Paul Ogbuokiri 
…decry N13.8trn deficit, N15.81trn debt service
President Bola Tinubu, last week, presented to the National Assembly his administration’s 2025 Appropriation Bill of N47.8 trillion, the biggest Naira value budget in Nigeria’s history. In this report, PAUL OGBUOKIRI reports that the budget titled, ‘Budget of Restoration: Securing Peace, Rebuilding Prosperity’, is obviously ambitious but would be hard to realize
Tackling economic hardship
Nigeria plans N47 trillion ($28.18 billion) spending for its 2025 budget, using an assumption of an oil price of $75 per barrel and target production of 2 million barrels per day, the country’s budget minister said last week.
The budget includes a deficit of N13.8 trillion, or 3.87 per cent of estimated GDP, Atiku Bagudu told reporters after a cabinet meeting in Abuja.
The 2025 budget also includes a forecast exchange rate to the U.S. dollar at N1, 400, stronger than its official closing rate of N1, 655 on Thursday.
Bagudu said the government’s fiscal efforts were on track with key non-oil revenue streams performing better than anticipated.
The 2025 budget, titled “Budget of Restoration: Securing Peace, Rebuilding Prosperity,” according to the President Bola Ahmed Tinubu, is central to the Renewed Hope Agenda. He said that the budget was aimed at strengthening key policies designed to restructure the economy, enhance human capital development, increase trade and investment, boost oil and gas production, and ultimately improve Nigeria’s economic competitiveness.
Sunday Telegraph reports that the government aims to use this budget to set the stage for lasting peace, prosperity, and renewed hope, envisioning a Nigeria where every citizen has the opportunity to dream, work, and thrive in safety.
With a revenue forecast of N35 trillion, the 2025 budget projects a deficit exceeding N13 trillion, equivalent to 4 per cent of the nation’s Gross Domestic Product (GDP).
To finance this shortfall, the administration plans to borrow over N13 trillion, comprising N9 trillion in direct borrowings and N4 trillion in project-specific loans.
Lowest budget in 5 years
Analysis of the budget indicates a significant increase of 74.18 per cent, reaching N47.9 trillion in nominal terms, signaling a bold fiscal strategy aimed at addressing persistent infrastructural gaps and development challenges. However, in dollar terms, the budget contracted by 23.22 per cent, dropping from $36.7 billion in 2024 to $28.18 billion in 2025. This reduction in real value limits the potential impact of the budget on economic growth and the well-being of the population.
In a statement signed by the President of Nigeria Economic Summit Group (NES), Adeola Adenikinju, the association said though the budget ws at a record high in naira terms, the effect of naira devaluation has shrunk its value when converted to the U.S. dollars.
“In nominal terms, the 2025 budget is the biggest naira value budget in Nigeria’s history. However, in terms of real purchasing power at constant U.S. dollars, this budget is the lowest since 2018,” the statement read.
Using the prevailing exchange rate of $1/N1, 679 rate, the proposed budget of N47.9 trillion translates to $27.96 billion, a 17.76 drop from the 2024 budget of $34 billion at constant dollar prices.
However, when the N1,400/$ used to peg the budget is computed, the value of the expenditure amounts to $34.14 billion which is still lower than the 2022 budget of N16.39 trillion at $39.8 billion and 2021’s N13.6 trillion at $35.66 billion.
Adenikinju noted that the benchmark exchange rate of N1, 400/USD though ambitious, is considered not fully grounded in the potential fiscal and monetary expectations in 2025 and deviates from major expert projections.
He explained that using this benchmark may require alternative supply sources of high and more stable forex earnings for building high external reserve stocks.
“The risks and uncertainties surrounding dependence on oil export revenue do not justify a sudden rapid appreciation in the naira exchange rate in 2025,” the NES president said.
“Average naira exchange rate projections by leading global financial institutions set the naira exchange rate at a base case scenario of N1,750/$1. From our own analysis, we project a base case exchange rate of N1,850/$1 in 2025,” he added.
Adenikinju recommended revising the oil price benchmark in the proposed budget from the current $75 per barrel to $70/barrel in order to give room for adjustment should there be any major oil price shocks.
The NES explained that a fall in global oil prices is plausible considering Donald Trump’s rhetoric about intensified oil drilling efforts in the USA.
