Nigeria pumped more crude oil in the first half of 2025, but the money did not follow.
Despite a modest recovery in production, the Federal Government earned ₦16.2 trillion less than projected from oil between January and June, once again exposing the fragility of an economy still heavily tied to a volatile commodity.
According to the Second Quarter Budget Performance Report released by the Budget Office, gross oil revenue stood at ₦9.32 trillion, far below the ₦25.52 trillion pro-rated target for the period. The result was a 63.49 per cent shortfall, reinforcing concerns that Nigeria’s fiscal health remains vulnerable despite incremental gains in output.
Oil production averaged 1.68 million barrels per day, missing the 2.12mbpd benchmark set in the 2025 budget. While output improved slightly—rising from 1.6mbpd in the first quarter and 1.41mbpd in the same period of 2024—the increase was not enough to translate into meaningful revenue growth.
Still, the report showed a year-on-year improvement. Oil earnings rose by ₦2.78 trillion, or 42.59 per cent, compared with the first half of 2024—evidence that production gains and better collections are having some effect, albeit not at the scale required.
“Gross oil revenue of ₦9.32tn recorded in the first half of 2025 fell short of the ₦25.52tn budget projection by ₦16.20tn,” the report stated, adding that the performance, though weak, marked an improvement over last year.
A familiar dependence, a familiar risk
Crude oil has dominated Nigeria’s public finances for over five decades, accounting for up to 90 per cent of export earnings and more than half of government revenue in many fiscal years. As a result, oil receipts shape foreign exchange inflows, influence the strength of the naira, and determine how much money is shared among the three tiers of government through FAAC.
But that dependence has come at a cost.
Oil revenues remain highly sensitive to global prices, production volumes, exchange rates, and fiscal terms, leaving government income exposed to shocks. Even when prices are relatively stable, local challenges—ranging from oil theft and pipeline vandalism to underinvestment and regulatory uncertainty—continue to drag performance.
Where the money fell short
A closer look at the data reveals sharp underperformance across Nigeria’s biggest oil revenue lines.
Revenue from crude oil and gas sales stood at just ₦712.57 billion, missing its target by ₦1.64 trillion. Petroleum Profit Tax and Gas Tax yielded ₦4.16 trillion, falling short of projections by ₦11.53 trillion, while oil and gas royalties came in ₦3.33 trillion below target.
By contrast, smaller revenue streams outperformed expectations. Concessional rentals surged more than tenfold above projections, while miscellaneous oil revenue, including pipeline fees, also exceeded estimates. However, these gains were too small to offset the collapse in core earnings.
Gas flaring penalties and exchange gains—lines without half-year projections—contributed a combined ₦415.56 billion.
Prices, production, and pressure
Nigeria’s crude sold at an average of $74 per barrel in Q2 2025, slightly below the $75 benchmark used in the budget and nearly $11 lower than prices a year earlier. Although output improved, analysts say the combination of lower prices and persistent production constraints continues to cap revenue.
In the second quarter alone, oil revenue reached ₦4.77 trillion, missing its quarterly target by ₦7.99 trillion, even though it exceeded Q2 2024 earnings by over ₦1.5 trillion.
Non-oil revenue offered some relief, supported by inflation-driven tax inflows and increased economic activity, but not enough to close the gap. Net distributable revenue for the period stood at ₦9.85 trillion, a 41.58 per cent shortfall.
A wider fiscal warning
The oil revenue miss reflects a broader budgetary strain. Last week, Finance Minister Wale Edun told the House of Representatives that the Federal Government had earned just ₦10.7 trillion in 2025 against a projected ₦40.8 trillion, raising questions about the sustainability of the ₦54.9 trillion “budget of restoration.”
Together, the figures underline a hard truth: higher oil output alone will not fix Nigeria’s fiscal problems.
Until deep-rooted issues—security, infrastructure, governance, refining capacity, and diversification—are resolved, oil will remain both Nigeria’s biggest earner and its biggest vulnerability.