The World Bank has labeled Nigeria’s 2025 federal budget as excessively ambitious, cautioning that the Federal Government might have to rely on the Central Bank of Nigeria’s Ways and Means facility to address potential revenue shortfalls.

This warning was issued on Monday during the public unveiling of the Bank’s latest Nigeria Development Update report, titled ‘Building Momentum for Inclusive Growth’, held in Abuja.

President Bola Tinubu signed the 2025 Appropriation Act into law, endorsing a historic budget of ₦54.99 trillion — the largest in the country’s history.

The budget was increased from the original ₦49.7 trillion proposal initially presented to the National Assembly. The 2025 fiscal blueprint allocates ₦13.64 trillion for recurrent expenses, ₦23.96 trillion for capital expenditure, ₦14.32 trillion for debt servicing, and ₦3.65 trillion for statutory transfers. It also projects a budget deficit of ₦13.08 trillion, which is expected to be covered through both domestic and international borrowing.

The budget is based on several key assumptions, including a crude oil price of $75 per barrel, daily oil output of 2.06 million barrels, an exchange rate of ₦1,400 to the US dollar, and an inflation rate target of 15 percent.

At the launch of the World Bank’s latest Nigeria Development Update report, the institution’s Lead Economist for Nigeria, Mr. Alex Sienaert, remarked that while Nigeria recorded solid revenue growth in 2024, the assumptions underlying the 2025 budget are still quite optimistic and could be difficult to realize.

He said, “It’s a very ambitious budget. Even with the very positive revenue sort of tailwind that we have… even considering that, it looks like it’s going to be pretty hard to meet some of the ambitious revenue targets that are in there.”

He pointed out that some core assumptions—such as an average daily crude oil output of 2.1 million barrels and a benchmark price of $75 per barrel—are unlikely to materialize, given that current production levels are closer to 1.6 million barrels per day. He also highlighted uncertainties surrounding the revenue impact of the petrol subsidy removal and the proposed windfall tax on foreign exchange gains, warning that these factors could undermine the Federal Government’s overall revenue outlook.

“This is important because if it does turn out that the revenue targets are not met, then that could mean that the financing requirements are more than budgeted. And if the financing requirements exceed what’s budgeted, then that’s either going to create arrears pressures… or it could renew risks of recourse to things like deficit monetisation under large-scale Ways and Means,” he said.

Sienaert warned that relying on the Central Bank’s overdraft facility again, despite the Nigerian government’s pledge to avoid it, could threaten the country’s fragile macroeconomic recovery.

“The authorities have been very clear that they will by no means be going back to large-scale use of Ways and Means, but were that to happen, it would be just extremely disruptive to the whole rebuilding of confidence in fiscal sustainability and in the naira ultimately,” he stated.

On broader fiscal issues, the World Bank urged the Federal Government to remove the electricity subsidy, calling it a "wasteful, regressive subsidy." 

Sienaert stated that important fiscal reforms, like the removal of the petrol subsidy and the adoption of a market-driven exchange rate, had strengthened the government’s fiscal position, but emphasized that additional reforms were still necessary.

“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.

“It’s just going to be important in the coming months to keep tracking this, and ultimately that the full revenue gains from the difficult job of eliminating the subsidy do flow to the Federation so that that can support a continued healthy fiscal picture and, in turn, spending on development priorities,” he said.

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 also mentioned that recent adjustments to the Consumer Price Index by the National Bureau of Statistics had made it challenging to assess the current inflation trend. However, he emphasized that ongoing coordination between fiscal and monetary authorities would be essential to restoring public confidence.

Additionally, the World Bank urged the government to accelerate the implementation of its targeted cash transfer program, which is designed to alleviate the impact of reforms on low-income households. Currently, the program provides ₦25,000 per month for three months to 15 million beneficiaries.

“The implementation has just been quite slow. So only about a third of those recipients have received transfers so far. The good news is that this is being scaled up… and just important that that effort really continues so that as many people as possible get help,” Sienaert said.

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.

“In 2022, Nigeria was only spending 1.2 per cent of GDP on education and 1.8 per cent on health, or $23 per Nigerian per year on education, $15 per Nigerian per year on health,” he said.

He emphasized that fostering private sector growth involves improving the competitive landscape and re-evaluating trade policies that restrict access to essential production inputs.

“Competition is like the sort of secret sauce that drives innovation and economic transformation. And in Nigeria, there’s some evidence… that actually there are elements of competition policy, and there are conditions that are needed for good competition that actually even compared to some of Nigeria’s immediate peers… the Nigerian competitive landscape lags some of those,” he said.

The Bank believes that implementing these reforms will enable Nigeria to reach its goal of becoming a $1 trillion economy by 2030.

