twin developments that have rattled the global oil market. The first is President Donald Trump’s renewed trade offensive, including fresh tariffs that have shaken investor confidence and triggered fears of a slowdown in global economic activity. The second is a surprise decision by OPEC+ to increase output, despite earlier commitments to maintain production cuts that helped stabilize prices in previous months.

Those two shocks sent oil prices plunging more than 7% last Thursday, with Brent and WTI extending declines to four-year lows by Monday.

“Increased production combined with growing concerns about global economic growth has shifted market psychology from scarcity to surplus,” wrote Angie Gildea, KPMG’s U.S. energy leader.

That shift is toxic for Nigeria. The country needs high oil prices not just to balance its books, but to attract foreign investors and stabilize its volatile currency. The Central Bank of Nigeria (CBN), which recently floated the naira in an attempt to unify exchange rates, has been hoping for increased oil receipts to shore up reserves. That lifeline could now be slipping away.

U.S. Shale Producers Also Under Pressure

Ironically, while Nigeria and other resource-dependent economies brace for impact, U.S. oil producers are hardly in better shape. With breakeven costs above $62 per barrel for many shale operators, prices around $60 — let alone $40, would force a wave of production cuts, capital expenditure reductions, and dividend suspensions.

“The corporate reality for public players means that already modest growth could be at risk,” said Matthew Bernstein of Rystad Energy. He added that U.S. producers may soon have to choose between profitability and output.

Trump’s energy agenda, which once touted “drill, baby, drill” as a pathway to energy dominance, is now colliding with the reality of his own tariff policies. Rising costs, including those from tariffs on imported steel used in oil well construction, are eating into margins and worsening the uncertainty that investors hate.

For Nigeria, however, the stakes are existential. The country entered multiple recessions over the last decade due to oil price volatility and has struggled to diversify its economy despite repeated promises. President Bola Tinubu’s administration is now under pressure to avoid repeating the mistakes of the past.

Analysts say the government must urgently revise its fiscal assumptions, explore alternative revenue sources, and reduce its dependence on oil exports. But that’s easier said than done. Non-oil tax collection remains abysmally low, and previous efforts to widen the tax net have met stiff resistance from a population already grappling with inflation, unemployment, and rising fuel costs.

If Brent does slide to $40, the federal budget will need drastic revisions. Subnational governments that rely on monthly allocations from the Federation Account could face cash crunches, public sector salaries may be delayed, and capital projects could be stalled across the board.

In the end, the only silver lining of Goldman Sachs’s under-$40 forecast could be —– a lower oil price that will result in a cheaper cost of transportation — which many believe would take some financial pressure off the Nigerian people.