U.S President Donald Trump’s energy policy could likely threaten Nigeria’s fiscal sustainability in a country where some 90 percent of its revenue is dependent on oil, according to a report by SB Morgen Intelligence.
In its latest report titled ‘The Ripple Effect: How Trump’s policies will impact Africa’, the Lagos-based research firm stated that Nigeria’s assumption of an oil price target of $75 per day may also be punctured with Trump at the White House.
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“Nigeria’s economy relies heavily on oil exports, and Trump’s pledge to flood the global market with American oil seriously threatens the country’s financial stability,” SBM Intel said.
“Nigeria’s 2025 budget, which hinges on an ambitious oil price target of $75 per barrel, faces significant risks,” it added.
Africa’s biggest oil producer plans for oil revenue to account for over half of the national budget but any significant price decline would severely undercut the country’s financial projections, threatening its economic plans and fiscal health.
Trump’s “Drill, baby, drill” mantra indicates a substantial escalation in U.S. oil production, a move expected to boost domestic drilling, asserting U.S energy independence as a dominant oil exporter.
This surge in supply could create downward pressure on global oil prices, affecting countries dependent on oil revenues.
A fall in oil prices would undermine economic growth projections of Nigeria, leading to potential cuts in government spending and delayed infrastructure projects.
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Lower oil prices means increased borrowing to cover budget gaps at rather outrageous interest rates for a country whose debt is expected to rise further to N187 trillion this year, according to investment and research firm Cardinalstone.
This will no doubt deepen fiscal instability and strain funding for social safety nets, plunging more people into abject poverty.
The country could face more serious difficulties meeting financial obligations, including paying public sector wages, servicing debts, and funding social programs, according to SBM Intel.
“The oil sector’s dominance in Nigeria means that a price reduction can have ripple effects across other sectors of the economy, compounding Nigeria’s economic challenges,” the data and intelligence gathering firm said.
“This could also deepen regional inequalities, as poorer states would bear the brunt of reduced federal allocations,” it added.
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