Crude oil prices dipped on Tuesday after the U.S. government implemented fresh tariffs, raising concerns about global trade tensions and their potential impact on fuel demand.
Brent Crude fell to $70.5 per barrel, while West Texas Intermediate (WTI) dropped to $67.56. Nigeria’s flagship crude, Qua Iboe, declined by 1.9% to $74 per barrel, while Brass River fell by the same margin to $73 per barrel.
The international benchmark, Brent Crude, was down 1.40%, trading at $73.00, as both major crude benchmarks headed for their first weekly loss in a month and the first monthly decline since November 2024.
The price dip comes as the global oil market reacts to ongoing trade tensions, uncertainty in OPEC+ production policies, and prospects of peace talks to end the war in Ukraine.
Why oil prices are falling
On Thursday, former U.S. President Donald Trump reaffirmed that previously delayed tariffs on Canada and Mexico would take effect on March 4.
- The policy imposes a 10% tax on energy imports from Canada while also adding a 25% tariff on Mexican and Canadian exports.
- In addition, the U.S. imposed an extra 10% tariff on Chinese goods.
- The move has triggered fresh concerns about a global trade war, which analysts say could slow economic growth and weaken demand for crude oil at a time when OPEC+ has yet to decide on production levels for April and beyond.
What this means for Nigeria
The decline in crude prices poses a direct threat to Nigeria’s revenue targets, as the government benchmarked oil at $75 per barrel and production at 2 million barrels per day (mbpd) in its 2025 budget.
Any prolonged drop below this threshold could worsen the fiscal deficit, increase borrowing needs, and exert pressure on government finances.
A drop in oil prices also raises concerns about Nigeria’s foreign exchange market, which relies heavily on crude sales for dollar liquidity.
The naira strengthened in the parallel market in February, appreciating from N1,600/$1 to N1,500/$1. However, with oil prices weakening, the naira depreciated slightly to N1,515/$1 on Tuesday.
Despite the recent volatility, the Central Bank of Nigeria (CBN) remains bullish, citing an improvement in crude oil production, which rose to 1.54 mbpd as of January 2025.
The apex bank believes this will help improve Nigeria’s current account position and boost external reserves.
However, the sustained decline in crude prices could threaten this outlook.
Nigeria’s economic stability remains tightly linked to crude oil performance, and the latest price drop highlights the vulnerability of the country’s revenue and exchange rate targets.
As global trade tensions mount and OPEC+ deliberates on output strategies, Nigeria faces the challenge of navigating an increasingly unpredictable oil market.
The government may need to explore alternative fiscal strategies to cushion the impact of revenue shortfalls and mitigate potential currency pressures in the months ahead.
