Nigeria’s premium oil grade, Bonny Light, dropped by 5.09% to $59.62 per barrel on Wednesday 9 April, signalling significant challenges for the nation’s economy. The decline comes amidst global trade tensions between the United States and China, alongside OPEC's decision to increase oil production, all of which pose a significant risk to Nigeria’s economic stability.

What Triggered the Price Fall?

The current oil price downturn is driven by two major factors:

• US-China Tariff War: On April 2, President Donald Trump imposed sweeping global tariffs, including a 14% tariff on Nigerian exports to the US. The increase in tariffs led to a cumulative 54% tariff on China. Since then, the two nations have been engaged in a retaliatory tariff war: April 2: The U.S. raises tariffs by 34%, resulting in a cumulative 54% tariff on Chinese imports. April 4: China announces a 34% tariff on all U.S. goods, effective April 10. April 9: The U.S. escalates tariffs to 125% on Chinese goods; the White House later clarifies that some tariffs reach 145%. April 11: China increases tariffs on U.S. goods from 84% to 125%, effectiveApril 12. This tit-for-tat escalation has sparked fears of a global economic recession, further exacerbating market instability.

• OPEC+ Production Increase: On April 3, OPEC and its allies decided to raise oil production by 411,000 barrels per day (bpd) starting in May 2025. The increase in supply in an already saturated market puts further downward pressure on prices.

On Wednesday 9 April, Brent crude fell to $59.62 per barrel, and US West Texas Intermediate dropped to $56.28 per barrel—levels not seen since February 2021 during the height of the COVID-19 pandemic when global lockdowns severely reduced energy demand. While not as catastrophic as the 2020 crash, the sharp fall in prices reflects the same market volatility that rattled oil-dependent economies like Nigeria during the pandemic.

Goldman Sachs has adjusted its oil price forecast, predicting Brent will average $58 per barrel in 2026. Given recession risks, decreasing demand, and OPEC+ production increases, the bank has halved its oil demand growth forecast for the year to just 300,000 bpd.

Impact on Nigeria’s Economy

The slump in oil prices is particularly troubling for Nigeria, as the 2025 budget was based on a $75 per barrel benchmark and a target of 2.06 million bpd in oil production. However, actual production in February 2025 fell short at 1.67 million bpd, posing significant risks to government revenue targets and exchange rate stability, according to the Centre for the Promotion of Private Enterprise (CPPE).

There is a silver lining for consumers. Falling depot prices have led to a drop in petrol prices, offering some relief to Nigerians grappling with high fuel costs since the removal of fuel subsidies. Recent price changes include:

• Mainland & A.Y.M: N918/litre (down from N920)

• Eterna: N897/litre (down from N900)

• Soroman: N915/litre (down from N916)

Additionally, the continuation of the Federal Government’s Crude and Refined Product Sales in Naira initiative is expected to reduce petrol prices further.. While recent fluctuations in crude oil prices have been a factor, high refining costs due to the importation of crude in dollars have kept prices elevated. For example, Dangote Refinery, with a capacity of 650,000 bpd, recently raised its petrol price to N865/litre from N815/litre after the suspension of the Naira-for-crude deal. With the deal’s reinstatement, which facilitates crude and refined product transactions in Naira, oil marketers—such as MRS—are now buying petrol from the refinery, signalling potential future price reductions.

Central Bank Intervention to Stabilise the Market

The Central Bank of Nigeria (CBN) intervened last Friday by providing $197.71 million through sales to authorised dealers. This action aims to ensure adequate liquidity and support the market, continuing a pattern of interventions that have helped stabilise the naira in recent months. CBN officials attribute recent shifts in the foreign exchange market to broader global macroeconomic changes, including the tariff war, affecting several emerging market economies, akin to the volatility witnessed during previous global economic disruptions. This recent volatility is particularly related to the ongoing tariff war.

Looking Ahead

The current oil price downturn challenges Nigeria's oil-dependent economy significantly. With crude oil generating about 80% of government revenues and 95% of foreign exchange earnings, prolonged price weakness will exacerbate fiscal pressures, as witnessed during previous oil crashes in 2014-2016 and 2020.

The crisis underscores the urgent need for economic diversification, a lesson Nigeria has repeatedly faced during each oil price cycle. Nigeria must develop non-oil sectors and reduce its vulnerability to oil price shocks to avoid repeating historical patterns of boom and bust.

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