written by Springnewsng media limited May 13,2025

The World Bank has cautioned that Nigeria’s N54.9 trillion 2025 federal budget is overly ambitious and may trigger renewed reliance on the Central Bank’s Ways and Means facility to cover potential revenue shortfalls.

Speaking during the launch of its latest Nigeria Development Update titled “Building Momentum for Inclusive Growth” in Abuja on Monday, the Bank warned that projected revenues may fall short of expectations, putting pressure on public finances and threatening economic stability.

President Bola Tinubu had earlier signed the 2025 Appropriation Act—the largest in Nigeria’s history—into law. The budget outlines N13.64 trillion in recurrent spending, N23.96 trillion for capital expenditure, N14.32 trillion for debt servicing, and N3.65 trillion for statutory transfers. The fiscal deficit of N13.08 trillion is to be funded through domestic and external borrowing.

Key assumptions include an oil benchmark of $75 per barrel, daily production of 2.06 million barrels, an average exchange rate of N1,400/$, and an inflation target of 15%.

However, the World Bank’s Lead Economist for Nigeria, Alex Sienaert, expressed skepticism about the feasibility of these assumptions, especially with Nigeria’s current crude oil output hovering around 1.6 million barrels per day.

“It’s a very ambitious budget,” Sienaert said. “If revenue projections fall short, the government may face pressures to resort again to deficit financing through the CBN’s Ways and Means, which could destabilize the naira and derail macroeconomic reforms.”

Despite commitments by the Nigerian government not to use the CBN overdraft facility, Sienaert warned that failure to meet revenue targets might make that inevitable.

The Bank also called for the elimination of what it described as “wasteful and regressive” subsidies—particularly electricity subsidies—and urged further reforms to improve non-oil revenue generation, reduce the cost of governance, and increase transparency in oil revenue reporting.

Sienaert noted that although the Nigerian National Petroleum Company (NNPC) adopted the official exchange rate for transactions in late 2023, only half of the anticipated revenue gains from fuel subsidy removal had been remitted to the Federation Account by January 2025.

On inflation, the Bank acknowledged improvements in monetary policy but warned that consumer price pressures remain high. It emphasized the need for continued coordination between fiscal and monetary authorities to restore economic confidence.

The World Bank also urged faster implementation of the N25,000 monthly cash transfer program aimed at cushioning the impact of recent reforms on 15 million vulnerable Nigerians, revealing that only one-third of beneficiaries had received payments so far.

Furthermore, the Bank recommended adopting a “private-led, public-facilitated” growth strategy, cutting non-essential government spending, and investing more in critical sectors like health and education—where Nigeria’s budget allocations remain among the lowest globally.

In response, Nigeria’s Minister of Budget and Economic Planning, Senator Abubakar Bagudu, rejected the World Bank’s concerns, insisting that the 2025 budget is “modest and realistic.”

He defended the oil production targets, stating, “We have produced over 2.3 million barrels per day in the past, and we have the capacity to exceed the 2.1 million target.”

Bagudu emphasized that the budget reflects Nigeria’s growth potential, not its current limitations. “Budgets should be aspirational,” he said. “Mr. President has challenged all of us to push for results.”

He added that Nigeria’s fiscal health is improving, with rising revenue-to-GDP and expenditure-to-GDP ratios, and revealed that the government will soon launch a national initiative to map economic opportunities in all 8,809 political wards across the country