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Nigeria’s 2025 federal budget, pegged at an unprecedented N54.99 trillion, has sparked debate for its bold vision and lofty assumptions. Described by the World Bank as “overly ambitious,” the budget hinges on optimistic projections that could lead to significant revenue shortfalls, potentially forcing the Federal Government to lean on the Central Bank of Nigeria’s (CBN) Ways and Means facility to bridge the gap. Here’s a closer look at the budget, the World Bank’s concerns, and what it means for Nigeria’s economic future.
A Record-Breaking Budget
The 2025 budget, a 56.89% increase from 2024’s N35.05 trillion, is Nigeria’s largest to date. It projects revenue of N36.35 trillion, leaving a N13.39 trillion deficit. Key allocations include:
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N6.11 trillion for security, addressing ongoing challenges like insurgency and banditry.
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N16.3 trillion for debt servicing, a staggering portion of the budget reflecting Nigeria’s growing debt burden.
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Major infrastructure projects, such as the Lagos-Calabar Highway, aimed at boosting economic connectivity.
The budget’s cornerstone is its reliance on oil, projecting production at 2.1 million barrels per day at $73 per barrel. However, current production lags at around 1.6 million barrels, and global oil prices are closer to $60. This discrepancy raises red flags about the feasibility of meeting revenue targets.
World Bank’s Warning
The World Bank has cautioned that Nigeria’s optimistic assumptions could lead to fiscal strain. If revenue falls short, the government may resort to borrowing from the CBN’s Ways and Means facility, a mechanism historically used to cover budget deficits. In 2020, the CBN loaned N2.8 trillion to offset revenue losses from low oil prices and COVID-19. By 2022, the government’s Ways and Means debt had ballooned to N23.77 trillion, with interest payments projected to consume 62% of revenue by 2027.
The World Bank also highlighted inefficiencies in revenue allocation. Only 50% of the gains from Nigeria’s fuel subsidy removal are currently transferred to the Federation, with the rest offsetting Nigerian National Petroleum Corporation (NNPC) arrears. This limits fiscal flexibility, making the budget’s ambitious targets even harder to achieve.
Government’s Defense
The Nigerian government, led by Minister of Budget Atiku Bagudu, remains optimistic. Bagudu argues that the budget reflects Nigeria’s potential, pointing to reforms like fuel subsidy removal and forex liberalization that boosted state revenues from N7.18 trillion in 2023 to N13.8 trillion in 2024. These reforms, the government claims, provide a foundation for achieving the 2025 targets.
However, critics question whether the government can execute its plans effectively. With debt servicing already consuming nearly half of projected revenue, there’s little room for error. Over-reliance on CBN financing could fuel inflation, weaken the naira, and deepen Nigeria’s debt trap, prioritizing repayments over critical investments in infrastructure and social programs.
A Balancing Act
The 2025 budget’s success depends on three key factors: execution, transparency, and curbing wasteful spending. Nigeria must address inefficiencies, such as the incomplete transfer of subsidy removal gains, and prioritize projects that deliver tangible economic benefits. While the government’s ambition is commendable, the World Bank’s warning serves as a sobering reminder of the risks of over-optimism.
What’s at Stake?
For Nigerians, the stakes are high. A well-executed budget could drive infrastructure development, improve security, and lay the groundwork for economic growth. But if revenue shortfalls materialize, increased borrowing could lead to higher inflation, a weaker currency, and reduced funding for essential services. The government must tread carefully to avoid a cycle of debt that hampers long-term progress.
Final Thoughts
Nigeria’s 2025 budget is a bold bet on the country’s potential, but it’s not without risks. The World Bank’s caution underscores the need for realism and discipline in implementation. As Nigeria navigates this critical juncture, transparency and accountability will be key to ensuring that ambition translates into results, rather than deeper fiscal challenges.
What do you think of Nigeria’s 2025 budget? Share your thoughts in the comments below, and stay tuned for more insights on Africa’s economic landscape!
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