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Nigeria’s President Bola Tinubu presented a 47.9 trillion naira ($30 billion) budget for 2025 to parliament on Wednesday.
The bill, Tinubu’s second as president, assumes a benchmark oil price of $75 per barrel and production of just over 2 million barrels per day — an output level some analysts say would be hard to achieve. Nigerian budgets are anchored on oil sales which make up around 90% of foreign exchange earnings.
The budget also assumes inflation will fall from over 34% currently to 15% next year. It is an “optimistic forecast,” says Ibukun Omoyeni, an economist at Lagos-based Vetiva Capital. He believes inflation “may be much higher” than the government’s estimate and that a supplementary budget would need to be issued at some point.
Tinubu, who has largely stuck by a policy agenda that has sharply raised the cost of living during his tenure, said the latest budget was “ambitious but necessary” for the country’s future. Defense and security will take 10% of the proposed spending, while education and health account for 7 and 5% respectively.
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The proposal projects that Nigeria’s economy will grow 4.6% next year, above recent estimates from Washington.
According to the IMF, Nigeria’s economy will grow next year by 3.2% after finishing this year with 2.9%. The World Bank’s growth projection for Nigeria for the next three years is an average of 3.7%.
Earlier this month, Nigeria issued a $2.2 billion eurobond partly to raise money needed to make up for this budget’s 3.9% deficit. Central Bank governor Yemi Cardoso described the bond sale as a measure of “growing confidence of investors and the resilience of the Nigeria credit, and evidence of our improved liquidity position.”
The bank under Tinubu’s direction has managed to stabilize the naira currency after a free fall at the beginning of the year following two devaluations. Next year’s budget is anchored on an exchange rate of 1,500 naira to the dollar, an estimate that isn’t far off the naira’s current position of 1,538.
But even if the exchange rate projection is feasible, Tinubu’s spending plan is “not realistic at all” based on its projections for inflation and oil revenues, says Basil Abia, co-founder of economic policy consultancy Veriv Africa. The firm’s best-case scenario projection for inflation next year is 31% — and that is if Nigeria produces at least 1.8 million barrels per day at $90 or more. But Nigeria’s output has been below that mark in the last half decade with insecurity in oil producing communities limiting production.
And Nigeria’s oil earnings next year could be affected by geopolitical factors beyond its control. “A Trump presidency means more American oil in the global market,” raising the prospect of prices going below $70, Abia said.