The U.S. oil market staggered on Monday as West Texas Intermediate (WTI) briefly plunged below $60 per barrel, a psychologically and economically critical threshold for American producers.
It marked the first time in four years, since the peak of the pandemic in April 2021 that prices slipped this low. Though the market clawed back some losses to settle at $60.70, the damage to sentiment was done. Energy analysts, traders, and producers are now bracing for further volatility, driven largely by a mix of tariff fears, global demand concerns, and an OPEC move that blindsided many.
But the impact of this oil slump isn’t limited to American shale country. Thousands of miles away, in Nigeria, the news has triggered renewed anxiety over the country’s already fragile fiscal outlook. For Africa’s largest oil producer, the drop in global oil prices is more than a market movement – it is a direct threat to its 2025 national budget and economic stability.
Two-Front Crisis for Nigeria
Nigeria faces a dangerous squeeze on two major fronts. First is the direct threat to its 2025 budget benchmark, set optimistically at $75 per barrel. With Brent Crude tumbling to around $65, the gap between expectations and reality has thrown a wrench into federal projections. The country had already penciled in a staggering N14 trillion budget deficit at the $75 price point. Now, with crude dropping $10 below that mark, the shortfall may expand beyond what even the boldest budget drafters anticipated.
“Nigeria benchmark oil price in the 2025 budget is $75. Brent Crude today is $65,” economist Kalu Aja said. “The FGN proposed $70, Akpabio and the strong men took it to $75 a barrel.”
To make matters worse, the oil output assumptions are no longer holding. Nigeria’s oil production target for the budget was 2.06 million barrels per day (mbpd). But in reality, the country is producing less than 1.5mbpd—a shortfall of over 500,000 barrels per day that severely undermines revenue expectations.
“56% of the budget revenues is expected from the export of crude oil and gas. The budget deficit at the $75 per barrel price was a humongous N13 trillion, now it will widen,” Aja warned. “A responsible manager of resources will cut down spending to create a fiscal buffer. Not a DOGE-type waste reduction, but a complete austerity budget. Nigeria is spending like she has a rich uncle that can bail her out.”
Forward Sales, FX Crisis Looming
The second threat lies in Nigeria’s multi-billion dollar forward oil sale agreements, many of which are pegged to the same lofty $75 benchmark. If Brent continues its slide, some traders expect it to test lows not seen since the early pandemic days, it could push Nigeria into difficult conversations with off-takers who signed deals based on the earlier pricing.
“Scenes when Brent crude drops below the strike price for so many of the existing forward sale agreements,” said energy analyst Kelvin Emmanuel. “I warned in January that oil price benchmark at $75 is wishful thinking. There were no economists in the room when the budget estimates were made, apparently.”
Emmanuel added that anything below $60 for Brent “will be serious trouble for the Naira.” A drop of that magnitude would deal a severe blow to Nigeria’s foreign exchange earnings, triggering new pressure on an already weakening local currency. “Because how do you even manage your cash cascade?” he asked.
Widening Deficit, Mounting Debt
Nigeria is already juggling ballooning debt servicing obligations and a rising interest burden on its domestic and external borrowings. The Finance Ministry has insisted that oil revenue, coupled with limited tax reform and external funding, would close the gap. But those assumptions were rooted in a higher oil price and relatively stable output.
With both falling short, the government may be forced to seek more borrowing, possibly under worse terms, or resort to printing more naira, a move that could further fuel inflation.
Economists and analysts say this downturn offers a clear warning: Nigeria’s heavy reliance on a single commodity for its budget and forex inflow is a long-running vulnerability that must be addressed.
“If anything, it’s a fiscal warning to Nigeria,” Aja said. “This over-dependence on only one FX source has risks. Get serious about diversifying FX revenue flows.”
U.S. Producers Also Reeling
Meanwhile, U.S. shale oil producers aren’t cheering either. The price of $60 per barrel is widely considered the level at which operators start cutting back activity. Drillers may continue operating wells, but they’re likely to delay bringing new wells online unless prices recover.
“At $60, the U.S. is going to slow down. There’s no question,” said Marshall Adkins, head of energy at Raymond James. “Production is going to go down. It just won’t happen overnight.”
For American producers, anything below $50 would be catastrophic. But even the current level is far from sustainable. Rystad Energy pegs the average breakeven cost for U.S. shale at around $62 per barrel.
“With Lower 48 production growth already unlikely outside the Permian Basin, a downshift in the country’s most prolific oil basin would decelerate the rate of production growth in 2025,” said Rystad’s Matthew Bernstein.
Tariffs, Trade, and Fuel Price Swings
Driving the panic is renewed concern over the Trump administration’s escalating tariff push and its potential impact on global economic growth. OPEC’s move to unexpectedly raise output last week only worsened the oversupply fears. While natural gas remains relatively stable, analysts warn that a prolonged downturn in oil could hit refinery economics and fuel retail prices.
“There are plenty of drops to come,” said Patrick DeHaan, head of petroleum analysis at GasBuddy. “Tariffs are really the biggest driver for fuel prices right now.”
Gasoline prices, which typically rise in April during refinery maintenance, could instead drop below $3 per gallon nationwide by May if crude continues falling.
President Trump, reacting to the oil slump, struck a bullish tone: “Oil prices are down, interest rates are down… food prices are down, there is NO INFLATION,” he posted on Truth Social.
But analysts say lower oil prices aren’t necessarily a win for everyone.
“Trump wants cheap gasoline,” DeHaan said. “But cheap gasoline usually means the economy is under pressure.”
For Nigeria, the oil crash has pulled the rug from under key assumptions in the country’s 2025 budget. And unless there’s a sharp rebound in prices or a drastic rethink in spending, Nigeria could be staring at a larger deficit, more borrowing, and renewed currency volatility. Goldman Sachs analysts wrote in a Monday note that oil prices could slump to under $40 a barrel in a worst-case scenario, referring to Brent oil, the international benchmark.
