There are signs that the 2025 federal budget is facing financial challenges, with the Nigerian Upstream Regulatory Commission (NUPRC) noting a major decline in crude oil production during the first half of 2025, H1'25.
The budget, primarily financed through oil earnings, was based on an oil production of 2.06 million barrels per day, a price of $75 per barrel, and an exchange rate of N1,500 to the dollar.
The NUPRC reports for the first half of 2025 indicate that the objective was not achieved.
The NUPRC July 2025 'Crude Oil and Condensate Production' report showed that the output for January, February, March, April, May, and June 2025 was 1.737 million bpd, 1.671 million bpd, 1.603 million bpd, 1.683 million bpd, 1.657 million bpd, and 1,697,045 respectively.
Additionally, the NUPRC report mentioned: "The minimum and highest combined crude oil and condensate production in June were 1.61 million barrels per day and 1.82 million barrels per day respectively."
Bonny Light oil remains at $71 per barrel - OPEC
Besides the underproduction, low crude oil prices characterized the period, in contrast to FG's predictions, as data from the Monthly Oil Market Reports, MOMRs, of the Organisation of Petroleum Exporting Countries, OPEC, showed that Nigeria's Bonny Light averaged $71.73 per barrel in June 2025.
It also noted that the maximum price of $80.14 per barrel was observed in January 2025, whereas the minimum price of $64.55 per barrel was noted in May 2025.
OPEC has also expressed concern over the global oil industry's performance in H1'25, noting: "Crude oil prices faced increased fluctuations during H1'25, primarily due to geopolitical events in the Middle East and Eastern Europe, along with uncertainty regarding US trade policies with major economic allies."
These advancements had a negative impact on market sentiment and led to changing risk premiums throughout the oil sector. The oil futures market experienced increased volatility due to high levels of speculative trading.
Hedge funds and other financial managers often modified their net positions due to changing geopolitical developments and indicators about global trade policy, leading to significant price fluctuations during the time frame.
The situation may not get better in H2' 25 - Iledare, BudgIT
However, in an interview with Financial Vanguard, Wumi Iledare, Professor Emeritus and Executive Director of the Emmanuel Egbogah Foundation in Abuja, stated: "I clearly voiced my concerns at that time, as the budget projections seemed more like fantasy and were overly optimistic. The main budget factors—production levels, oil prices, and expenses—continue to be very uncertain, with substantial differences from the original estimates."
This clearly indicates that the budget process requires significant enhancements. The global oil market remains highly volatile. Oil prices are expected to increase but will not remain stable. This situation is likely to continue affecting the execution of the budget during the second half of 2025.
In the same way, Vahyala Kwaga, the Group Head of Research at BudgIT, stated: "These budget assumptions should be examined individually. This is because each one relates to a different part of the local and domestic economy."
The oil production target was not achieved and is expected to remain unmet because of long-standing problems within Nigeria's oil industry. Persistent challenges such as limited production capacity, poor upkeep of oil infrastructure, sabotage, and fuel theft continue to affect the sector today.
Furthermore, investments from abroad in the industry have decreased (numerous foreign investors have shifted to deep offshore locations).
The average oil price of $75 was not achieved (because of global conflicts and the activities of major economies), but it could be reached in the second half of the year because of political factors (such as conflict with Iran, higher demand from China, and similar issues).
The Nigerian federal government is being urged to adopt a negative outlook in their oil price predictions, ensuring there is space for increased income if the estimates prove to be wrong.
Nevertheless, the government continually forecasts extremely high prices. In any event, the global oil price has minimal connection to the Nigerian government.
FG revenue expected to decrease in the second half of 2025
He further stated, "If none of the aforementioned conditions are fulfilled, the government will generate less revenue than anticipated."
In such cases, the budget deficit will rise, expanding the difference between income and spending. This will result in fewer funds available to carry out the budget and deliver public services.
The government has the choice to reduce expenses, take on debt, or greatly enhance non-oil income. It may choose to concentrate on one, two, or all three approaches. The consequences are evident. If it reduces costs, this will affect the delivery of government services, and if the correct areas are targeted, it might lower the deficit. However, the Nigerian budget is mainly made up of recurrent expenditures (debt servicing, wages, and operational costs).
If the government chooses to take on more debt, it will lead to a larger deficit, resulting in fewer funds available for public services down the line. The most environmentally and financially responsible choice would be for the government to focus on boosting non-oil income.
Where it performs well, effectively, and openly, it can tackle the approaching financial challenges in the economy. I would recommend the government to reduce unnecessary expenditure and boost income from non-oil sources.
Unpredictability dominates the H2'25 forecast - LCCI
Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, stated: "The failure to meet targets in the first half of the year highlights underlying structural and policy-related issues."
During the first half of 2025, oil production consistently fell short, averaging less than 1.5 million barrels per day when condensates are considered. This was caused by ongoing problems like pipeline sabotage, crude theft, insufficient investment, and operational inefficiencies that limit output. Without the government speeding up security improvements in oil regions, encouraging investment in upstream projects, and expediting regulatory processes, meeting the 2.06 million bpd target in the second half appears improbable.
Global oil prices have varied within a generally positive range, with an average of $70 to $67 per barrel during the first half of the year. Oil prices have stayed under $75 since March up to now. Geopolitical issues and OPEC+ production control have supported this situation. Looking forward, although the $75 level is still possible, there are potential risks, especially due to a possible global economic slowdown or higher output from non-OPEC countries.
Price fluctuations are expected to continue, but there is a cautious hope that this standard might be achieved or surpassed.
Lower-than-anticipated oil production and an unstable currency exchange rate may result in significant decreases in income.
In brief, the latter part of 2025 offers a limited opportunity to adjust financial expectations and enact courageous, practical reforms. Closing the divide between budget projections and economic conditions demands determined political commitment, coordinated policies, and involvement from the private sector.
The LCCI continues to focus on promoting discussions that encourage financial stability and economic strength.
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