The World Bank has described Nigeria’s 2025 federal budget as overly ambitious, warning that the Federal Government may be forced to turn to the Central Bank of Nigeria’s Ways and Means facility to finance likely revenue shortfalls.

The Bank gave this warning on Monday during the public presentation of its latest Nigeria Development Update report titled ‘Building Momentum for Inclusive Growth’ in Abuja.

President Bola Tinubu signed the 2025 Appropriation Act into law, approving a record budget of N54.99tn, the highest in Nigeria’s history.

The budget was raised from the initial proposal of N49.7tn submitted to the National Assembly.

The fiscal plan makes provisions for N13.64tn in recurrent expenditure, N23.96tn for capital projects, N14.32tn for debt servicing, and N3.65tn for statutory transfers, while projecting a deficit of N13.08tn, to be financed through domestic and external borrowing.

The budget assumptions include a crude oil benchmark of $75 per barrel, oil production at 2.06 million barrels per day, an average exchange rate of N1,400/$, and an inflation target of 15 per cent.

Speaking at the event, the World Bank’s Lead Economist for Nigeria, Mr Alex Sienaert, said that despite strong revenue gains recorded in 2024, Nigeria’s 2025 budget assumptions remain optimistic and may prove difficult to meet.

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.”

According to him, key assumptions such as average daily crude oil production of 2.1 million barrels per day and a benchmark oil price of $75 per barrel are unlikely to hold, noting that current production figures are closer to 1.6 million barrels per day.

He also cited uncertainty over how much revenue would flow from the removal of the petrol subsidy and the planned windfall tax on foreign exchange gains, saying these could weaken the Federal Government’s revenue position.

“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 although Nigerian authorities had pledged not to resort to the CBN’s overdraft facility, doing so again could derail 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 noted.

On broader fiscal matters, the World Bank called on the Federal Government to eliminate the electricity subsidy, which it described as a “wasteful, regressive subsidy.”

Sienaert said key fiscal reforms such as the removal of the petrol subsidy and the adoption of a market-reflective exchange rate had helped improve the government’s fiscal position, but further reforms were needed.

“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 added that recent changes to the Consumer Price Index by the National Bureau of Statistics had made it difficult to determine the current trend in inflation, noting, however, that continued coordination between fiscal and monetary authorities would be critical to restoring confidence.

The World Bank further urged the government to ramp up implementation of its targeted cash transfer programme aimed at cushioning the cost of reforms on poor households.

The programme currently offers N25,000 monthly for three months to 15 million recipients.

“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 said private sector growth must also be supported by improving the competitive landscape and reviewing 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 following through with these reforms will position Nigeria to achieve its goal of becoming a $1tn economy by 2030.

Speaking at the event, the Minister of Budget and Economic Planning, Senator Abubakar Bagudu, has faulted the World Bank’s claim that Nigeria’s 2025 budget is overly ambitious, insisting that the projections are modest and aligned with the country’s growth capacity.

While the World Bank’s Lead Economist for Nigeria, Mr Alex Sienaert, had earlier described the 2025 fiscal projections as “very ambitious” and warned of possible recourse to deficit monetisation, Bagudu took a different view.

“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.

”On crude oil production, which the World Bank said was likely overstated in the budget at 2.1 million barrels per day, Bagudu insisted Nigeria has both the record and capacity to exceed that.

“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 argued that budgets should be aspirational and not constrained by present challenges.

aspirational and not constrained by present challenges.

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“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.

”Highlighting President Bola Tinubu’s broader economic agenda, the minister revealed that a national initiative focused on mapping economic opportunities in 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.