Nigeria’s revenue target under threat as Trump eyes oil production increase

The inception of the Trump administration in the United States of America has immediate and remote consequences for energy prices, trade relations, economic diplomacy, macroeconomic stability, donor funding, and capital flows, BusinessDay has learnt.

The Centre for Promotion of Private Enterprises revealed that the evolving outcomes of the Trump Presidency would impact the outlook for the Nigerian economy in the near term.

Muda Yusuf, chief executive officer at CPPE noted that President Trump’s commitment to increasing oil output to reduce energy prices in the USA and globally might weaken crude oil prices in the near term.

This he said would impact the outlook for government revenue and foreign exchange earnings in 2025, noting that the Nigerian government had set a crude oil price benchmark of $75 per barrel in the 2025 budget.

Read also: Nigeria oil production now 1.75mbpd, as NUPRC targets additional 1mbpd by 2026

”Heightened prospects of a drop in oil prices would negatively impact government revenue and foreign exchange earnings. This has implications for the outlook for revenue, fiscal deficit, government debt, and exchange rate. The current budget benchmark of $75 per barrel may not stand in the circumstances.

”The decision of President Trump to opt out of the Climate change agreement [the Paris Accord] also has far-reaching consequences for the global oil market. This signals less commitment to climate change concerns and the acceleration of more investment in fossil fuels by the USA. Additionally, the sweeping imposition of trade tariffs on major US trading partners may weaken the global economic growth outlook, dampen global oil demand, and depress oil prices.

”However, the upside is that energy prices would drop globally – the price of diesel, PMS Jet fuel, gas, etc. This would gladden the hearts of many economic players in the country. The transmission effect would be very fast because of the deregulated regime of the oil and gas sector,” Yusuf said.

Yusuf also noted that the current Trump policies presented prospects of a strong dollar, which would mean a weaker naira. This, he said, might result in higher import costs for domestic investors and invariably become inflationary.

”Current tariff policies of the Trump administration would trigger inflation as the costs of imports into the United States surge. The US Federal Reserve would respond by tightening monetary policy which would create a high-interest rate scenario in the United States. This could result in capital flow reversals, posing a risk to the naira exchange rate”, he noted.

Yusuf further stressed the need for the Nigerian Government to commit more to the policy of self-reliance and less import dependence in critical areas of the economy, especially energy, food, pharmaceuticals, and security, adding that excessive import dependence poses a major risk to economic and social security of a country.

According to him, the Government must deepen backward integration through stronger intentionality to promote domestic production of goods and services as well as export development.

Read also: NUPRC targets more output as oil production hits 1.75mbpd

‘’The current economic reforms are already on course to ensure strategic structural shifts toward reducing dependence on imports. There should be a special emphasis on food security, energy security, health security, and internal security, leveraging largely domestic resources.

‘’The Government should urgently address current productivity shortcomings in the real sector to make domestic production competitive domestically and internationally. Current global developments reinforce the need to protect domestic industries against unfair competition from imports,’’ he added.