- Say N47.9trn revenue projection, N1, 400 benchmark exchange rate unrealistic
- ‘N18trn budget deficit shows disconnect between projections, fiscal reality’
- Delay in transmitting 2025 proposal to NASS threatens budget cycle – Analysts
Economic experts and analysts have raised serious concerns about the Federal Government’s 2025 budget proposal, citing unrealistic projections and a widening fiscal gap that could exacerbate the country’s economic woes.
They warned that the assumptions underpinning the budget could exacerbate fiscal instability and deepen the country’s financial woes.
The Federal Executive Council chaired by President Bola Tinubu had on Thursday approved the Medium Term Expenditure Framework for the 2025- 2027 fiscal period.
Based on the approval, the key assumptions for the 2025 budget includes an oil price benchmark of $75 per barrel, oil production of 2.06 million barrels per day, as well as an exchange rate of N1,400 to $1, and Gross Domestic Product growth rate of 4.6 per cent.
The aggregate expenditure is estimated at N47trn, and this includes a borrowing of N13.8trn, which is 3.87 per cent of estimated expenditure.
Key highlights of the proposed budget include a N47.9trn revenue target, and a staggering N18trn deficit, which experts argue reveal a worrying disconnect between fiscal projections and economic realities.
Speaking on the development, the Registrar of the Institute of Finance and Control of Nigeria, Godwin Eohoi believes that the N47.9trn revenue target is unattainable given Nigeria’s historical struggle to meet similar goals.
He told THE POINT that persistent issues such as oil theft, weak non-oil revenue growth, and limited tax collection capacity have raised doubts about the feasibility of this projection.
He said, “The proposed N1, 400 to the dollar exchange rate is seen as a miscalculation, given the volatility of the naira in parallel markets and a persistent forex shortage.
“The N18trn deficit, one of Nigeria’s highest on record, raises alarms about the government’s ability to finance its spending. This deficit underscores a reliance on unsustainable borrowing, creating long-term fiscal risks.”
“There have been lots of predictions on further depreciation of the naira unless structural reforms bolster foreign exchange inflows.
“The N18trn deficit, one of Nigeria’s highest on record, raises alarms about the government’s ability to finance its spending. This deficit underscores a reliance on unsustainable borrowing, creating long-term fiscal risks.”
With new external loans proposed to bridge the funding gap, Eohoi explained that concerns over Nigeria’s debt sustainability have intensified.
“Debt servicing already consumes more than 70 per cent of the nation’s revenue, leaving little room for investment in critical sectors.
“I urge the government to adopt more realistic fiscal assumptions, prioritize non-oil revenue generation, and address inefficiencies in public spending.
“Structural reforms, such as tackling oil theft, diversifying the economy, and enhancing tax compliance, are viewed as critical steps to reduce reliance on debt financing,” he added.
Also speaking with THE POINT, an Abuja based developmental economist, Afeez Balogun, called for a significant overhaul to align the budget parameters with Nigeria’s economic realities.
Without such adjustments, he warned that the 2025 budget could push the country closer to a fiscal crisis, undermining efforts to restore economic stability.
He said, “In terms of crude oil production, they are projecting two million barrels per day. We can say this two million is realistic if they ramp it up since they have already achieved up to 1.8 million barrels per day as of November 12.
“Then, for the exchange rate of N1,400, I think that one is a very tough call, because it’s hitting about N2,000 to $1, and from the way things are going, we’ve not been able to see any indication that it is going to improve in the near term. So this may actually be a bit ambitious.
“For the 4.6 percent GDP growth rate, we struggled to do 2.3 per cent in the last quarter. Also, remember that the CBN is pursuing a contractionary monetary policy. So, if I look at that, it might be difficult for us to achieve this 4.6 per cent.”
The Chief Executive Officer of CFG Advisory, Tilewa Adebajo in an interview, highlighted the disconnect between the projections and Nigeria’s fiscal reality.
He said, “The real issue is whether we can afford what we’re budgeting for. Revenues for 2024 were projected at N17trn, but we consistently implemented only half the budget due to shortfalls.
“If you cannot fund your plans, you carry deficits forward, a cycle we’ve seen repeatedly. The budget’s effectiveness depends on realistic revenue projections.
“For example, the finance minister mentioned raising $2.2bm in external debt financing, $1.7bn from Eurobonds, and $500m from the Sukuh programme. Yet, domestic debt has ballooned from N50trn to N70trn in just one year.
