Tinubu’s economic plan is under strain as political unrest in Rivers State compounds revenue shortfalls.
Nigeria’s newly approved N54.99trn ($36.6bn) budget is already facing severe strain from two fronts: the global collapse in oil prices, partly fuelled by Donald Trump’s latest tariff offensive, and a worsening production outlook linked to political upheaval in Rivers State.
President Bola Tinubu signed the budget into law on 28 February. Less than two months after it was set, the budget’s assumptions — a daily oil output of 2.06 million barrels (bpd) at a benchmark price of $75 per barrel — are being tested.
Oil price shock
Brent crude, the global price gauge for Nigeria’s crude, dipped from just under $75 at the end of February to under $59 on Wednesday, its lowest level since 2021, before recovering slightly after Trump announced a 90-day pause on new tariffs for all countries except China.
The fall has largely been attributed to the escalating trade war sparked by the tariffs first announced on 2 April, and the surprise move by OPEC+ – the Organisation of the Petroleum Exporting Countries and its allies – to boost supply by 411,000 bpd for May. Economics professor Akpan Ekpo describes the situation as a “collapse in global oil prices” that will drastically reduce government revenues and undermine the new budget.
Nigerian authorities have been counting on a steady uptick in output to offset shortfalls. The country’s production climbed to 1.74 million bpd in January this year, up from 1.44 million bpd in March 2024, according to official data from the upstream petroleum regulator. However, that recovery risks stalling if prices remain subdued and if domestic output is further disrupted by local security issues.
Rivers State turmoil
Even before the global oil market took a hit, Nigeria’s plan to meet its production target had run up against a crisis in Rivers State, home to the nation’s third-largest output share.
On 18 March, Tinubu declared emergency rule there and suspended Governor Siminalayi Fubara, his deputy, and the state parliament. The move came in the wake of two pipeline explosions, which officials linked to a feud between Fubara and the state’s lawmakers loyal to his predecessor, Nyesom Wike, now minister of the Federal Capital Territory.
Retired Chief of Naval Staff Ibok-Ete Ibas has since been appointed as the state’s sole administrator. Critics warn that any protracted unrest in Rivers — an area central to Nigeria’s daily output — could derail the country’s plans to hit its 2.06 million bpd goal.
“If you don’t solve the crisis, you won’t meet that production target,” says Ekpo. “Leaders elected by the people should be brought back; using force in an oil-producing hub is bound to create further complications.”
Debt risks and fiscal strain
With lower-than-expected oil earnings and more pressure on the budget, many economists see a rise in debt as almost inevitable. Nigeria’s public debt soared by 49% to N144.67trn ($94.23bn) last year, and analysts at Lagos-based CSL Research forecast that it could climb to N187.6trn this year. They note that oil output setbacks, combined with falling global prices, could leave the government scrambling to plug revenue holes.
A weaker naira also points to fiscal stress. Having traded at over 1,600 to the dollar on Wednesday — well above the budget rate of N1,400/$ — the local currency is showing few signs of stabilising. CSL Research warns that a sustained slide in both crude prices and production would crimp foreign exchange earnings and reduce external reserves, potentially limiting the Central Bank of Nigeria’s capacity to defend the naira.
Trump’s tariffs and African trade dilemma
Compounding these challenges is the new wave of tariffs imposed by the Trump administration. In a post on X on Monday, the US Trade Representative cited Nigeria’s ban on 25 items, ranging from poultry products to ballpoint pens, as evidence of restrictive practices that hinder American exporters. While Nigeria maintains these restrictions across the board, the US has reacted with a 14% tariff on Nigerian goods, citing a $1.5bn trade deficit with the West African nation.
Trump reversed course on the global tariffs late Wednesday, however, announcing a 90-day pause. As a result, nearly every US trading partner, including Nigeria, faces a 10% tariff until July.
Local experts are concerned about the long-term impact of punitive tariffs. “It is a difficult situation, but this import ban is on all countries, not just the US,” says Muda Yusuf, head of the Centre for the Promotion of Private Enterprise. He says Nigeria could consider lifting some restrictions to secure a special bilateral trade pact, although producers — particularly farmers — fear such concessions may leave them vulnerable to cheaper imports.
Prospects for the way ahead
As Nigeria tries to forge closer economic ties with Washington, it must also grapple with a domestic budget built on a now-fragile oil market. Even though cheaper energy could help mitigate inflation, the slump in crude prices threatens to leave a gaping hole in public finances.
Observers point to the urgent need for cost-cutting in government and a shift away from overreliance on oil.
“This should be a wake-up call,” says Ekpo, who stresses that the authorities must prioritise people-centred spending in education, healthcare, agriculture and infrastructure. Reducing the cost of governance, he argues, is “critical to ensure that limited revenues stretch further”.
Faced with a potential shortfall in oil earnings, ballooning debt, and higher tariffs from the US, Nigeria’s policymakers could be forced to choose between further borrowing and broad fiscal restructuring. The path they choose will determine whether the country can safeguard its economic ambitions — or risk seeing its budgetary goals slip further out of reach.
(The Africa Report)
