Crude oil prices took a hit on Tuesday after the U.S. introduced new trade tariffs, sparking concerns about global economic growth and energy demand.
Brent Crude dropped to $70.5 per barrel, while West Texas Intermediate (WTI) slipped to $67.56. Nigeria’s own crude, Qua Iboe, fell by 1.9% to $74 per barrel, while Brass River also declined to $73 per barrel. The broader benchmark, Brent Crude, was down 1.40%, trading at $73.00.
Why Oil Prices Are Falling
The recent dip in crude oil prices is largely due to fresh U.S. trade policies. U.S. President Donald Trump confirmed that previously delayed tariffs on Canada and Mexico would take effect on March 4.
The new policy adds a 10% tax on energy imports from Canada, along with a 25% tariff on exports from Mexico and Canada. Additionally, the U.S. has slapped an extra 10% tariff on Chinese goods.
These trade restrictions have raised fears of a global trade war, which analysts warn could slow economic growth and reduce demand for crude oil. At the same time, OPEC+ the coalition of oil-producing nations has yet to finalise its plans for April production levels, leaving the market uncertain.
What This Means for Nigeria
For Nigeria, falling oil prices are a big concern. The government based its 2025 budget on an oil price of $75 per barrel and a production target of 2 million barrels per day (mbpd). If prices stay below this level for too long, the country could struggle to meet its revenue targets, leading to more borrowing and financial strain.
Lower oil prices also put pressure on Nigeria’s foreign exchange market. Crude oil sales are the country’s biggest source of U.S. dollars, and any dip in revenue can weaken the naira.
In February, the naira appreciated in the parallel market, strengthening from ₦1,600/$1 to ₦1,500/$1. However, with oil prices now sliding, the currency has dropped slightly to ₦1,515/$1.
Despite these challenges, the Central Bank of Nigeria (CBN) remains optimistic, pointing to an increase in crude oil production, which rose to 1.54 mbpd in January 2025. The CBN believes higher production levels will help boost Nigeria’s external reserves and stabilise the naira.
What’s Next?
Nigeria’s economy is still heavily dependent on oil, and the latest price drop exposes its vulnerability. With global trade tensions rising and OPEC+ yet to decide on production adjustments, Nigeria is in for a tough ride.
To weather the storm, the government may need to explore alternative revenue sources and find new ways to reduce pressure on the naira in the coming months.
