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Nigeria may have to devalue its naira again as sliding oil prices triggered by US President Donald Trump’s trade war pressure the budget of Africa’s largest crude producer.

“The natural policy response to lower oil prices is a depreciation of the naira, as this boosts oil revenues in naira terms,” Goldman Sach Group Inc. economist Andrew Matheny said in an interview. “Given that the oil-production assumption in the budget is already optimistic, risks are in our view tilted toward fiscal slippage.”

The government projected oil production of 2 million barrels a day and assumed a price of $75 per barrel in the budget. Crude is trading $10 below that level and Nigeria’s oil output slipped 9% to about 1.4 million barrels daily in March compared with January.

Oil accounts for the bulk of Nigeria’s foreign-exchange earnings and the naira has slipped about 5% against the dollar this month, making it the second-worst performing currency tracked by Bloomberg worldwide so far this month.

That’s ended the recent stability of the unit, which endured steep devaluations in 2023 and 2024 triggered by foreign-exchange reforms by President Bola Tinubu that relaxed its longstanding dollar peg.

“If we lose the price of crude by $10, you can see the negative impact to our economy, to our national reserves and the strength of our naira,” Nigerian Midstream and Downstream Petroleum Regulatory Authority Chief Executive Officer Farouk Ahmed said this week in Abuja, the capital.

A weaker naira stokes inflation pressures that have contributed to a cost-of-living crisis that stoked deadly protests last year, and the Central Bank of Nigeria has sold hundreds of millions of dollars in recent weeks to calm volatility in the local currency market.

But intervention drains foreign-exchange reserves that the CBN has been carefully restoring, limiting its appetite to keep this up.

“While the CBN has intervened to stabilize the naira, reliance on forex reserves disbursement is unsustainable,” said Ikemesit Effiong, head of research at SBM Intelligence in Lagos. “A managed devaluation or transitioning to a more flexible exchange rate regime may become inevitable.”

Read also: CBN sells $197.71m as Trump tariffs hit naira

Still, some analysts were optimistic that another big devaluation could be avoided through belt-tightening measures to make up the budget shortfall from lower-than-expected oil revenues.

“I don’t expect to see a larger FX rate adjustment in the near term,” said Mark Bohlund, senior credit research analyst at REDD Intelligence. “Expenditure cuts will be the most likely fiscal adjustment.”

Finance Minister Wale Edun recently said the country was going back to the drawing board to “see what changes have been made in the assumptions that underlaid the production of that budget and the reality over the first quarter.”