“Oil price of $75/barrel appears to be conservative at current price trends but it fails to account for a potential fall in oil price that may accompany the dousing of geopolitical tension under President Trump’s administration, as well as impact of ongoing rapid energy transition initiatives,” the statement read.
How 2025 budget can unlock Nigeria’s growth potentials
Economists said beyond the decline in the real value of the budget, several key factors will influence whether it can truly unlock Nigeria’s growth potential. Among the factors they listed were:
Revenue Generation: The Federal 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 overtly optimistic. 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.
Debt Management: 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.
Inflation and Exchange Rates: Rising inflation and currency depreciation could erode the purchasing power of the budget, undermining its effectiveness, particularly for essential imports and capital expenditure.
Inclusive Growth: Ensuring that the budget prioritizes job creation, poverty reduction, and social welfare programmes will be key to making growth sustainable and inclusive, benefiting a wider portion of the population.
In conclusion, they said while the nominal increase in the 2025 budget reflects an ambitious policy shift, its success will depend on effective revenue generation, debt management, project execution, and addressing inflation and exchange rate volatility. Without tackling these challenges, the budget’s ability to deliver meaningful growth could be limited.
The economists also noted that the budget’s oil production benchmark set at 2.06 million barrels per day is feasible if the government intensifies its war on oil theft and pipeline vandalism.
N13.8trn budget deficit
The Federal Government is proposing a budget deficit of N13.8 trillion, which marks 3.87 per cent of the GDP, which is above the 3 per cent ceiling set in the Fiscal Responsibility Act of 2007.
NES advised the National Assembly to carry out a review of the country’s budget between 2021 and 2024, noting that the review can help to determine what the acceptable deficit limit is for 2025.
Analysis of current trends suggests that the actual deficit is likely to exceed projections. This is underscored by data from the 2024 budget, which, as of August 2024, indicated a budget deficit already reaching 7.5 percent of GDP.
The NES emphasised the urgent need for a more effective budgetary framework to address Nigeria’s core socioeconomic challenges. Such a framework, they argued, must prioritise pressing macroeconomic issues, including stability, economic growth, job creation, and poverty reduction.
According to Adenikinju, the risks to achieving these goals are deeply rooted in an unfavourable business environment characterised by insecurity, high inflation, naira scarcity and volatility, inadequate power and transport infrastructure, high logistics costs, and weak governance framework.
He noted that addressing these critical issues in the budget could drive capital accumulation, attract substantial foreign direct investment and forex inflows, and empower farmers.
The 2025 budget allocates N7.72 trillion to capital expenditure, representing 16 per cent of total spending—a figure significantly below the 50 per cent benchmark recommended for developing countries.
Adenikinju further said that this low capital investment may have “limited impact on the growth of domestic infrastructure, employment, economic growth, poverty reduction and other welfare indicators highlighted earlier during the budget year.”
Also speaking, the Lagos Chamber of Commerce and Industry (LCCI) noted that in nominal terms, the budget is the highest in the history of the country in Naira denomination. It noted, however, that the proposed 2025 budget aggregates are inherently sensitive to current macroeconomic conditions, as they directly impact revenue generation, expenditure, and overall fiscal performance.
“A review of the key parameters and assumptions on which the 2025 budget is being proposed appears to be too optimistic in the face of current realities as recorded in the economic and social indicators. Particularly, the assumption of an exchange rate at N1,400 is too fragile to work with against the current average of above N1600 to a Dollar in both the official and parallel markets. Assuming an inflation rate at 15.8 per cent does not reflect the unabating factors pushing up both the headline and food inflation. With inflation rising to 33.88 per cent as of October 2024, it is unrealistic to assume a steep 51 per cent crash within a year. Since the current challenging economic conditions are mostly fueled by the inflation rate and the exchange rate, we advise the government to reconsider the apparently over-ambitious assumptions for the 2025 federal budget,” LCCI said in a statement by its director-general, Dr. Chinyere Almona.
She further said that beyond the assumptions and projections, the creation of an enabling environment for the private sector to thrive, and the clarity of policy direction in the economy were critical to achieving the projected growth rate of the Gross Domestic Product (GDP) in 2025.
According to her, with the Federal Government debt already at about N134 trillion as of June 2024, inflation reaching a new high of 33.88 per cent as of October, and businesses burdened with a high Monetary Policy Rate at 27.25 per cent, the Federal Government has a narrow bridge to navigate choices of policy options.
