By Dr. Wisdom Enang
The recent slump in global oil prices presents a serious threat to Nigeria’s fiscal stability. Once again, it highlights the dangers of overdependence on crude for government revenue and foreign exchange.
Without much ado, let me emphasise this: industrialisation remains the surest path to unlocking Nigeria’s economic potential. Oil may remain important for the foreseeable future, but unless Nigeria decisively shifts from consumption to production, the country risks being trapped in cycles of slow growth, fiscal fragility, and import dependence.
This is no longer just an economic option. It is a matter of national survival.
Why Industrialisation Matters
Nigeria’s long-term prosperity hinges on building a strong industrial base, one that can create jobs, boost exports, and drive inclusive prosperity.
Yet, for decades, the country has suffered from deindustrialisation, chronic import reliance, and limited value creation in agriculture, mining, and manufacturing.
Industrialisation is the strategic solution. It can unlock Nigeria’s manufacturing potential, enhance productivity, and strengthen linkages across the economy. But success requires more than building factories. It requires creating an ecosystem of productivity which encompasses skilled labour, reliable infrastructure, affordable finance, and supportive policies working together.
To achieve this, Nigeria must modernise its industrial policy by:
• Supporting SMEs with easier access to credit and markets.
• Integrating value chains in agribusiness, mining, and pharmaceuticals.
• Leveraging Fourth Industrial Revolution technologies for efficiency and competitiveness.
Done properly, this will establish three strategic pillars: reforms, resilience, and results. With stable power, streamlined regulations, open trade, and strong human capital investment, Nigeria can position itself as West Africa’s industrial powerhouse.
Oil Price Decline and Fiscal Risks
The urgency for reform is underscored by the fiscal risks from oil’s current decline. Brent crude has fallen below Nigeria’s 2025 budget benchmark of $77.96 per barrel, threatening wider deficits and more borrowing.
The fall is driven by weaker global demand, rising supply from OPEC+ members, and geopolitical tensions clouding the energy outlook.
Domestically, Nigeria’s oil production averaged 1.5 million barrels per day (bpd) this year. While this is an improvement on last year, it remains below the 1.78 million bpd budget target and far short of the aspirational 2 million bpd.
Looking ahead, the outlook is troubling. OPEC+ is unwinding production cuts faster than expected, adding nearly 2 million bpd to global supply in the second half of 2025. Combined with weak demand and rising trade frictions, this has swelled global inventories to levels that historically cause 25–50% price drops.
Projections suggest Brent could average $67.84 per barrel in 2025, with a dip to $63 by mid-year. For Nigeria, this is well below fiscal assumptions.
Reform Efforts and Their Limits
Since 2023, President Bola Tinubu has pursued market-orientated reforms to stabilise the Nigerian economy.
The removal of fuel subsidy freed up significant funds for distribution through FAAC, resulting in record-high allocations to states and the federal government. Currency reforms and operational changes at NNPC have also boosted transparency and output.
Government is also banking on the new Tax Reform Act to expand the revenue base and reduce reliance on oil. But with Nigeria’s tax-to-GDP ratio still just 9%, among the lowest in the world, the short-term revenue boost is unlikely to offset oil shortfalls.
Mounting Debt Pressures
The fiscal picture is further darkened by a projected N13 trillion budget deficit in 2025 and a ballooning N149 trillion public debt.
Debt servicing already consumes a large share of revenue. While recent reforms have eased the debt-service-to-revenue ratio, sustained oil weakness could reverse these gains.
Lower oil receipts also reduce dollar inflows, invariably putting pressure on Nigeria’s foreign reserves, thus limiting the Central Bank’s ability to stabilise the Naira. A weaker currency risks worsening imported inflation and eroding household incomes.
If oil prices remain low and production stays below target, Nigeria could face a dangerous mix: wider fiscal deficits, rising debt-service costs, tighter foreign exchange liquidity, and slower growth.
Critical Growth Enabling Factors
Nigeria’s economic outlook will depend on three critical factors:
- Global oil trends. A rebound in crude prices would ease fiscal strain, but Nigeria cannot leave its future to market forces.
- Domestic production. Improving security, curbing oil theft, and fixing infrastructure are essential to lift output closer to target.
- Non-oil reforms. The success of tax reforms, industrialisation, and diversification will determine how quickly Nigeria can reduce vulnerability to oil shocks.
Without real progress on at least two of these fronts, the Tinubu administration may be forced into heavier borrowing. That path would raise debt-service costs, undermine investor confidence, and threaten growth.
A Defining Moment
Nigeria stands at a defining moment. The oil price decline is not just another fiscal challenge; it is a wake-up call.
The choice is stark: remain dependent on volatile oil markets or seize this moment to accelerate industrialisation and diversification.
Industrialisation is not merely about factories. It is about building a competitive ecosystem that empowers citizens, strengthens fiscal resilience, and secures long-term prosperity.
If Nigeria embraces bold reforms and invests in productivity, it can turn today’s oil slump into a springboard for sustainable growth. If it fails, the risks of fiscal instability, debt overhang, and economic stagnation will remain ever-present.
The time for bold choices is now
