Nigeria’s economy is under pressure as fluctuating crude oil prices threaten the federal government’s plan to generate N36.35 trillion in revenue for 2025.
A recent report warns that global oil price instability, combined with geopolitical tensions, could impact Nigeria’s earnings. The report, published by PricewaterhouseCoopers (PwC), states that Nigeria must increase crude oil production by 37% to meet its revenue goals.
Nigeria’s Oil Production Targets
PwC’s 2025 Nigeria Budget and Economic Outlook notes that if Nigeria meets its oil production target, the country can maintain a trade surplus. However, achieving this depends on global oil prices, as crude oil remains Nigeria’s main export.
In December 2024, Nigeria met its OPEC quota by producing 1.5 million barrels per day (bpd), excluding an additional 200,000 bpd in condensate. The government aims to increase production to 2.06 million bpd this year, with an assumed oil price of $75 per barrel.
Last year, the global average oil price was $78.05 per barrel. PwC explains that sustaining high prices depends on factors like increased oil demand from China, OPEC supply restrictions, and U.S. shale production. To meet its target, Nigeria must improve security, attract investments, and strengthen its regulatory policies. Key investments by Shell and TotalEnergies in deepwater and upstream oil projects are expected to help boost output.
Impact on the Naira and Trade Balance
The federal government projects an exchange rate of N1,500 per dollar in 2025. PwC states that for Nigeria to maintain a positive balance of payments, the country must boost diaspora remittances and attract foreign investors.
Government revenue is expected to rise in 2025 due to ongoing reforms, but PwC warns that reaching the N36.35 trillion target will be challenging. Revenue allocation from the Federation Account Allocation Committee (FAAC) will depend on oil prices, exchange rate stability, and tax collection.
Nigeria’s trade surplus grew significantly in 2024, rising by 511% to N6.95 trillion in Q2, up from N133.2 billion in Q2 2023. This was largely driven by a 190.9% increase in crude oil exports, which reached N14.6 trillion. PwC predicts that this trade surplus will continue into 2025, provided oil production and prices remain strong.
Heavy Dependence on Oil Exports
Oil exports dominated Nigeria’s trade in the first half of 2024, generating N34.87 trillion—nearly 14 times more than non-oil exports. Compared to H1 2023, oil exports grew by 97%, while non-oil exports increased by only 37.3%.
PwC suggests that Nigeria must take advantage of the weaker naira under the floating exchange rate to boost non-oil exports. Encouraging value-added production, export incentives, and better logistics could reduce the country’s reliance on crude oil and protect it from external shocks.
Challenges with Revenue and Debt
Although Nigeria has improved revenue collection through higher taxes and oil output, the country is unlikely to meet the N36.35 trillion target due to limited oil revenue and a low tax base. PwC emphasises the need for effective tax reforms to increase non-oil revenue.
The report also raises concerns about Nigeria’s rising debt. As of October 2024, Nigeria’s debt-to-GDP ratio stood at 50.7%, exceeding the 40% threshold. The proposed N13.8 trillion fiscal deficit (3.87% of GDP) for 2025 also surpasses the 3% limit set by the 2007 Fiscal Responsibility Act.
PwC warns that Nigeria’s increasing bilateral and multilateral debt could lead to financial difficulties if not matched by strong economic growth and revenue generation. The country must carefully manage its borrowing to ensure long-term financial stability.
Nigeria’s revenue target for 2025 is ambitious, but it faces several challenges, including unstable oil prices, security issues, and low non-oil earnings. While the government’s reforms and foreign investments could help improve the situation, meeting the N36.35 trillion target will require significant economic and policy adjustments.
