Global crude oil prices have bounced back above $65 per barrel after a steep plunge earlier this month, offering a sliver of hope to oil-dependent economies like Nigeria.
The rebound, though modest, comes as a relief following weeks of volatility triggered by resurgent global trade tensions and fears that the U.S. economy might slip into a recession under President Donald Trump’s renewed hardline stance on tariffs.
Brent crude—the international benchmark and Nigeria’s flagship blends such as Bonny Light are currently trading above $65, recovering over 10% since April 9, when prices had crashed to their lowest point this year. Though still below the $70 threshold, the price movement signals the potential for further recovery if market conditions stabilize.
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However, for Nigeria, this rebound, while welcome, remains insufficient to meet its fiscal targets. The 2025 national budget, passed in December, is based on a benchmark oil price of $75 per barrel. As of April 15, oil prices are still roughly $10 short of that mark, raising concerns about a potential revenue shortfall for the government.
Trade Fears and Currency Decline Fuel Price Slump
The recent slump in oil prices, which saw Brent drop from a high of $82.03 in January to below $65 in early April, was largely triggered by escalating fears of a global trade war. President Trump’s return to the White House brought with it an aggressive push for reciprocal tariffs, unsettling investors and reigniting concerns that his economic strategy could further destabilize international markets.
The renewed trade tensions didn’t just weigh on commodities—they also dragged down the U.S. dollar. The greenback has shed over 8% of its value since the start of the year, a development analysts say reflects waning confidence in Trump’s economic stewardship and growing unease about the country’s fiscal direction. Typically, a weaker dollar drives oil prices higher, but that pattern has begun to shift.
According to analysts at J.P. Morgan, the longstanding inverse relationship between the dollar and crude oil is beginning to break down. As the United States has grown into a dominant oil exporter, fluctuations in crude markets now exert more influence on the dollar, creating a more synchronized relationship between the two. That’s more common among large exporters like Russia or Saudi Arabia—but it’s a relatively new territory for the U.S.
Data from the U.S. Energy Information Administration (EIA) show that America’s crude oil exports have hit record highs, averaging over 4.1 million barrels per day in 2024. This represents a slight increase from 2023, which itself saw a 14% jump in exports after a 21% rise in 2022. The export surge has reshaped global oil flows, with Europe absorbing nearly half of U.S. shipments.
The Netherlands continues to lead among importers, receiving an average of 825,000 barrels daily, up 32% from the previous year. Asia and Oceania follow, with North and South America trailing in third place.
This export surge has helped cushion the impact of domestic demand fluctuations in the U.S. but has also tied the dollar’s fate more tightly to oil prices. When oil crashes, the dollar often follows, amplifying the effects across global markets.
The Impact on Nigeria’s Fragile Budget
For Nigeria, the world’s sixth-largest oil exporter, oil remains the backbone of government revenue and foreign exchange earnings. While non-oil revenue sources have grown slightly in recent years, they remain insufficient to offset a significant dip in oil receipts.
The 2025 budget, set at N49.74 trillion, was predicated on an oil production target of 1.78 million barrels per day and a benchmark price of $75 per barrel. With current prices hovering around $65–$67, the government faces a potential funding gap if the recovery stalls or reverses. This shortfall could affect critical public expenditure, debt servicing, and capital projects—especially as Nigeria grapples with rising inflation, high debt servicing costs, and a weakening naira.
Although prices have rebounded from the low in early April, the difference between the current market and the budget benchmark has forced economic managers in Abuja to quietly revise revenue expectations. Analysts warn that if crude fails to climb back toward $75 soon, the country may be compelled to ramp up borrowing, further straining its already precarious debt profile.
Volatility Still Looms
Despite the recent bounce, oil markets remain volatile. Prices have declined more than 9% year-to-date, having opened 2025 at $74.93 before peaking briefly in mid-January. February and March brought steep declines as tariff-related anxieties gripped investors. A short-lived rally in late March pushed Brent back toward $74, but the commodity tumbled again in April, shedding nearly 16% before the current rebound.
Market watchers say the trajectory remains uncertain. If Trump intensifies his trade offensive, or if global demand softens, oil could slump again. However, tighter OPEC+ supply, escalating tensions in the Middle East, or a weakening dollar could push prices higher in the months ahead.
For Nigeria, the recent rally, though modest, offers some hope. Even a partial recovery helps shore up foreign reserves, support the naira, and sustain dollar inflows from crude exports. But the country needs oil to not just recover, but remain stable above its budget benchmark to maintain fiscal balance.