Analysts Pick Holes in FG’s 2025 Proposed Budget

*Express concern over debt sustainability

Nume Ekeghe

The federal government’s ambitious N47.9 trillion budget proposal for 2025 has sparked widespread debate among economic experts, with concerns over its projections and sustainability.
While the government has touted the budget as a tool to tackle 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.

Chief Executive Officer of CFG Advisory, Tilewa Adebajo in an interview on ARISE News Channel yesterday 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 rom 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.”

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.”
Key components of the budget, including an oil price target of $75 per barrel and production pegged at 2.06mbpd, face similar skepticism.

Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, argued that GDP growth projections of 4.6 per cent appeared optimistic, given recent performance and current policies.
“To assess the potential of the budget is to look at the assumptions of the budget. The first one has to be the price of all our $75 that they are projecting and based on what’s happening now, it seems as if it is realistic, but the truth of the matter is that a lot of things that will happen in the world market depends on the stance of Donald Trump when he gets to power in January.

“If he really goes tough on the Middle East, all prices might soar higher. Although he has mentioned that his plan is to reduce oil prices as part of the measures to reduce inflation in America. So, if it goes about that he might actually even increase more supply into the market, and the oil prices will crash. Based on that, $75 may be too high.

“In terms of crude oil production, they are projecting two million barrels per day. We can say this two million is realistic if they ramp it off. However, the main question is the 1.8 million barrel they claim, how verifiable is it? Because now, over the last couple of months, we’ve seen the NNPC working back on some of their statements.

“Then, for the exchange rate of N1,400, I think that one is a very tough call, because it’s hitting about N2,000 to $1, and from the way things are going, we’ve not been able to see any indication that it is going to improve in the near term. So this may actually be a bit ambitious.
“For the 4.6 percent GDP growth rate, we struggled to do to 2.3 percent in the last quarter. And also remember that the CBN is pursuing a contractionary monetary policy. So, if I look at that, it might be difficult for us to achieve this 4.6 percent.”

On her part, 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.”

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.

Furthermore, on inclusive growth, she said: “Ensuring that the budget prioritises job creation, poverty reduction, and social welfare programmes will be key to making growth sustainable and inclusive, benefiting a wider portion of the population.”