… Oil windfall looms for Nigeria as Bonny Light surges past budget benchmark

The Federal Government’s savings in the first quarter of 2025 increased by over 500% following the removal of petrol subsidies, according to a new report released by the National Orientation Agency (NOA).

The report, titled “Two Years Later: Key Benefits of Subsidy Removal,” detailed how the abolition of subsidies under President Bola Tinubu has significantly boosted government revenue and improved fiscal stability.

Between January and March 2025, revenue from petroleum savings surged from ₦154 billion to ₦836 billion, as the Nigerian National Petroleum Company Limited (NNPCL) began remitting directly to the Federation Account Allocation Committee (FAAC).

As a result, state and local governments received ₦15.26 trillion in 2024, up from ₦6.16 trillion in 2023. Many states used the increased allocations to clear debts, pay salaries promptly, and invest in infrastructure.

The report highlighted that capital expenditure in the 2025 national budget rose to ₦23.96 trillion—₦10 trillion more than recurrent expenditure—a milestone in Nigeria’s fiscal history.

The removal of the subsidy, which had cost the country over $84 billion between 2005 and 2022, was likened to labour pains that eventually yielded positive outcomes.

“The policy averted economic collapse. By 2023, Nigeria was spending 97% of its revenue servicing debts. Today, that trend is reversing as states have repaid ₦1.85 trillion in domestic debt within 18 months,” the report noted.

Investments from subsidy savings include a ₦20 trillion infrastructure fund, ₦54 billion for student loans, ₦1.5 trillion for agriculture, ₦1 trillion for solid minerals, and conversion to compressed natural gas (CNG) for public transport.

The NOA stressed that though painful, the reforms are necessary for long-term growth and the financial autonomy of states.

Meanwhile, Nigeria’s oil revenue prospects improved last week as its key crude blend, Bonny Light, traded at $78.62 per barrel—above the Federal Government’s 2025 budget benchmark of $75.

Other major blends also recorded strong prices, with Girassol at $79.56, Saharan at $67.18, and Arab Light at $65.72 per barrel. 

The development comes amid ongoing OPEC+ production adjustments and global market volatility.

Although prices are favourable, Nigeria continues to fall short of its production target of 2.06 million barrels per day (including condensates), recording only about 1.6 million bpd in March, according to OPEC data.

This production shortfall comes despite market optimism over upcoming trade talks between the US and China and modest oil price gains in global markets. 

Bonny Light, which typically trades at a premium to Brent crude, benefited from this uptick.

However, analysts remain cautious. Goldman Sachs, Barclays, and Morgan Stanley have all slashed their oil price forecasts for 2025, citing expected oversupply. Morgan Stanley projects a market surplus of 1.1 million bpd by the second half of 2025.

Despite these concerns, Nigeria stands to gain in the short term, with current crude prices offering some cushion to the ₦55 trillion budget. 

But analysts warn that unless production levels improve, the country may not fully maximise the benefits of favourable global pricing.