Crude oil prices dropped on Tuesday following new U.S. tariffs, raising concerns over global trade tensions and potential impacts on fuel demand.
Brent Crude fell to $70.5 per barrel, while West Texas Intermediate (WTI) declined to $67.56. Nigeria’s Qua Iboe crude dropped by 1.9% to $74 per barrel, with Brass River also sliding to $73 per barrel. Brent was down 1.40%, trading at $73.00, as both major benchmarks faced their first weekly and monthly losses since November 2024.
US Tariffs and Market Uncertainty
The price decline follows former U.S. President Donald Trump’s confirmation that previously delayed tariffs on Canada and Mexico will take effect on March 4. The new policy imposes a 10% tax on Canadian energy imports and a 25% tariff on exports from both Canada and Mexico. A separate 10% tariff on Chinese goods has heightened concerns of a global trade war, which analysts warn could slow economic growth and reduce crude demand.
Market volatility is further compounded by uncertainty surrounding OPEC+ production policies and ongoing Ukraine peace talks.
Nigeria’s Economic Outlook at Risk
The crude price drop threatens Nigeria’s revenue targets, as the 2025 budget is based on a $75 per barrel oil benchmark and a production target of 2 million barrels per day (mbpd). A sustained decline below this threshold could widen the fiscal deficit, increase borrowing, and strain government finances.
Nigeria’s foreign exchange market is also at risk. The naira strengthened from N1,600/$1 to N1,500/$1 in February but slightly weakened to N1,515/$1 on Tuesday as oil prices fell.
Despite this, the Central Bank of Nigeria (CBN) remains optimistic, citing an increase in crude production to 1.54 mbpd as of January 2025. The CBN expects this to improve Nigeria’s current account balance and foreign reserves, though further oil price declines could challenge this outlook.
With Nigeria’s economy heavily reliant on oil, the government may need to explore alternative fiscal strategies to cushion revenue shortfalls and manage potential currency pressures in the months ahead.
Credit: Nairametrics (Text Excluding Headline)
