The World Bank has raised red flags over Nigeria’s 2025 federal budget, describing it as overly ambitious and cautioning that the Federal Government may resort to borrowing from the Central Bank of Nigeria (CBN) through the Ways and Means facility if projected revenues fall short.
This warning was issued on Monday during the launch of the Bank’s latest Nigeria Development Update report titled “Building Momentum for Inclusive Growth” in Abuja.
President Bola Tinubu recently signed the record N54.99 trillion 2025 Appropriation Act—the largest budget in the nation’s history—following its increase from an initial N49.7 trillion proposal. The budget outlines N13.64 trillion in recurrent spending, N23.96 trillion for capital projects, N14.32 trillion for debt servicing, and N3.65 trillion in statutory transfers. A projected deficit of N13.08 trillion is expected to be covered by both domestic and foreign borrowing.
Key assumptions driving the budget include a crude oil benchmark price of $75 per barrel, daily oil production of 2.06 million barrels, an average exchange rate of N1,400 to the dollar, and an inflation target of 15 percent.
However, World Bank Lead Economist for Nigeria, Mr. Alex Sienaert, expressed concerns over the feasibility of these projections. “It’s a very ambitious budget. Even with strong revenue performance in 2024, it will be difficult to meet these targets,” he said.
Sienaert highlighted challenges in meeting the oil production target, noting that actual daily output has hovered around 1.6 million barrels per day. He also pointed to uncertainties around the removal of the petrol subsidy and a proposed windfall tax on foreign exchange gains, which may not generate the expected revenue.
If revenue expectations fall short, Sienaert warned, the government may face pressure to return to deficit monetisation—borrowing directly from the CBN—despite previous commitments to avoid such a move.
“Were that to happen, it would be extremely disruptive to rebuilding confidence in fiscal sustainability and the naira,” he said.
The World Bank also urged the government to phase out what it described as a “wasteful, regressive” electricity subsidy, while praising earlier reforms such as petrol subsidy removal and a more market-reflective exchange rate. Sienaert emphasized the importance of continued reforms, including better transparency in oil revenue reporting, improved fiscal discipline, and cost-cutting across government.
He criticized low investments in key sectors, stating, “In 2022, Nigeria spent only 1.2% of GDP on education and 1.8% on health—about $23 and $15 per person per year, respectively.”
Sienaert further recommended that Nigeria intensify efforts to boost non-oil revenue and reduce the cost of governance, particularly in curbing excessive spending on non-essential items like vehicles and overseas training.
He also highlighted the need to improve the transparency of the Nigerian National Petroleum Company Limited (NNPCL), noting that only half of the revenue gains from subsidy removal had reached the Federation Account by early 2025.
On inflation, he said price pressures remain high despite recent monetary tightening. He stressed the importance of fiscal and monetary policy coordination to restore macroeconomic stability.
Meanwhile, he noted the slow rollout of the government’s targeted cash transfer programme, which pays N25,000 monthly for three months to 15 million low-income Nigerians. “Only about a third of recipients have received payments so far,” he said, calling for accelerated implementation.
The Bank believes that a private-sector-led growth strategy, underpinned by public sector support and competition reforms, is key to achieving Nigeria’s ambition of becoming a $1 trillion economy by 2030.
Government Pushes Back
Responding to the World Bank’s concerns, Minister of Budget and Economic Planning Senator Abubakar Bagudu defended the 2025 budget, arguing that its projections are realistic and aligned with Nigeria’s potential.
“Is the projection ambitious? No, they are modest,” Bagudu said, citing Nigeria’s past crude oil output exceeding 2.3 million barrels per day and noting that current oil prices support the budget assumptions.
He added that budgets should reflect aspirations, not just current realities. “A budget should reflect our potential. Mr. President made it clear—we are all being challenged to give our best.”
Bagudu also cited improvements in fiscal metrics, including increased revenue-to-GDP and expenditure-to-GDP ratios, as evidence of progress.
He revealed that the administration is launching a national programme to map economic opportunities across all 8,809 political wards to spur inclusive growth. “Cash transfers don’t create jobs by themselves. We must identify local opportunities for employment and enterprise,” he said.
On poverty data showing high deprivation, Bagudu clarified that the figures predated President Tinubu’s reforms and should serve as a call to action.
He also noted updates to the inflation tracking methodology by the National Bureau of Statistics, which he said reinforced the agency’s independence.
Other Stakeholders Reaffirm Reform Commitment
Finance Minister Wale Edun stressed the need for more transparency in oil revenue and fiscal data, saying it is crucial for investor confidence and effective policy. “Investment is what grows the economy and creates jobs that lift Nigerians out of poverty,” he said.
CBN Governor Olayemi Cardoso reaffirmed the Bank’s commitment to orthodox monetary policy and said inflation should moderate over time. He also noted a decline in exchange rate volatility, from 4% to under 0.5%.
Minister of Communications, Innovation, and Digital Economy Dr. Bosun Tijani said reforms had led to a surge in foreign investment in the tech sector—from $22 million in Q1 2023 to nearly $200 million in Q1 2024. He announced major investments in fiber-optic infrastructure, backed by a $500 million World Bank facility.
Plateau State Governor Caleb Mutfwang acknowledged increased revenue to sub-nationals but said rising inflation and insecurity had eroded purchasing power. He cited state-level investments in transport, agriculture, and education to cushion economic shocks.
From the private sector, UAC Foods Managing Director Mr. Oluyemi Oloyede urged the government to ensure policy consistency and avoid midstream changes that discourage investors.
“You say you want a $1 trillion economy by 2030—what’s the roadmap? We need stability to invest,” he said, calling for reforms to boost exports, reduce bureaucracy, and encourage innovation.
The event concluded with consensus among stakeholders on the need to deepen reforms, enhance governance, and foster stronger coordination to sustain economic recovery and growth.
