Sopuruchi Onwuka

Nigeria’s fiscal projections in the immediate to medium term remain vulnerable to changes in the fortune of petroleum liquids in the global commodity markets as analysts insist that the nation’s major export commodity, petroleum, will continue to suffer price depression.

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A number of analysts including Rystad Energy have, since the emergence of Donald Trump of the United States and the subsequent trade wars waged by his administration declared that, declared that oil dependent economies stand the risk of fiscal instability.

The World Bank also stated on Tuesday that a mix of price volatility and dip in the value of petroleum commodity would certainly spell fiscal disaster for oil exporting economies like Nigeria.

Chief Economist, Indermit Gill, also cautioned developing countries that stand on commodity exports to liberalize trade where possible, restore fiscal discipline and create a more business-friendly environment to attract private capital.

He pointed out that current market realities manifesting in price volatility and fall form gloomy outlook for vulnerable economies.

The Oracle Today reports that petroleum commodity including crude oil, condensate and natural gas account for over 85 percent of Nigeria’s exports, over 75 percent of the country’s balance of payments and nearly 90 percent total national foreign exchange receipts.

Thus, fiscal projections drawn by government’s planners are based on expectation of petroleum production volumes, exports and returns from the international energy markets.

Already the projections which formed basis for the 2025 budget are already detaching from reality as the industry has remained unable to close the 200,000 barrels per day gap in liquids production estimates. Oil prices have also climbed down from the budget threshold of $75 per barrel.

Thus, the ability of the industry to surmount daunting operating challenges and deliver government’s mandate to boost production by significant million barrels per day has proved unviable in the immediate term, rendering the country’s medium term economic outlook unrealistic and leaving the budget susceptible to borrowing.

The World Bank reported its latest Commodity Markets Outlook report on Tuesday that energy prices are expected to fall by 17 percent to lowest level in five years before dropping another 6 percent in 2026.

It also forecast that Brent crude prices would decline of $17 from 2024 to average $64 a barrel in 2025 and an average of $60 a barrel in 2026 amid ample supply and falling demand, partly due to the rapid adoption of electric vehicles in China, the world’s largest auto market.

Brent traded at $64.80 a barrel early on Tuesday.

The development finance lender also predicted coal prices to fall 27 percent in 2025 and 5 percent further in 2026 as the growth of coal consumption for power generation in developing economies slows.

The Oracle Today reports that the prevailing trade wars emerging from the reciprocal tariffs by the United States government, the ripple effect in the global economy and rising global oil production also appear to mount downward pressure on the commodity’s prices.

The World Bank explained in the report that weakening global growth would push global commodity prices down 12 percent in 2025 and another 5 percent in 2026 to the lowest levels of the 2020s in real terms.

The bank stated that commodity prices would tumble to their 2015-2019 average in the next two years, marking an end to a price boom fueled by the COVID-19 economic recovery and Russia’s 2022 invasion of Ukraine.

The decline, the bank noted, could have negative consequences for developing economies that export commodities.

Gill said in a statement that “higher commodity prices have been a boon for many developing economies, two-thirds of which are commodity exporters,” adding that “we’re seeing the highest price volatility in more than 50 years.”