FG, World Bank Differ On Funding Approach

The World Bank has expressed concerns over Nigeria’s 2025 federal budget, describing it as excessively ambitious and cautioning that the Federal Government may be compelled to rely on the Central Bank of Nigeria’s Ways and Means facility to cover potential revenue deficits.

This caution was issued on Monday during the formal unveiling of the latest edition of the Nigeria Development Update report, titled ‘Building Momentum for Inclusive Growth’, held in Abuja.

President Bola Tinubu recently enacted the 2025 Appropriation Act into law, authorising an unprecedented national expenditure of N54.99tn — the largest budget in the nation’s history. The figure represents an upward adjustment from the original proposal of N49.7tn submitted to the National Assembly.

The financial plan allocates N13.64tn for recurrent costs, earmarks N23.96tn for capital investment, sets aside N14.32tn for debt repayments, and includes N3.65tn for statutory transfers. It anticipates a budget deficit of N13.08tn, which the government intends to finance through a mix of domestic and foreign borrowing.

The assumptions underpinning the budget include a crude oil price benchmark of $75 per barrel, daily oil output of 2.06 million barrels, an average exchange rate of N1,400 per dollar, and a 15 percent inflation goal.

During the event, Mr. Alex Sienaert, Lead Economist for Nigeria at the World Bank, remarked that despite notable revenue performance in 2024, the expectations embedded in the 2025 budget may be difficult to realise.

“It’s an extremely ambitious budget. Even taking into account the positive revenue trends… achieving some of the projected revenue figures will be quite challenging,” Sienaert stated.

He argued that core assumptions, including a daily crude production rate of 2.1 million barrels and the benchmark price of $75 per barrel, may not hold water, pointing out that actual production remains closer to 1.6 million barrels daily.

Sienaert further noted uncertainties surrounding the revenue impact of the removed petrol subsidy and a proposed windfall tax on foreign exchange gains, warning these variables could significantly weaken the government’s revenue position.

“This matters because if the government fails to meet its revenue targets, the resulting funding gap may exceed budget estimates. That could lead to payment arrears or potentially necessitate a return to deficit financing through the Ways and Means facility,” he warned.

Although Nigerian authorities have publicly committed to avoiding CBN overdrafts, Sienaert cautioned that reverting to such practices could destabilise the fragile macroeconomic recovery.

“The government has been clear about its intention not to revert to significant use of Ways and Means. But if that happens, it would severely disrupt efforts to rebuild confidence in fiscal discipline and currency stability,” he said.

The World Bank also urged the Federal Government to discontinue the electricity subsidy, calling it a “wasteful, regressive” expenditure.

Sienaert acknowledged that recent fiscal reforms — including the fuel subsidy removal and adoption of a market-driven exchange rate — have strengthened the government’s fiscal framework, but he emphasised the need for further actions.

“Beyond what has already been done, there remain several fiscal policy issues that require attention… One of them is the ongoing electricity subsidy, which remains inefficient and inequitable,” he said.

He also pushed for better transparency in oil revenues and a reduction in government overheads, highlighting the necessity of continued efforts to boost non-oil income streams.

While noting that the Nigerian National Petroleum Company Limited began using official exchange rates for remittances in October 2023, Sienaert pointed out that by January 2025, only half of the anticipated revenues from the fuel subsidy removal had been credited to the Federation Account.

“It’s critical to closely monitor these developments and ensure that all revenue gains from the subsidy removal are fully realised. This is essential to support sustainable public finances and development-oriented spending,” he explained.

Touching on inflation, Sienaert credited monetary reforms for easing price pressures but conceded that inflation remained elevated. “There’s no denying that inflationary pressures are still significant,” he said. “To use a military analogy — it’s like being in a dense fog of war.”

He noted that recent changes in the Consumer Price Index methodology by the National Bureau of Statistics have made inflation trends harder to interpret but stressed the importance of continued collaboration between fiscal and monetary authorities.

The World Bank also called for faster execution of the government’s targeted cash transfer programme, which offers N25,000 monthly for three months to 15 million low-income recipients.

“Implementation has been sluggish. So far, only about one-third of the recipients have actually received payments. The positive news is that scaling efforts are underway — but it’s important to maintain momentum so support reaches those in need,” Sienaert said.

Looking forward, he advocated a new economic model centred around “private-sector-led, government-facilitated” growth.

The World Bank further recommended curbing non-essential government expenditures such as vehicle procurements and overseas training, and cutting the cost of revenue collection by agencies like the FIRS, NCS, NMDPRA, and NUPRC.

He also underscored the urgent need for increased funding for education and healthcare, noting that Nigeria ranks among the lowest globally in terms of public investment in these areas.

“In 2022, Nigeria allocated just 1.2 percent of GDP to education and 1.8 percent to health — translating to $23 and $15 per Nigerian per year respectively,” Sienaert said.

The economist called for stronger private sector participation through improved competition and a review of restrictive trade policies.

“Competition is the secret ingredient that fuels innovation and transformation. Yet, compared to peer countries, Nigeria lags behind in fostering a competitive business environment,” he added.

The Bank believes that adhering to these reform recommendations will position Nigeria to achieve its target of becoming a $1tn economy by 2030.

