World Bank Flags Nigeria’s 2025 Budget as Overly Ambitious, Warns of Fiscal Risks

‘Ambition vs Reality’: World Bank Warns of Risks in Nigeria’s Record 2025 Budget

The World Bank has described Nigeria’s ₦54.99 trillion 2025 federal budget as “overly ambitious,” cautioning that the Federal Government may need to fall back on the Central Bank of Nigeria’s Ways and Means facility if projected revenues fall short. The warning came during the release of the Bank’s Nigeria Development Update report, themed “Building Momentum for Inclusive Growth”, presented in Abuja on Monday.

Signed into law by President Bola Tinubu, the 2025 Appropriation Act represents the largest budget in Nigeria’s history, revised upward from ₦49.7 trillion to nearly ₦55 trillion. The fiscal plan includes ₦13.64 trillion for recurrent spending, ₦23.96 trillion for capital projects, and ₦14.32 trillion earmarked for debt servicing. A deficit of ₦13.08 trillion is projected to be financed through domestic and foreign borrowing.

Despite reforms and revenue improvements in 2024, the World Bank’s Lead Economist for Nigeria, Alex Sienaert, cautioned that the budget’s assumptions — including oil production of 2.1 million barrels per day at $75 per barrel, a ₦1,400/$ exchange rate, and 15% inflation — are optimistic and may prove difficult to sustain.

“It’s a very ambitious budget. Even with the revenue momentum, meeting these targets will be difficult,” Sienaert noted.

Tinubu Swears In Two INEC Commissioners, CCB Members at FEC Meeting

Ambitious Assumptions Could Strain Public Finances

The World Bank’s critique centered on the feasibility of Nigeria’s macroeconomic assumptions, particularly its oil revenue projections. According to the Bank, current oil output is closer to 1.6 million barrels per day, significantly below budget expectations. Furthermore, uncertainties linger over the fiscal impact of petrol subsidy removal and the government’s planned windfall tax on forex gains.

Sienaert stressed that unmet revenue targets could push the government to seek unbudgeted financing, potentially reviving controversial deficit monetisation practices. He warned that resorting to the CBN’s Ways and Means facility, which the government had previously pledged to abandon, could erode macroeconomic stability and public confidence.

“A return to large-scale deficit monetisation would be disruptive and risk undermining fiscal credibility,” he said.

The World Bank also flagged Nigeria’s electricity subsidy as regressive and urged its removal. In tandem, it advocated for increased transparency in oil revenue, reduced cost of governance, and deeper investments in education and healthcare, noting that Nigeria spends just 1.2% of GDP on education and 1.8% on health — among the lowest globally.

The report praised some recent reforms, such as adopting a market-reflective exchange rate and eliminating petrol subsidies, which have improved the fiscal position. However, it emphasized that more action is needed to safeguard these gains, especially in ramping up non-oil revenue and cutting unnecessary public expenditures.

FG Defends Budget Projections, Says Targets Are Modest

Responding to the World Bank’s concerns, Nigeria’s Minister of Budget and Economic Planning, Senator Abubakar Bagudu, dismissed claims of overambition, asserting that the budget projections are realistic and necessary to unlock national potential.

“This is not an indulgent budget. It’s aspirational. We are challenging ourselves to meet our capacity,” Bagudu stated.

The minister cited Nigeria’s historic ability to produce over 2.3 million barrels of crude oil daily and emphasized that the current targets are within reach. He also pointed to improved fiscal ratios, such as a rise in the revenue-to-GDP and expenditure-to-GDP metrics, which he said are critical to delivering inclusive development.

As part of a broader economic strategy, Bagudu revealed that a new initiative would soon launch to map economic opportunities across Nigeria’s 8,809 political wards, aimed at promoting job creation beyond cash transfers.

Private Sector Urges Stability and Accountability in Reforms

During a high-level panel discussion at the event, stakeholders from both the public and private sectors reiterated their commitment to the ongoing reform agenda. Finance Minister Wale Edun called for increased fiscal transparency, particularly in oil revenue disclosures, while Central Bank Governor Olayemi Cardoso emphasized monetary policy stability as a foundation for economic growth.

“Exchange rate volatility has dropped significantly, and if we stay the course, inflation will moderate,” Cardoso said.

Representatives from the private sector, such as UAC Foods Managing Director Oluyemi Oloyede, urged the government to provide clear and consistent policies to restore investor confidence.

“We can’t hit a $1 trillion economy target if policies keep changing midstream,” Oloyede warned.

Dr Bosun Tijani, Minister of Digital Economy, highlighted the sector’s rapid growth, revealing that FDI in Q1 2024 reached nearly $200 million, up from $22 million in Q1 2023. He also announced ongoing efforts to deploy a nationwide fibre-optic network to further stimulate the digital economy.

As Nigeria navigates its reform trajectory toward macroeconomic stability and inclusive growth, the 2025 budget represents both a test of fiscal discipline and a statement of intent. Whether the federal government can meet its ambitious targets without sacrificing credibility remains to be seen.