“Combined with external debt nearing $45bn, debt sustainability is a concern. Despite recent reforms, like fuel subsidy removal and foreign exchange liberalisation, the revenue increases expected from these measures haven’t materialised. The economy is still in stagflation. We need to address the issue of fuel pricing.
“While development commissions serve critical needs, you cannot sustainably budget for initiatives you cannot finance. If you continue to do that, you are going to continue carrying deficits.
“The government must demonstrate the impact of these allocations. For example, oil production was targeted at 1.8 million barrels per day, yet this is not reflected in foreign reserves or the Federation Account. Transparency is lacking.”
To ease debt pressures, Adebajo proposed selling joint venture oil assets to raise $50bn.
He said, “If the government pursued balance sheet restructuring, such as selling JV oil assets, it could raise $50bn to reduce debt and boost efficiency.”
Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, argued that GDP growth projections of 4.6 per cent appeared optimistic, given recent performance and current policies.
“To assess the potential of the budget is to look at the assumptions of the budget. The first one has to be the price of all our $75 that they are projecting and based on what’s happening now, it seems as if it is realistic, but the truth of the matter is that a lot of things that will happen in the world market depends on the stance of Donald Trump when he gets to power in January.
“If he really goes tough on the Middle East, all prices might soar higher. Although he has mentioned that his plan is to reduce oil prices as part of the measures to reduce inflation in America. So, if it goes about that he might actually even increase more supply into the market, and the oil prices will crash. Based on that, $75 may be too high.
“In terms of crude oil production, they are projecting two million barrels per day. We can say this two million is realistic if they ramp it off. However, the main question is the 1.8 million barrel they claim, how verifiable is it? Because now, over the last couple of months, we’ve seen the NNPC working back on some of their statements.
On her part, Head of Research at Parthian Partners, Olufunmilola Adebowale, noted that although the budget represents a 74.18 per cent nominal increase, its real value has declined by 23.22 per cent in dollar terms due to inflation and currency depreciation.
She said, “The government aims to generate over N30 trillion in revenue, underpinned by an oil price target of $75 per barrel and a production target of 2.06 million barrels per day (mbpd). While the oil price target is reasonable, the production target of 2.06mbpd appears overly optimistic.
“About six weeks to the end of the 2024 fiscal year, the Federal Government has yet to transmit the 2025 proposed expenditure to the National Assembly, raising concern among experts as to Nigeria’s ability to maintain the January-December budget cycle.”
“OPEC reported Nigeria’s oil production reached just 1.4mbpd in October, well below the target. Although production is expected to rise due to efforts to combat theft and pipeline vandalism, achieving the 2mbpd target in the short term seems unlikely.
“The government’s ability to manage its debt will be crucial in determining the space available for growth-enhancing spending. Excessive borrowing without a clear repayment plan could further exacerbate the nation’s debt burden.”
On inflation and exchange rates, she noted that rising inflation and currency depreciation could erode the purchasing power of the budget, undermining its effectiveness, particularly for essential imports and capital expenditure.
Furthermore, on inclusive growth, she said, “Ensuring that the budget prioritises job creation, poverty reduction, and social welfare programmes will be key to making growth sustainable and inclusive, benefiting a wider portion of the population.”
The Lead Director of Centre for Social Justice, Eze Onyekpere in his reaction, said though it is too early to comment as the details are not yet made public, the N47.9 is approximately N48 trillion which is equivalent to $28.2 billion at an exchange rate of N1,700/$.
“Nothing to cheer about,” he said. “Check the budget of peers like South Africa and Egypt and you will know we are joking in the name of budgeting. No hope in the renewed hope after putting Nigerians through unprecedented misery.”
Nigerians had expressed worry over the delay in the submission of the MTEF 2025-2027 to the National Assembly few weeks to the end of the year, a situation they fear may also delay the presentation of the 2025 budget to the National Assembly and affect the quality of debate on the budget.
The Fiscal Responsibility Act mandates the Minister of Budget and Economic Planning to, before the end of the second quarter of each financial year, present the Medium-Term Expenditure Framework to the Federal Executive Council for consideration and endorsement.
Thereafter, the MTEF as endorsed by the FEC shall take effect upon approval by a resolution of each House of the National Assembly.