In response, Minister of Budget and Economic Planning, Senator Abubakar Bagudu, refuted the World Bank’s assessment that the 2025 budget is overly ambitious, asserting that the projections are realistic and commensurate with national potential.

While Mr. Sienaert had earlier described the budget targets as ambitious and warned of possible resort to monetary financing, Bagudu countered that the figures are achievable.

“Are the budget’s targets ambitious? Not at all. They are modest,” the minister insisted. “The assumption is $73 per barrel, which reflects our premium grades, even when others mention $60.”

On oil output estimates, which the Bank questioned, Bagudu maintained that Nigeria has both the history and capacity to exceed the 2.1 million barrels per day benchmark.

“We’ve surpassed 2.3 million barrels per day in the past. The Petroleum Minister often reiterates that our technical and fiscal capacity is even higher,” he said. “We are therefore justified in setting such production targets.”

The minister argued that national budgets should reflect potential, not limitations.

“A budget should express our aspirations, not our indulgences. The President has made it clear — everyone must rise to the occasion,” Bagudu stated.

He cited progress in Nigeria’s fiscal performance, with increases in both revenue-to-GDP and expenditure-to-GDP ratios — metrics essential for inclusive growth.

“These ratios are climbing, and that’s crucial for inclusion,” he said. “Sub-national debt has even declined, creating more fiscal room.”

Bagudu disclosed that a national programme to map economic opportunities in all 8,809 political wards will soon be launched, underlining the administration’s long-term development approach.

“This initiative will ensure all tiers of government collaborate in unlocking the potential within every ward,” he explained. “Cash transfers alone won’t create jobs — we must identify where opportunities exist.”

He clarified that recent poverty statistics reflected conditions before the administration’s reforms and should be seen as a call to action, not a verdict.

He also defended the independence of the National Bureau of Statistics following its methodology revision for calculating inflation, adding that the data agency’s enhanced framework supports better macroeconomic management.

Commending the current reform efforts, Bagudu reaffirmed the Tinubu administration’s commitment to economic transformation and stated that Nigeria’s trajectory aligns with its $1tn economy goal.

“The findings in this report affirm the validity of our macroeconomic roadmap under the Renewed Hope agenda,” he said. “The reforms are already producing measurable outcomes.”

At a subsequent high-level panel session, government officials, private sector leaders, and sub-national representatives reiterated their resolve to maintain the reform momentum despite enduring structural challenges.

Finance Minister and Coordinating Minister of the Economy, Mr. Wale Edun, acknowledged recent macroeconomic improvements but stressed the need for enhanced transparency, particularly in oil revenue disclosures.

“There’s still work to be done to ensure comprehensive transparency — especially in fiscal and oil-related data,” Edun stated.

He noted that revenue-generating bodies, including the CBN, are now required to produce timely and reliable fiscal reports.

“Investment is key. That’s what drives productivity, growth, job creation, and poverty reduction on a massive scale,” Edun added.

He highlighted growing investor interest in sectors like telecommunications and manufacturing, suggesting a renewed appetite for Nigerian opportunities.

From the monetary policy perspective, CBN Governor Mr. Olayemi Cardoso reaffirmed the Bank’s commitment to orthodox policy tools, pledging to maintain financial and price stability.

“No economy can grow without stability. We know our responsibility and are acting to uphold it,” Cardoso stated.

He said exchange rate volatility had dropped from around 4 percent to under 0.5 percent, expressing confidence that inflation would further decline with continued reforms.

“If we stay the course with orthodox monetary policy, inflation will ease, and this will eventually bring down interest rates,” he said.

Minister of Communications, Innovation and Digital Economy, Dr. Bosun Tijani, highlighted the sector’s reform gains, noting that foreign direct investment in Q1 2024 had risen nearly tenfold compared to Q1 2023.

“In Q1 2023, the sector attracted $22 million; by Q1 2024, that figure had reached nearly $200 million,” he said.

He revealed that telecom operators had placed over $1bn in orders for new equipment, with shipments expected from June, and disclosed a $2bn government investment in a national fibre-optic infrastructure — supported by a $500m World Bank loan.

“If we succeed in deploying 90,000km of fibre network, we can upgrade our towers and deliver world-class broadband,” Tijani added.

At the sub-national level, Plateau State Governor Caleb Mutfwang acknowledged increased revenues but noted they were being offset by inflation and insecurity.

“Yes, allocations have risen, but so have the costs of living and service delivery,” he explained.

Mutfwang shared that Plateau had increased its internally generated revenue from N800 million to N3 billion monthly and was investing in transport, agriculture, and education to alleviate hardship.

“We’re making strategic investments — including transport subsidies and railway revival — but insecurity is draining funds that would otherwise go to infrastructure,” he said.

Representing the private sector, UAC Foods Managing Director Mr. Oluyemi Oloyede urged government to establish a stable policy environment to support long-term investment.

“You talk about a $1tn economy by 2030 — what’s the concrete roadmap?” he queried. “Frequent policy reversals erode investor confidence.”

He also called for export reform, faster regulatory processes, gas sector expansion, better access to capital, and a nationwide embrace of excellence.

“We must pursue excellence relentlessly, even as we focus on progress over perfection,” Oloyede concluded.

The session wrapped up with a consensus on the need for sustained reforms, efficient governance, and enhanced multi-sector coordination to drive inclusive, private-sector-led economic growth.

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