Nigeria’s Economy Faces Strain as Global Oil Prices Drop to Four-Year Low Amid US-China Tariff War
Global oil prices have plunged to a four-year low due to escalating US-China trade tensions and rising concerns over supply imbalances. Brent crude dropped to $60.44 per barrel, while WTI fell to $57.12, marking a five-day consecutive decline. This price drop, coupled with a narrowing Brent six-month spread, signals market fears of an oversupply. The growing trade dispute between the US and China has dampened global economic growth and reduced oil demand, leading to this steep decline in oil prices.
The intensifying trade war between the two largest economies in the world, with the US imposing higher tariffs on Chinese imports and China retaliating, has fueled concerns over a prolonged global slowdown. Analysts have warned that China’s oil demand growth, previously projected to increase by 50,000-100,000 barrels per day (bpd), will likely be significantly reduced. Adding to the supply-side pressures, OPEC+ has decided to increase production by 411,000 bpd in May 2025, exacerbating the already fragile oil market.
For Nigeria, the falling oil prices pose a substantial risk to its economy, which is heavily reliant on oil revenues, accounting for 80% of government revenue and 95% of foreign exchange earnings. The current oil price drop is well below Nigeria’s 2025 budget benchmark of $75 per barrel, threatening to increase budget deficits, raise borrowing needs, and put additional pressure on the foreign exchange market. Furthermore, the declining prices and narrow Brent spread could discourage investment in Nigeria’s oil sector, especially in costly deepwater projects.
Despite the negative impact on global oil prices, the American Petroleum Institute reported an unexpected 1.1 million barrel drawdown in US crude inventories, offering a slight glimmer of resilience in oil demand. However, the broader economic outlook remains grim for Nigeria, given its vulnerability to fluctuations in the global oil market.
Source: The Sun