During the event, Senator Abubakar Bagudu, the Minister of Budget and Economic Planning, disagreed with the World Bank's assessment that Nigeria’s 2025 budget is overly ambitious. He argued that the projections are reasonable and in line with the country's growth potential.

While the World Bank’s Lead Economist for Nigeria, Mr. Alex Sienaert, had earlier described the 2025 fiscal projections as "very ambitious" and cautioned against potential reliance on deficit monetization, Bagudu presented a different perspective.

“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.”

Regarding crude oil production, which the World Bank suggested might be overstated in the budget at 2.1 million barrels per day, Bagudu maintained that Nigeria not only has the capacity but also a proven track record of surpassing that figure.

“We have produced more than 2.3 million barrels a day,” he said. “And the Minister of Petroleum always tells us that the technical and fiscal capacity — that means the ability to produce in terms of acreage, in terms of technology — is higher than that. So, we are right as a team to say that, look, we are going to task everyone.”

He maintained that, rather than being restricted by existing challenges, budgets should aim high and reflect aspirations for the future.

“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 pointed to improvements in Nigeria’s fiscal performance, citing a rise in revenue-to-GDP and expenditure-to-GDP ratios. He said these indicators are critical to delivering inclusive growth.

“Revenue-to-GDP ratio has gone up, expenditure-to-GDP ratio has gone up, which is critical to delivering inclusiveness,” he said. “Especially the fact that in the increased revenue to sub-nationals… there is even a reduction in debt for the sub-nationals, which enhances their fiscal space.”

The minister, highlighting President Bola Tinubu’s broader economic agenda, announced that a national initiative aimed at identifying economic opportunities across Nigeria’s 8,809 political wards would soon be launched.

“What we have been dealing with is a programme to ensure that all three tiers of government are working together to map economic opportunities in all the 8,809 wards,” he said. “Because, as they said, cash transfer by itself does not create jobs. You have to map what economic opportunities are there.”

He added, “We believe by focusing on the economic opportunities in the 8,809 wards, we can generate significant growth. And then Mr President will soon launch it.”

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 pointed out that the National Bureau of Statistics had revised its method for measuring inflation via the Consumer Price Index, which, while making direct comparisons more challenging, underscores the agency’s independence.

Bagudu praised the government's reform efforts, especially its collaboration with private sector stakeholders.

He concluded by reaffirming that Nigeria’s macroeconomic strategy remains on course and is aligned with the nation's goal of achieving a $1 trillion economy by 2030.

“This report being presented — and the numbers — all go to show that the strategy for which we campaigned upon, the Renewed Hope agenda, is working,” Bagudu said. “Macroeconomic reform is justified by the numbers.”

During a high-level panel session at the report launch, key stakeholders from the Federal Government, private sector, and sub-nationals have reaffirmed their commitment to Nigeria’s reform agenda, insisting that the country is on the path to macroeconomic stability and inclusive growth despite lingering structural and social challenges.

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.

“We saw from the red areas on the chart that there is a need still to really push for transparency of fiscal data, and also transparency in the oil revenue sector,” Edun said.

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.

“The key is investment. It is investment that allows increases in productivity, that grows the economy, that creates jobs, high-quality jobs that lift Nigerians out of poverty in their millions,” he said.

Edun said there was renewed investor interest across sectors, particularly telecommunications and manufacturing. “There’s a momentum to invest in Nigeria,” he added.

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.

“For any economy, you need stability for you to be able to grow. We recognise our role as custodians of stability, and we recognise what we have to do to attain and protect it,” he said.

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.

“In Q1 2023, FDI to our sector was about $22m. In Q1 2024, we are close to $200m,” Tijani said, attributing the rise to improved investor confidence and government reforms.

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.

“If we can drive investment in 90,000km of fibre-optic networks, then we can fiberize our towers and deliver world-class internet,” Tijani said.

On the state level, Plateau State Governor, Mr Caleb Mutfwang, said revenues to sub-nationals had increased, but so had spending pressures due to inflation and insecurity.

“Yes, it’s true there has been increased revenue to the states. But purchasing power has also declined,” Mutfwang said.

He cited Plateau’s increase in internally generated revenue from N800m to N3bn monthly and detailed targeted interventions in transport, agriculture, and education to cushion the vulnerable.

“We are making definite investments… from subsidising transport to reviving rail services. But insecurity is diverting funds we would have used for infrastructure,” he said.

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.

“You say $1tn economy by 2030. I need to know what the government will do—and not do—between now and then. If you keep banning items or changing policies midstream, how can I invest?” he asked.

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.

“We need to promote progress over perfection, but we must never stop aiming for excellence,” he said.

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