Oil sector slowdown puts 2025 budget at risk –NESG

By Uche Usim

From the Nigerian Economic Summit Group (NESG) comes a stern warning to the federal government to fortify its economic revitalisation framework as the persistent slowdown in Nigeria’s oil and gas sector may jeopardise the effective implementation of the 2025 national budget.

In its latest publication, “NESG 2025Q1 GDP Alert,” the private sector-led think tank noted that the country’s crude oil production in the first quarter of 2025 fell significantly below the government’s budget benchmark of 2.06 million barrels per day (mbpd). The shortfall, it said, translates directly into lost revenues that are vital for funding critical government programmes and services outlined in the budget.

“Persistent slowdown in the oil and gas sector poses a threat to the execution of the 2025 budget. “In 2025Q1, the average crude oil production is significantly below the budget benchmark of 2.06mbpd, translating to lost oil revenues needed to implement the budget. This suggests the urgent need to resolve challenges facing domestic crude oil production, including ageing infrastructure, oil theft, pipeline vandalism, and kidnapping of expatriate workers,” the report stated.

While raising the alarm over oil production, the NESG commended the recent progress made in the refining sector, describing the improvements as “remarkable.”

The group highlighted the game-changing impact of the privately-owned Dangote Refinery, which it said had helped reverse more than half a decade of contraction in the country’s refining capacity.

“The emergence of Dangote Refinery has been a game-changer for Nigeria’s oil and gas sector, reversing more than half a decade of contraction in the Oil refining sector and slashing import bills on petrol by about 53 percent (year-on-year) in 2025Q1. This suggests the need to support privately owned refineries and incentivise investments into the downstream oil and gas sector,” it stated.

However, the group cautioned that sustaining this progress would require the revival of state-owned refineries and increased support for private sector investments to ensure long-term stability and self-sufficiency in petroleum refining.

The NESG also welcomed the improved capture of informal economic activities following the recent GDP rebasing, which set 2019 as the new base year. As a result, Nigeria’s Gross Domestic Product (GDP) stood at N372.8 trillion in 2024. The group stressed the importance of transitioning informal sector operators into the formal economy, noting that the country stands to benefit more if these activities are properly regulated and taxed.

“An example is the new tax laws, which, when implemented on January 1, 2026, will reduce the value-added tax (VAT) burden for many small and medium-sized enterprises. This could prompt voluntary business registration and reduce the pervasive incidence of business closures nationwide,” the NESG said.

On agriculture, the group expressed deep concern about growing risks in the sector, warning that food prices could surge unless urgent action is taken to strengthen productivity and security.

It observed that the rebasing exercise revealed a significant increase in the share of the livestock subsector in total agricultural GDP, from 4.8 percent in Q1 2024 (using the old base year) to 16.1 percent in the same period, and 13.4 percent in Q1 2025 (using the new base year), largely due to better tracking of informal activities.

“This suggests the need to address incessant communal clashes between the farmers and the herders to enhance crop and livestock production, with downward pressures on food inflation,” the group warned.

As the economy continues to navigate multiple structural and fiscal challenges, experts say the NESG’s analysis presents a candid picture of the hurdles that lie ahead.