“We urge the Central Bank of Nigeria to sustain its Ways and Means Advances to the Federal Government at a five per cent limit for the fiscal years 2024-2025. The Federal Government should sustain fiscal discipline by complying with the Fiscal Responsibility Act in budget management and borrowing.
“Non-oil revenues, such as taxes, customs duties, and surpluses from government agencies, are all subject to volatility in the economy. Current economic downturns, tense business environment, ongoing debates on tax policies, and shifts in consumer behaviour can impact non-oil revenue performance.
“In the face of current realities, we urge the government at all levels to be more proactive in respect of nature-induced casualties, climate change impacts, and damages caused by human activities. In recent months, we have recorded massive destruction of lives and properties due to Climate-related factors. We therefore expect the legislative arms at all levels of government to appropriate more funds to tackle climate change adaptation and mitigation nationwide,” Dr Aloma said.
Debt servicing
The estimates for debt servicing more than double the budget for education (N3.5trillion) and health (N2.48 trillion) which stands at a combined N5.98trillion.
The N15.81trillion debt servicing also exceeds the estimates for all key spending combined including health (N2.48trn), education (N3.5 trillion), security (N4.9trillion) and infrastructure (N4.06 trillion) which stand at a combined N14.95 trillion.
Addressing a joint session of parliament, President Bola Tinubu said that there was an urgent need to reduce repayments but noted that the 2025 budget proposal had a deficit of N13 trillion representing about 26.1 per cent of the total budget.
President Tinubu is projecting that in 2025, inflation will decline from the current 34.6 per cent to 15 per cent while the exchange rate will improve from approximately N1, 700/$1 to N1,500/$1. The crude oil production will hit 2.06 million barrels per day.
The latest exchange rate expectation is much lower than the 2024 budget proposal, in which Tinubu pegged the currency at N750/$1, an assumption that proved to be completely off the mark.
However, the President said the latest revenue projections are based on a reduced importation of petroleum products, increased foreign portfolio investments, exports, and bumper harvests following improved security.
Too optimistic, not realistic
While the government has touted the budget as a tool to tackling economic hardship and reflate growth, analysts argued that key assumptions such as the exchange rate of N1, 400 to the dollar, an oil output of 2.06 million barrels per day (mbpd), and oil pricing were unrealistic.
An economist, Marcel Okeke, in a telephone interview with the Sunday Telegraph on Thursday said, “The country is already over geared. That means we are borrowing more than we can carry.
“When you question these borrowings, somebody will tell you about infrastructure and then you ask if there is a target on the number of infrastructure that must be constructed within a specific time.
“Nobody gave that target. Like this Lagos-Calabar coastline road; who picked it as a priority project that must be done now? Who is interested in that when the old major roads are left to rot away?
“It is an avoidable pain that is being inflicted whether the people like it or not. Anyways, the N1,400 (foreign exchange rate) is not realistic. If they have pegged it at N1,600, where we are now, it can be accepted, but N1,400 is too optimistic. Again, the pegged price of oil is neither here nor there.” Okeke, who is also a sustainability expert added: “Talking about debt, we are putting ourselves into a bottomless pit in terms of borrowing and piling up debt.
“Some people are already asking; how do you pay back? They just keep borrowing, and the National Assembly is just there to say go ahead.”
Chief Executive Officer of CFG Advisory, Tilewa Adebajo, in a recent interview on ARISE News Channel, highlighted the disconnect between the projections and Nigeria’s fiscal reality.
He questioned the feasibility of further expansion, given the fiscal deficit’s rise from N13 trillion in 2023 to a projected N18 trillion in 2024.
On the exchange rate benchmark, Adebajo warned that N1,400 to the dollar was overly optimistic, saying inflationary pressure and deficit financing could push rates to N1,800 or beyond.
He said: “The real issue is whether we can afford what we’re budgeting for. Revenues for 2024 were projected at N17 trillion, 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 $2.2 billion in external debt financing, $1.7 billion from Eurobonds, and $500 million from the Sukuh programme. Yet, domestic debt has ballooned from N50 trillion to N70 trillion in just one year.“
Combined with external debt nearing $45 billion, 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,” he said
To ease debt pressures, Adebajo proposed selling joint venture oil assets to raise $50 billion.
He said: “If the government pursued balance sheet restructuring, such as selling JV oil assets, it could raise $50 billion to reduce debt and boost efficiency.”
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.
“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,” she said
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.
