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The Federal Government and the World Bank appear to be on a collision course over Nigeria’s record N54.9 trillion 2025 federal budget. The global financial institution describes the fiscal projections as overly ambitious and warns of potential overreliance on central bank financing.
The caution came on Monday during the launch of the World Bank’s latest Nigeria Development Update titled “Building Momentum for Inclusive Growth”, held in Abuja.
President Bola Ahmed Tinubu had earlier signed into law the 2025 Appropriation Act — Nigeria’s largest budget on record — with allocations of N13.64tn for recurrent expenditure, N23.96tn for capital projects, N14.32tn for debt servicing, and N3.65tn for statutory transfers. The fiscal plan anticipates a budget deficit of N13.08tn, to be financed through domestic and foreign borrowing.
Budget assumptions include a $75 per barrel oil benchmark, daily crude production of 2.06 million barrels, an exchange rate of N1,400/$1, and a 15% inflation target.
However, speaking at the forum, the World Bank’s Lead Economist for Nigeria, Mr Alex Sienaert, expressed doubts over the realism of the projections, cautioning that failure to meet revenue targets could push the government toward unsustainable financing options.
“It’s a very ambitious budget. Even with the strong revenue momentum from 2024, some of the targets may be difficult to achieve,” Sienaert said, citing key assumptions such as crude oil output and earnings from subsidy removal and forex windfall taxes as vulnerable to shortfalls.
With current daily oil production hovering around 1.6 million barrels, the World Bank warned that the shortfall could escalate financing needs beyond current projections, potentially forcing a return to the Central Bank’s Ways and Means facility, a practice the government has pledged to avoid.
“The authorities have clearly stated they would not resort to large-scale use of Ways and Means again. But if revenue targets aren’t met, the risk of renewed deficit monetisation looms, which could severely disrupt the country’s fragile macroeconomic recovery,” Sienaert said.
The Bank also reiterated calls for further fiscal reforms, urging the elimination of electricity subsidies, which it termed “wasteful and regressive.” It acknowledged progress made through petrol subsidy removal and a market-determined exchange rate but stressed the need for transparency in oil revenue remittances and cuts to governance costs.
According to Sienaert, while the Nigerian National Petroleum Company Limited (NNPCL) began applying official exchange rates to fiscal transactions in October 2023, only about half of the expected revenue from subsidy reforms had been transferred to the Federation Account by January 2025.
He noted: “It’s important that the full gains from these tough reforms flow into government coffers to support development spending and restore fiscal health.”
On inflation, Sienaert praised recent monetary policy interventions but warned that consumer prices remain elevated. He also noted that changes to the Consumer Price Index have made it harder to track inflation trends accurately, calling for stronger coordination between fiscal and monetary authorities.
Addressing the social impact of reforms, the Bank expressed concern over delays in the government’s cash transfer programme aimed at cushioning hardship among vulnerable households. Of the 15 million targeted beneficiaries, only one-third had received the monthly N25,000 stipend.
“The good news is that the programme is scaling up, but it is critical that momentum is maintained to ensure timely and widespread relief,” Sienaert said.
Looking ahead, the World Bank called for a shift toward a “private-sector-led, public-facilitated” growth model, improved competition policies, and a review of trade restrictions that hamper access to essential production inputs.
It also decried the country’s low investment in human capital, revealing that Nigeria spent just 1.2% of GDP on education and 1.8% on health in 2022 — among the lowest globally.
“In per capita terms, that’s just $23 per Nigerian for education and $15 for health. These figures must improve if Nigeria is serious about achieving its $1 trillion economy goal by 2030,” Sienaert stressed.
In response, Minister of Budget and Economic Planning, Senator Abubakar Atiku Bagudu, defended the 2025 budget projections, dismissing the World Bank’s concerns as unfounded.
“Are the projections ambitious? No, they are modest and well-aligned with Nigeria’s growth potential,” Bagudu said.
He argued that Nigeria’s average crude benchmark of $73 per barrel is justified given the country’s premium crude grades, and maintained that the production target of 2.1 million barrels per day is achievable.
“We have the record and capacity to exceed that figure,” the minister asserted.
The exchange highlights growing tensions between the government’s optimism and the World Bank’s caution, as Nigeria navigates a delicate path toward fiscal consolidation amid ambitious growth targets and mounting social pressures.
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