If that provision was observed, the MTEF 2025-2027 should have been endorsed by the Federal Executive Council by the end of June 2024 and should have been presented to the National Assembly in August 2024.
Professor of Accounting and Financial Development, Lead City University, Ibadan, Professor Godwin Oyedokun, said the late approval of the MTEF for 2025-2027 by the Federal Executive Council is a cause for concern for several reasons because, according to him, it compromised the budgetary process.
“The late approval significantly undermines the quality of the budgetary process. It limits the time available for thorough scrutiny, analysis, and public input,” he said.
He said the Lawmakers may be forced to rush through the budget approval process, increasing the risk of errors and omissions.
However, he said it is important not to sacrifice quality scrutiny on the altar of meeting deadlines.
According to him, “Even if the budget proposal came late, lawmakers should conduct a thorough review of the budget proposal, paying close attention to revenue projections, expenditure allocations, and debt sustainability.
“They should engage with civil society organizations, experts, and the public to gather feedback and ensure that the budget aligns with the needs of the people. And of course they should ensure that the budget adequately funds critical sectors such as education, healthcare, and infrastructure.”
About six weeks to the end of the 2024 fiscal year, the Federal Government has yet to transmit the 2025 proposed expenditure to the National Assembly, raising concern among experts as to Nigeria’s ability to maintain the January-December budget cycle.
Experts and some lawmakers argue that the delay could have significant implications for the country’s financial planning by either disrupting the budget cycle, while an attempt to fast-track the process could pave the way for ministries, departments, and agencies to exploit the situation to insert projects outside their mandates, ultimately leading to a waste of public resources.
BudgIT, a civil tech organisation, disclosed that the National Assembly inserted 7,447 constituency projects worth N2.24 trillion in the 2024 budget.
According to BudgIT, these projects have no national significance but are narrowed to personal interests.
The Stakeholder Manager at BudgIT, Andrew Orlando, observed that the insertions were part of the reasons the 2024 budget performed poorly and did not have the necessary impact on the lives of the citizens.
In his assessment, the 2024 budget’s effectiveness was limited, performing at only 30 percent in terms of impact, partly due to insufficient scrutiny.
Currently, the National Assembly is on recess and will resume on November 19, leaving the executive and legislature with about six weeks to scrutinise and pass the budget if they are to meet the January-December cycle.
While President Bola Tinubu has been commended for sticking to this cycle, he, however, presented the Medium-Term Expenditure Framework, Fiscal Strategy Paper and 2025 Budget Estimates late.
For instance, the 2024 estimates were only submitted at the end of November last year.
This practice violates Section 11(1)(b) of the Fiscal Responsibility Act, 2007 which stipulates that “The Federal Government must, not later than four months before the commencement of the next financial year, cause to be prepared and laid before the National Assembly an MTEF for the next three financial years.”
Last year, lawmakers complained that the 2024 budget was presented late which gave MDAs limited time to defend their estimates. Some lawmakers have again expressed their displeasure at the delayed presentation of annual budget proposals to the parliament, which leaves them little time for adequate review.
According to Billy Osawaru, representing Orhionmwon/Uhunmwode Federal Constituency, Edo State, the late arrival of annual budget proposals allows MDAs to short-change Nigerians.
The minority leader, Kingsley Chinda, also emphasised that unless budget estimates arrive on time, legislators would struggle to scrutinise the budget in the public interest.
“We were practically rushed into completing work on the 2023 budget just to meet up with the January – December cycle. By now, the MTEF should have been with us”, he said.
The head, research and policy advisory at BudgIT Nigeria, Iniobong Usen, said the MTEF ought to be sent to the National Assembly at least two months before the budget is issued, as it provides insights, a sense of direction into the government’s priorities for the coming fiscal year.
“It’s a major concern because global best practice recommends that the budget gets to the parliament at least two months before the end of the fiscal year. Anything short of that would be too late and would only allow a little time for the parliament to do justice to the budget,” he said.
Reflecting on the 2024 budget, Usen noted it had minimal impact despite the government’s claim of increased revenue.
Tagged the “Budget of Renewed Hope,” the 2024 budget allocated N27.5 trillion, with non-debt recurrent spending set at N9.92 trillion, debt servicing at N8.25 trillion, and capital expenditure at N8.7 trillion.
However, in the first half of 2024, only N1.84 billion out of N9 trillion capital allocations had been utilised, with some MDAs still awaiting funds for capital projects, according to the Senate.
