Chris Okpoko
In the first week of April, crude oil futures prices dropped following the announcements of new US tariffs on 2 April and retaliatory measures from major economies, which triggered heavy selling in oil futures and broader financial markets. As of May 5, 2025, the price of the OPEC basket of twelve crudes stood at $61,80 a barrel compared with $61,88 the previous day. However, according to the daily pricing data from Oilprice.com, the price of Bonny Light crude oil (a high-grade, low-sulfur crude oil produced in Nigeria) is currently at $78.62 per barrel, a decrease of $2.30 from the previous day.
In recent years, Nigeria’s economy has been significantly affected by fluctuations in global crude oil prices. As the country grapples with a persistent reliance on oil exports, which account for over 90% of its foreign exchange earnings, the recent downturn in oil prices has underscored the urgent need for diversification and sustainable economic strategies. Analysts believe the declining price of crude oil poses a huge blow to Nigeria’s N55 trillion 2025 budget, which was built around a $75/barrel oil price benchmark. The recent fluctuations in global oil prices and impending revenue gap may plunge Nigeria into an economic quandary, as sub-benchmark crude oil prices threaten the nation’s financial stability. Hence, this article explores the challenges posed by sub-benchmark oil prices and proposes a multifaceted approach to sustaining Nigeria’s economy through diversification, strategic investment in infrastructure, efficient governance, investment in human capital, and the promotion of technological innovation.
The Nigerian economy has historically been vulnerable to the volatility of oil prices. The country’s economic performance is often measured against benchmark crude oil prices, and when these fall below expectations, it triggers a cascade of negative socio-economic impacts, including reduced government revenue, increased inflation, and job losses. For instance, the oil price crash of 2014-2015 reverberated through the economy, leading to recession and stagnation. With the ongoing global transition towards renewable energy sources and the rise of alternative energy technologies, Nigeria must mitigate its heavy reliance on oil and embrace economic diversification.
Several administrations in Nigeria have long sought to diversify the economy beyond its heavy reliance on oil, aiming to reduce vulnerability to global oil price fluctuations and foster broader economic growth. While efforts have been made in various sectors like agriculture and manufacturing, diversification has been largely unsuccessful, and the country continues to depend heavily on oil exports.
The challenges to diversification include: over-reliance on oil that led to “Dutch disease,” where the oil sector absorbs resources from other sectors, hindering diversification.
Lack of reliable infrastructure, including power, transportation, and telecommunications, has hampered the growth of non-oil sectors.
Corruption and weak governance have created an unstable business environment, discouraging investment and hindering development.
Geopolitical tensions and security concerns in some regions have impacted economic activity and investment; and
Lack of consistent and long-term policies has made it difficult for businesses to plan and invest in diversification efforts.
Diversification of the economy is paramount for Nigeria as it seeks to foster resilience against such external shocks. Agro-industrial development offers a promising pathway; given Nigeria’s vast arable land and agricultural potential, investment in this sector can not only increase food security but also generate employment and export opportunities. The government should encourage mechanized agriculture, incentivize farmers through access to credit, modern farming techniques, and infrastructure development to enhance productivity. Initiatives like the Anchors Borrowers’ Programme, which connects small holder farmers with markets and financial resources, exemplify the type of strategic efforts that need to be scaled to achieve substantial impact. Federal and state agricultural policy should encourage public-private partnerships in agricultural development, particularly in infrastructure development, technology transfer, and marketing.
Nigeria possesses solid minerals, including gold, iron ore, coal, limestone, and bitumen. These minerals are found in various states across the country, and their presence offers significant potential for economic growth. The Nigerian government, through the Ministry of Solid Minerals Development, should unlock the potential of these resources. The sector is yet to realize its potential, contributing less than 3% to the nation’s GDP. The country faces challenges such as illegal mining, infrastructure limitations, and the need for investment in the sector.
In addition to diversification, strategic investments in infrastructure play a vital role in sustaining Nigeria’s economy. The country has long struggled with inadequate infrastructure, including poor transportation networks, unreliable power supply, and limited access to clean water. By channeling investments into these critical areas, Nigeria can enhance productivity, lower business operational costs, and attract foreign direct investment (FDI). Improved infrastructure facilitates the movement of goods and services, stimulating economic activity beyond the oil sector. Consequently, a concerted effort to upgrade infrastructure will empower Nigeria to navigate the challenges of low oil prices and foster sustainable growth.
Equally significant is the role of governance in sustaining economic growth. Institutional effectiveness, transparency, and adherence to the rule of law are crucial for creating a conducive environment for domestic and foreign investment. Corruption has been a longstanding impediment to Nigeria’s economic development, discouraging legitimate investors while undermining public trust in the government. Therefore, implementing stringent anti-corruption measures, coupled with an emphasis on accountability and efficiency in public service, can foster investor confidence and stimulate economic activities outside of crude oil.
Investing in human capital is also vital for sustainable economic growth. A well-educated and skilled workforce not only enhances productivity across various sectors but also spurs innovation and entrepreneurship, particularly in technology-driven industries. The government and private sector must collaborate to enhance educational systems, vocational training, and continuous professional development programs that address the skills gap prevalent in Nigeria. Expanding access to education, especially for science and technology, is imperative for driving economic growth, improving quality of life, and tackling societal challenges. They enable innovation, enhance productivity, and lead to advancements in various sectors.
Technology and innovation are critical drivers of modern economies, and Nigeria is well-positioned to leverage its youthful population toward a more tech-savvy future. The burgeoning tech startup ecosystem presents opportunities for job creation and economic diversification. Policymakers should facilitate this growth by creating a robust digital infrastructure, incentives for tech entrepreneurs, and fostering partnerships between academic institutions and the private sector to drive research and development. Such initiatives can help Nigeria capitalize on the global digital economy.
Furthermore, fostering innovation and entrepreneurship is essential for sustaining Nigeria’s economy amid sub-benchmark crude oil prices. By promoting entrepreneurial initiatives and providing access to funding and mentorship, Nigeria can cultivate a vibrant ecosystem that supports small and medium-sized enterprises (SMEs). These enterprises not only contribute to job creation but also stimulate economic diversification by introducing new products and services to the market. Thus, encouraging innovation is a key strategy in mitigating the adverse effects of falling oil prices on the economy.
Moreover, regional integration within the African continent can serve as a strategic avenue for Nigeria to navigate its economic challenges. By participating in frameworks like the African Continental Free Trade Area (AfCFTA), Nigeria can enhance its trade relationships and expand its market access beyond oil. An increase in regional trade can help bolster various sectors, including manufacturing, agriculture, and services, ultimately leading to a more balanced economic portfolio that can endure price shocks in the oil market.
While the immediate response to sub-benchmark crude oil prices will require decisive action and commitment from the Nigerian government and the private sector, a long-term perspective is essential for sustaining economic growth. Addressing the challenges of diversification, governance, investment in human capital, and technology will lay the groundwork for a resilient economy less dependent on the volatile oil sector. In conclusion, the path toward economic sustainability for Nigeria involves a comprehensive approach that embraces change and leverages the country’s unique strengths, positioning it for prosperity in an increasingly interconnected and evolving global economy.
