Nigeria’s National Budget for 2025 is expected to include 47 trillion naira, or roughly $28.18 billion. With a production target of two million barrels per day, the government has predicated its budget estimates on an oil price of $75 per barrel. A deficit of 13.8 trillion naira, or 3.87% of the expected GDP of the nation, will be caused by this budget. The official rate of 1,655 Naira published recently is weaker than the budget’s predicted exchange rate of 1,400 naira to the US dollar. Budget Minister Abubakar Bagudu claims that the nation’s non-oil Revenue sources have been outperforming forecasts, indicating that budgetary initiatives are progressing favourably.
In recent years, Nigeria has experienced severe budgetary difficulties, as seen by ongoing budget deficits, mounting debt, and slow economic expansion. The nation has routinely experienced significant budget deficits; in 2023, the deficit was approximately 10.78 trillion naira, or 4.78% of GDP. By mid-2023, the Debt Management Office (DMO) estimates that the public debt has grown to almost $103 billion as a result of this pattern of deficit financing. These difficulties have been made worse by a mix of ineffective Tax structures, poor oil revenues brought on by volatile world oil prices, and the financial effects of COVID-19.
Economists are wary of the 2025 budget projections.
Historically, almost 90% of Nigeria’s Export revenue comes from the oil industry, but its Volatility has impacted the country’s fiscal stability. Nonetheless, the government has worked hard to diversify the Economy and increase non-oil earnings. Economists are wary of the 2025 budget projections due to Nigeria’s budgetary difficulties. Given the past volatility in the world’s oil markets and the unpredictability of geopolitical circumstances, the projected oil price of $75 per barrel may be overly optimistic.
For instance, shifts in global Supply and Demand have caused price volatility in recent years, with oil prices ranging from $50 to $80 per barrel. The government’s goal of generating two million barrels of oil per day may also be overly ambitious. Nigeria’s oil production has regularly fallen short of goals in recent years due to ageing infrastructure, theft, and Pipeline vandalism. Nigerian National Petroleum Corporation (NNPC) data shows that oil output in 2023 averaged 1.3 million barrels per day, well below the 2 million barrels per day goal.
The significant deficit might result in higher borrowing costs.
Despite being higher than the current official rate of 1,655, the budget’s projection of an exchange rate of 1,400 naira to the US Dollar may also be viewed as unrealistic. Due to the wide discrepancy between the official exchange rate and rates on the black market, as well as Nigeria’s reliance on imports, the country has experienced currency devaluation. To stabilise the naira, the government would need to implement major changes, such as lowering inflation, boosting foreign exchange reserves, and regulating capital outflow. The 2025 budget might have a big effect on important areas including healthcare, education, and infrastructure.
Effective implementation of the additional spending might accelerate the development of infrastructure, including Electricity and road projects, which are essential for economic expansion. The significant deficit, however, might result in higher borrowing costs, which could cut down the amount of money available for social services. Underfunding has been present in recent years, with expenditure on healthcare and Education falling short of what the UN recommends. For example, Nigeria only devoted 5.75 percent of its 2023 budget on education, far less than the 15–25% that UNESCO recommends.
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On the positive side, Nigeria’s non-oil earnings have been rising due to expansion in industries including fintech, telecoms, and agriculture. Revenue has increased as a result of the government’s emphasis on tax reforms and initiatives to curb tax evasion. Nigeria’s Federal Inland Revenue Service (FIRS) reports that Tax Revenue in 2023 was the largest in the country’s history, totalling 10.1 trillion naira. Particularly, the telecom and Technology industries have grown rapidly, boosting non-oil revenue streams and adding to GDP.