Nigeria’s 2025 budget is the lowest since 2018, economists say

Nigeria’s proposed N47.9 trillion 2025 budget is the lowest the country has had since 2018 in dollar terms, according to the Nigerian Economic Society (NES).

In a statement signed by Adeola Adenikinju, president of NES, and seen by BusinessDay on Tuesday, the association said though the budget is 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 exports 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.

Revise oil price benchmark to $70 per barrel

Adenikinju recommended revising the oil price benchmark in the proposed budget from the current $75 per barrel to $70 per 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.

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.

“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 many accompany the dousing of geopolitical tension under President Trump’s administration, as well as impact of ongoing rapid energy transition initiatives,” the statement read.

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.

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, 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 argue, must prioritise 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 characterised by insecurity, high inflation, naira scarcity and volatility, inadequate power and transport infrastructure, high logistics costs, and weak governance.

Adenikinju 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.

Adenikinju 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.”