Nigeria may be inching toward another round of currency devaluation as global crude oil prices, rattled by a fresh round of tariff salvos from U.S. President Donald Trump, threaten the delicate foundation of the country’s 2025 budget.
The price of Brent crude, the international benchmark for oil, is currently trading at $66.62 per barrel, nearly $10 below the $75 per barrel benchmark upon which the Nigerian government based its fiscal projections.
Though Nigeria’s Bonny Light crude has hovered slightly higher, around $78 per barrel, analysts say the broader oil price volatility triggered by the ongoing tariff war poses serious risks to Nigeria’s already fragile economy, particularly given the country’s continued reliance on oil exports to fund its budget and defend its currency.
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The warning came into sharper focus after Bloomberg quoted Andrew Matheny, an economist with Goldman Sachs Group Inc., who said the “natural policy response” to weaker oil prices for oil-dependent economies like Nigeria is a devaluation of the local currency. His remarks follow mounting concerns that Nigeria’s budget assumptions for 2025—particularly its oil production target of 2 million barrels per day—are overly optimistic.
As of March 2025, Nigeria was producing roughly 1.4 million barrels per day, down nine percent from January and well below the government’s target. With lower output and weaker prices, revenue projections are already under strain.
Oil: The Lifeline Slipping Away
Oil remains Nigeria’s most critical economic pillar, accounting for more than 90 percent of its foreign exchange earnings and a significant chunk of its GDP. Any disruption in global oil markets typically sets off alarms in Abuja. So when Brent crude slipped below the budget threshold, it triggered immediate concerns of a funding gap, reduced reserves, and an inevitable weakening of the naira.
“The natural policy response to lower oil prices is a depreciation of the naira, as this boosts oil revenues in naira terms,” Matheny told Bloomberg. “Given that the oil production assumption in the budget is already optimistic, risks are, in our view, tilted toward fiscal slippage.”
In simpler terms, if crude oil prices continue to trend below expectations while production volumes also fall short, the government could be forced to print more money, borrow beyond capacity, or allow the naira to slide to make up for revenue losses—all of which come with their own consequences.
Already, the local currency has come under fresh pressure. The naira fell by about 5 percent this month, with exchange rates hitting N1,620 per dollar in the parallel market as of Wednesday. Though authorities continue to tout market reforms and a managed float regime, the fundamentals remain heavily tied to oil receipts.
Cracks in the Reserve Wall
The impact of the price crash is not just theoretical. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) confirmed this week that the country’s economic outlook is being squeezed by falling crude prices. Speaking in Abuja, the agency’s CEO, Farouk Ahmed, said that a $10 dip in oil prices could significantly erode Nigeria’s national reserves and further weaken the naira.
“If we lose the price of crude by $10, you can see the negative impact on our economy, on our national reserves, and the strength of our naira,” he warned.
Though there was some relief this week after crude prices staged a mild rebound on the back of speculation that President Trump might soften his tariff stance, especially on semiconductors and smartphones, analysts warn that the rebound is fragile. Oil prices remain far below the levels recorded just four months ago, and global producers like Nigeria, Venezuela, Colombia, and Angola remain vulnerable.
Tariff War Fallout and Budget Pressures
Trump’s renewed tariff offensive has dragged several exporting economies into uncertain waters. While his administration has argued that the measures are designed to protect American manufacturers, they have already ignited retaliatory moves from key trade partners, stifling global trade flows and triggering a slowdown in commodity demand.
The resulting price squeeze has left oil exporters with hard choices. For Nigeria, which only recently exited a long and painful currency crisis, the prospect of another round of naira devaluation will be politically sensitive and economically damaging. A weaker currency would raise the cost of imports, push inflation further into double digits, and hurt consumer purchasing power—especially for a population already reeling under high food and fuel prices.
To close the funding gap, the federal government may resort to borrowing or accelerating the sale of state assets, but such moves could invite criticism over transparency and long-term economic planning.
Forex Market Sees Temporary Relief
Despite the bleak outlook, some signs of resilience remain. Participants in the forex market reported increased inflows through the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, which recorded $847 million in the past week—up from $795 million the previous week. These inflows have temporarily cushioned the naira from further decline.
The uptick in dollar liquidity is partly due to crude oil sales to nearby refineries, paid in naira, which helped ease demand pressure. However, experts warn this is a short-term patch, not a lasting fix.