The World Bank has raised concerns over Nigeria’s N54.99 trillion 2025 federal budget, warning that ambitious revenue projections could force the Federal Government to resort to Central Bank financing via the controversial Ways and Means facility.
This warning was issued during the public presentation of the World Bank’s latest Nigeria Development Update (NDU) titled “Building Momentum for Inclusive Growth” held in Abuja on Monday.
President Bola Ahmed Tinubu had earlier signed into law the record-high 2025 Appropriation Act, increasing the initial proposal of N49.7 trillion to N54.99 trillion. The budget earmarks N13.64tn for recurrent expenditure, N23.96tn for capital projects, N14.32tn for debt servicing, and N3.65tn for statutory transfers. It projects a deficit of N13.08tn to be financed through domestic and external borrowing.
Key assumptions for the budget include crude oil at $75 per barrel, production of 2.06 million barrels per day, an exchange rate of N1,400/$1, and a 15% inflation target.
World Bank Lead Economist for Nigeria, Mr. Alex Sienaert, said these assumptions appear overly optimistic, despite revenue improvements in 2024. He cautioned that oil production remains around 1.6 million barrels per day—below the budgeted 2.1 million bpd—and that projected earnings from petrol subsidy removal and a proposed windfall tax on FX gains may fall short.
“If the revenue targets are not met, the government may face financing gaps that could result in payment arrears or a return to deficit monetisation,” Sienaert warned. He noted that any large-scale use of the CBN’s overdraft facility would severely undermine efforts to restore macroeconomic stability and confidence in the naira.
The World Bank urged the Federal Government to eliminate electricity subsidies, describing them as “wasteful and regressive.” Sienaert also called for transparency in oil revenue remittance, pointing out that only half of the gains from petrol subsidy removal had reached the Federation Account by January 2025, despite the NNPC using official exchange rates since October 2023.
On inflation, Sienaert acknowledged progress from monetary reforms but said consumer prices remain high. He described inflation monitoring as difficult due to recent CPI changes by the National Bureau of Statistics, stressing the importance of sustained fiscal-monetary coordination.
The World Bank also emphasized the need to scale up the conditional cash transfer program aimed at cushioning reforms. Of the 15 million targeted households promised N25,000 monthly for three months, only one-third had received payments by May 2025.
On structural reforms, the Bank urged reduced governance costs, including limiting non-essential spending like vehicle purchases and foreign training. It recommended improved competitiveness and reviewed trade policies to support private-sector growth, especially access to critical production inputs.
Additionally, the Bank called for more investment in education and healthcare, highlighting Nigeria’s low public spending—1.2% of GDP on education and 1.8% on health in 2022, translating to just $23 and $15 per person, respectively.
Despite the criticisms, Minister of Budget and Economic Planning, Senator Abubakar Bagudu, defended the budget’s projections, rejecting claims that they are unrealistic.
“Is the 2025 budget ambitious? No, it is modest,” he said. He argued that Nigeria’s premium crude grades justify the $75 per barrel benchmark and asserted that the country has both the historical record and capacity to surpass 2.1 million barrels per day.
While the World Bank advocates caution, Bagudu expressed confidence that the government’s assumptions are grounded in economic realities and geared toward growth. The administration remains committed to positioning Nigeria to achieve its ambition of becoming a $1 trillion economy by 2030.
ADEOLA KUNLE
