The Nigerian Economic Summit (NES) has tasked the Federal Government to revise oil price benchmark in the proposed 2025 budget from $75 to $70 per barrel.
This was contained in a statement on the 2025 Federal Government budget proposal, featuring analysis and a series of recommendations for the executive and legislative arms of the Federal government.
The statement signed by Adeola Adenikinju, president of the Nigerian Economic Society (NES), recommended revising the oil price benchmark in the proposed budget from the current $75 per barrel to $70 per barrel. The statement read, “It is recommended that the 2025 oil price benchmark should be revised down to about $70 per barrel to facilitate easier adjustment to any major oil price shock.”
It was noted that a fall in global oil prices is plausible considering Donald Trump’s rhetorics about intensified oil drilling efforts in the USA. 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.
As of November 18, Brent Crude futures were trading around the $73 per barrel region, with the Nigerian crude oil variety Bonny Light trading around the $80 mark. With US oil production projected to hit 14 million barrels per day in 2025, as well as the stoppage of OPEC+ oil production cuts by 2025 end, analysts have projected that oil may fall to as low as $40 per barrel in 2025.
In the statement released by NES, it was noted that the benchmark exchange rate of N1, 400/$ was a deviation from expert projections. According to the statement, the exchange rate appears “ambitious”, and is not “fully grounded in the potential fiscal and monetary expectations”. NES notes that their analysis projects that base exchange rate of N1, 850/$ in 2025, while analysts from other global financial institutions project the exchange rate to hit N1, 750/$.
Another theme that was strongly considered was the budget deficit. The FG is proposing a budget deficit of N13.8 trillion, which marks 3.87 percent of the GDP, which is above the 3 percent 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, indicates a budget deficit already reaching 7.5 percent of GDP.
In the statement, NES emphasized the urgent need for a more effective budgetary framework to address Nigeria’s core socioeconomic challenges. Such a framework, they argue, must prioritize pressing macroeconomic issues, including stability, economic growth, job creation, and poverty reduction.
The risks to achieving these goals are deeply rooted in an unfavourable business environment characterized by insecurity, high inflation, naira scarcity and volatility, inadequate power and transport infrastructure, high logistics costs, and weak governance. It was 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 percent of total spending, a figure significantly below the 50 percent benchmark recommended for developing countries. It was noted 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.”
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