FG, World Bank At Odds Over Funding Strategy

The World Bank has described Nigeria’s 2025 federal budget as overly ambitious, warning that the Federal Government may be forced to turn to the Central Bank of Nigeria’s Ways and Means facility to finance likely revenue shortfalls. The Bank gave this warning on Monday during the public presentation of its latest Nigeria Development Update report titled ‘Building Momentum for Inclusive Growth’ in Abuja. The budget was raised from the initial proposal of N49.7tn submitted to the National Assembly.

The fiscal plan makes provisions for N13.64tn in recurrent expenditure, N23.96tn for capital projects, N14.32tn for debt servicing, and N3.65tn for statutory transfers, while projecting a deficit of N13.08tn, to be financed through domestic and external borrowing. The budget assumptions include a crude oil benchmark of $75 per barrel, oil production at 2.06 million barrels per day, an average exchange rate of N1,400/$, and an inflation target of 15 per cent.

Speaking at the event, the World Bank’s Lead Economist for Nigeria, Mr Alex Sienaert, said that despite strong revenue gains recorded in 2024, Nigeria’s 2025 budget assumptions remain optimistic and may prove difficult to meet.

According to him, key assumptions such as average daily crude oil production of 2.1 million barrels per day and a benchmark oil price of $75 per barrel are unlikely to hold, noting that current production figures are closer to 1.6 million barrels per day. He also cited uncertainty over how much revenue would flow from the removal of the petrol subsidy and the planned windfall tax on foreign exchange gains, saying these could weaken the Federal Government’s revenue position.

Sienaert warned that although Nigerian authorities had pledged not to resort to the CBN’s overdraft facility, doing so again could derail the country’s fragile macroeconomic recovery.

“There’s still a range of fiscal policy and fiscal management issues where more can be done to safeguard the gains that have already been achieved… just to name, there is still one kind of wasteful regressive subsidy, which is the electricity subsidy. So work to address that,” he said.

He also advocated for improved oil revenue transparency and a reduction in the cost of governance, saying efforts to increase non-oil revenue must continue.

Sienaert noted that although the Nigerian National Petroleum Company Limited began applying official exchange rates for fiscal transactions in October 2023, only half of the revenue gains from the subsidy removal had been remitted to the Federation Account by January 2025.

On inflation, the World Bank economist said monetary policy reforms had helped reduce inflationary pressures but noted that consumer prices remained high.

“We do need to acknowledge that price pressures remain elevated,” he said. “The battle against inflation continues, and to extend the military analogy a little bit, there’s a kind of fog of war… quite dense just at the moment.”

He added that recent changes to the Consumer Price Index by the National Bureau of Statistics had made it difficult to determine the current trend in inflation, noting, however, that continued coordination between fiscal and monetary authorities would be critical to restoring confidence.

The World Bank further urged the government to ramp up implementation of its targeted cash transfer programme aimed at cushioning the cost of reforms on poor households. The programme currently offers N25,000 monthly for three months to 15 million recipients.

Looking ahead, he called for a new growth strategy based on a “private-led, public-facilitated” model.

The World Bank also stressed the need to reduce costs of governance, including cutting “wasteful expenditures that are not essential, such as purchase of vehicles, external training, etc.” and reducing “the cost of collection of GOEs (FIRS, NCS, NMDPRA, NUPRC, etc.).”

He emphasised the need for increased investment in education and health, noting that Nigeria’s combined spending in these sectors remained among the lowest globally.

He said private sector growth must also be supported by improving the competitive landscape and reviewing trade policies that restrict access to essential production inputs.

The Bank believes that following through with these reforms will position Nigeria to achieve its goal of becoming a $1tn economy by 2030.

Speaking at the event, the Minister of Budget and Economic Planning, Senator Abubakar Bagudu, has faulted the World Bank’s claim that Nigeria’s 2025 budget is overly ambitious, insisting that the projections are modest and aligned with the country’s growth capacity.

While the World Bank’s Lead Economist for Nigeria, Mr Alex Sienaert, had earlier described the 2025 fiscal projections as “very ambitious” and warned of possible recourse to deficit monetisation, Bagudu took a different view.

“Is the projection of the 2025 budget ambitious? No, they are not,” the minister said. “They are all modest. Because even in the presentation, two things were said — some oil prices are about $60, but the average for Nigeria is $73 because of our premium grades.”

On crude oil production, which the World Bank said was likely overstated in the budget at 2.1 million barrels per day, Bagudu insisted Nigeria has both the record and capacity to exceed that.

He argued that budgets should be aspirational and not constrained by present challenges. A budget should not be a reflection of our indulgences. It should be a reflection of our potential. Mr President made it clear — all of us are going to be challenged to give our best,” he said.

Bagudu also addressed recent poverty data that showed high deprivation levels in Nigeria. He clarified that the figures predated the current administration’s reforms and urged Nigerians to see them as a motivation for action rather than an indictment.

The minister also noted that the National Bureau of Statistics had updated its methodology for tracking inflation through the Consumer Price Index, making comparisons difficult but reinforcing the agency’s independence.

Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, acknowledged the stabilising gains made since mid-2023 but said Nigeria must still push for greater fiscal transparency, especially in oil revenue reporting. He noted that the government had begun working with revenue-generating agencies, including the Central Bank of Nigeria, to ensure regular, accurate, and consistent data disclosures.

On the monetary side, the Governor of the Central Bank of Nigeria, Mr Olayemi Cardoso, reiterated the Bank’s commitment to orthodox monetary policy and pledged to maintain price and financial stability.

He stated that exchange rate volatility had dropped significantly—from around 4 per cent to less than 0.5 per cent—and expressed confidence that inflation, though still elevated, would moderate further as reforms take root.

“If we continue the course of orthodox monetary policy, which has brought results, then over time, inflation should moderate, and with that will come moderation in interest rates as well,” Cardoso said.

Minister of Communications, Innovation and Digital Economy, Dr Bosun Tijani, described the digital economy as one of the biggest winners of the reform agenda.

He disclosed that telecom firms had placed orders worth over $1bn in equipment, with deliveries expected to begin in June. He also announced the government’s $2bn investment in a nationwide fibre-optic backbone, supported by a $500m World Bank facility.

Representing the private sector, Managing Director of UAC Foods, Mr Oluyemi Oloyede, urged the government to back its reform ambition with clear, stable policy frameworks. He called for urgent reforms to improve exports and industrial revival, citing a one-year delay in registering a Nigerian-made product for export.

Oloyede also advocated for gas adoption, improved access to risk capital, and a “national culture of excellence,” warning against normalising mediocrity in public and private service.

The session ended with renewed calls for sustained reforms, improved governance, and stronger coordination across sectors to unlock inclusive, private-sector-led growth.