In a high-stakes clash of economic perspectives, the World Bank has raised red flags over the Federal Government’s record N54.99tn 2025 budget, warning of potential shortfalls that could derail Nigeria’s macroeconomic recovery if not managed prudently. The caution came during the release of the World Bank’s biannual Nigeria Development Update (NDU) report in Abuja, titled “Building Momentum for Inclusive Growth.”
While the budget, signed into law by President Bola Tinubu in December 2024, reflects an audacious plan to fund infrastructure, recurrent obligations, and social welfare, the World Bank insists that critical assumptions underpinning the budget are overly optimistic, and may force the government into deficit financing via the Central Bank’s controversial Ways and Means facility.
With projections pegged at N13.64tn for recurrent spending, N23.96tn for capital expenditure, N14.32tn for debt servicing, and N3.65tn for statutory transfers, the budget envisions a deficit of N13.08tn to be financed through borrowing.
Key assumptions include:
Crude oil benchmark: $75/barrel
Oil production: 2.06 million barrels/day
Exchange rate: N1,400/$
Inflation target: 15%
But the World Bank’s Lead Economist for Nigeria, Alex Sienaert, expressed concerns, noting that current oil output hovers closer to 1.6 million barrels per day—far below the target. He warned that revenue assumptions tied to fuel subsidy removal, exchange rate gains, and windfall taxes might not materialize fully.
“Even with improved revenues, the government’s targets appear stretched. If revenues underperform, the deficit could widen beyond projections, reviving the risk of monetisation through Ways and Means—a move that could destabilise monetary policy,” Sienaert said.
Sienaert urged the elimination of the electricity subsidy, which the Bank labeled “regressive and wasteful.” He also called for:
Improved oil revenue transparency
Prudent governance to reduce bloated administrative costs
Stronger tracking of subsidy removal gains
Acceleration of non-oil revenue initiatives
In his view, despite some progress—such as adopting a market-driven exchange rate and cutting fuel subsidies—Nigeria must take bolder fiscal steps to sustain macroeconomic gains.
Minister of Budget and Economic Planning, Senator Abubakar Bagudu, countered the World Bank’s analysis, insisting the projections are grounded in Nigeria’s economic potential, not fantasies.
“A national budget should reflect aspiration. The oil benchmark is based on our premium crude grades. The country has exceeded 2.3 million barrels per day in the past. We are tasking ourselves to exceed expectations,” Bagudu stated.
He disclosed plans for a nationwide initiative to map economic opportunities across Nigeria’s 8,809 political wards, adding that the budget is aligned with the “Renewed Hope” agenda and Nigeria’s ambition to grow into a $1tn economy by 2030.
Bagudu further argued that key indicators—such as improved revenue-to-GDP and reduced sub-national debt—demonstrate fiscal progress under Tinubu’s leadership.
Central Bank Governor Olayemi Cardoso reaffirmed the Bank’s commitment to orthodox monetary policy, stressing that exchange rate volatility had dropped sharply and inflation was expected to ease.
“Stability is the bedrock of economic recovery. We’ll stay the course and avoid deficit monetisation,” Cardoso said.
Minister of Finance, Wale Edun, acknowledged the need for transparency, especially in oil sector revenues. He stated that the administration is working with agencies like the CBN and FIRS to ensure timely and accurate disclosures to build investor confidence.
“Investment drives productivity and job creation. The private sector must lead, with the government facilitating,” Edun noted.
Representing industry, UAC Foods MD Oluyemi Oloyede warned that inconsistent government policies pose serious risks to long-term investments.
“Policy instability undermines trust. For Nigeria to become a $1tn economy, we need a clear and stable path, especially for exports and industrial policy,” he said.
He cited the one-year delay in registering a Nigerian product for export as a glaring example of systemic inefficiencies frustrating business growth.
On the state level, Plateau State Governor Caleb Mutfwang highlighted a significant rise in internally generated revenue—from N800m to N3bn monthly—but warned that inflation and insecurity are eroding the gains.
“We are investing in agriculture, transport, and education. But security spending is consuming funds that should go to infrastructure,” Mutfwang lamented.
Beyond revenue reforms, the World Bank urged higher spending on health and education, stating that Nigeria lags globally. In 2022, education spending was only 1.2% of GDP, and health 1.8%—equating to $23 and $15 per Nigerian, respectively.
“You cannot build a $1tn economy on underfunded education and healthcare. Human capital must be prioritised.”
The Bank also criticised the slow rollout of the federal government’s targeted cash transfer programme—N25,000 monthly to 15 million vulnerable Nigerians. As of January 2025, only a third had received payments.
The broader economic debate now rests on whether Nigeria can match its fiscal ambition with grounded reforms. While the Tinubu administration maintains that the 2025 budget is realistic and transformative, international observers remain cautious.