Nigeria’s proposed N47.9 trillion ($27.96 billion) budget for 2025 is the lowest in dollar terms since 2018, according to the Nigerian Economic Society (NES). In a statement released by NES President, Adeola Adenikinju, the association highlighted the impact of the naira’s devaluation, which has diminished the budget’s value when converted to U.S. dollars despite its record high in nominal terms.
The NES emphasized that while the 2025 budget is the largest ever in Nigeria’s history in naira terms, its real purchasing power has declined due to the sharp devaluation of the naira against the U.S. dollar. At the prevailing exchange rate of $1 = N1,679, the budget totals $27.96 billion, marking a 17.76% decline from the 2024 budget of $34 billion in constant dollar terms. The proposed budget is still higher when using a pegged rate of N1,400 per dollar, translating to $34.14 billion, but it remains lower than the 2022 budget, which stood at $39.8 billion.
Adenikinju questioned the feasibility of the N1,400/USD exchange rate benchmark set by the government, noting that it is overly optimistic and deviates from expert projections. NES analysts predict that the naira will trade at N1,750/USD in a base-case scenario, with some projections suggesting it could reach N1,850/USD by 2025. Adenikinju urged the government to adopt a more realistic exchange rate to mitigate the risks posed by Nigeria’s reliance on oil exports.
In addition, the NES has called for a revision of the oil price benchmark in the proposed budget from $75 per barrel to $70 per barrel, citing potential volatility in global oil prices. With rising U.S. oil production and the potential cessation of OPEC+ production cuts by 2025, analysts predict that oil prices could fall to $40 per barrel in the coming years. The NES stressed the need for fiscal flexibility to account for potential oil price shocks.
The budget also proposes an oil production target of 2.06 million barrels per day, which the NES believes is achievable if the government intensifies efforts to combat oil theft and pipeline vandalism, issues that have plagued the country’s oil sector in recent years.
The 2025 budget also highlights a proposed budget deficit of N13.8 trillion, representing 3.87% of GDP, which exceeds the 3% limit set by the Fiscal Responsibility Act of 2007. The NES has advised the National Assembly to review the country’s budget deficits from 2021 to 2024 in order to determine an acceptable deficit threshold for 2025.
Despite these challenges, the NES has urged the government to develop a more robust and effective budget framework, focusing on macroeconomic stability, economic growth, job creation, and poverty reduction. The association warned that the current business environment—characterized by insecurity, inflation, naira volatility, and poor infrastructure—poses significant risks to the success of the 2025 budget.
Capital expenditure in the proposed budget is set at N7.72 trillion, accounting for 16% of total spending, which is notably lower than the 50% target recommended for developing countries. Adenikinju expressed concern that this low level of capital investment could have limited impact on the country’s infrastructure development, job creation, and overall economic growth.
As Nigeria faces these fiscal and economic hurdles, experts will closely monitor the implementation of the 2025 budget and its potential effects on the country’s economy.