A leading global business advisory firm, PricewaterhouseCoopers International Ltd (PwC), has raised concerns over Nigeria’s Revenue target plan of ₦36.35 trillion for 2025, warning that the instability of global crude oil prices could pose significant risks to the nation’s economy. In its report titled “2025 Nigeria Budget and Economic Outlook,” PwC underscores the potential negative impact of fluctuating oil prices and geopolitical tensions on the national revenue projections, which are heavily dependent on crude oil exports. With oil accounting for the largest share of the country’s total exports, the federal government’s plans to achieve a Trade surplus and meet its revenue goals are now under threat.
The report further reveals that Nigeria must increase its crude oil production by 37% to achieve its revenue target. This comes as they struggle with global oil market risks, including supply restrictions by the Organization of Petroleum Exporting Countries (OPEC) and fluctuating demand from major economies like China. While Nigeria achieved its OPEC quota of 1.5 million Barrels Per Day (bpd) in December 2023, excluding condensate, the government aims to ramp up production to 2.06 million bpd in 2024. However, this ambitious target is contingent on improvements in security, regulatory frameworks, and notable investments in oil fields such as Bonga and Ubeta by major players like Shell and TotalEnergies.
Global oil price volatility and Nigeria’s economic exposure.
In 2024, the average global oil price stood at $78.05 per barrel, driven by increased demand from China, OPEC supply restrictions, and U.S. shale production. While these factors have temporarily supported higher prices, the PwC report warns that the region’s revenue projections are susceptible to sudden price drops. The country’s heavy reliance on crude oil exports, which accounted for ₦34.87 trillion in the first half of 2024, underscores the risks associated with global market fluctuations.
Non-oil exports, which grew by only 37.3% during the same period, lagged, noting the urgent need for economic diversification. To mitigate these risks, the report emphasises the importance of boosting non-oil exports through value-added production, Export incentives, and improved logistics. The depreciation of the Naira under the floating exchange rate regime presents a unique opportunity to enhance the competitiveness of non-oil exports. On the other hand, achieving this requires substantial investments and policy reforms to reduce the dependency on crude oil and strengthen the resilience against external shocks.
Revenue generation and debt sustainability challenges.
Despite improvements in revenue generation, the nation could face significant challenges in meeting its ₦36.35 trillion revenue target for 2025. As of August 2024, the federal government had achieved 73.8% of its pro rata budget, driven by higher Tax revenues and increased oil production. However, the report cautions that oil revenue constraints and a low tax base could hinder the achievement of the ambitious target. Effective tax reforms and enhanced compliance measures are crucial to boosting non-oil revenues and ensuring fiscal stability.
On the debt front, the national debt-to-GDP ratio stood at 50.7% in October 2024, exceeding the 40% threshold recommended by fiscal experts. The proposed fiscal deficit of ₦13.8 trillion for 2025, representing 3.87% of GDP, also surpasses the 3% limit set by the 2007 Fiscal Responsibility Act. Rising bilateral and multilateral debt levels pose significant risks to the country’s financial stability, particularly if Economic Growth and revenue generation fail to keep pace. The report calls for fiscal consolidation, including privatisation and the sale of underperforming assets, to reduce deficits and enhance non-debt revenue.
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As a result, the report identifies several policy interventions that could shape the economic trajectory in 2025. Establishing regional development commissions and amendments to fiscal laws to reduce regional inequalities and attract international funds. However, the proposed increase in the Minimum Wage to ₦70,000 risks exacerbating inflationary pressures, which have already been strained by rising Government Spending and liquidity challenges and in 2024, increased government spending complicates efforts to control inflation, underscoring the need for coordinated policies to ensure macroeconomic stability. Lastly, agricultural reforms, increased food production, and higher Security spending, which rose to 16% of the budget, are expected to reduce food inflation.