…Naira outlook brightens
A sudden military escalation between Israel and Iran has triggered a sharp spike in global crude prices, pushing Brent crude above $75 a barrel, a critical threshold beyond Nigeria’s 2025 budget benchmark of $75 per barrel.
The surge comes amid the most intense regional confrontation in decades, boosting naira’s outlook, improving revenue prospects for Africa’s top oil exporter.
BusinessDay’s findings showed Brent Oil Futures for July delivery gained over 9 percent, trading at $75.15 per barrel, the highest price since early February, while West Texas Intermediate (WTI) crude futures increased to $74 per barrel, posting a 10 percent increase at their peak.
Impact on Nigeria’s budget
Nigeria’s 2025 federal budget is predicated on a $75-per-barrel oil price benchmark. The recent jump in Brent past this threshold is particularly significant, as it signals that the nation might finally close its budget gap, after months of shortfalls when prices hovered closer to $60.
Notably, domestic benchmark export Bonny Light, which typically carries a premium above Brent, was reported trading at around $78.6, comfortably eclipsing the government’s budget assumption.
This sudden windfall could help improve revenue inflows, reduce borrowing needs, and cover planned public expenditures without resorting to drastic cuts or tax hikes.
Read also: Oil prices jump more than 9% after Israel attacks Iran
Impact on naira
The crude rally is also injecting optimism into Nigeria’s currency market. With oil revenues underpinning over 90 percent of foreign exchange (FX) inflows, the naira has been under pressure, trading above N1,600 to the dollar, far weaker than the budgeted rate of ₦1,400.
However, the stronger oil price signals a potential uptick in FX supply. Financial analysts note that improved petro‑dollar inflows could ease pressure on the naira, enhance liquidity, reduce FX premiums, and help stabilise the currency in the foreign exchange market.
Cautious optimism amid high stakes
Despite the positive implications for Nigeria’s budget and currency, economists caution that the uplift may be temporary. The Middle East conflict could rapidly escalate, threatening the stability of longer-term energy supplies and driving sustained price volatility. Historical precedent shows that political risk premiums can reverse swiftly, leaving markets on edge.
Moreover, Nigeria must still address structural issues, such as achieving its target of 2.06 m barrels per day production (currently closer to 1.6 m bpd) and further diversifying its economy to reduce reliance on crude.
