World Bank, Federal Government at Odds Over 2025 Budget Assumptions…
A significant divergence in economic outlook has emerged between the World Bank and the Federal Government of Nigeria regarding the assumptions embedded in the 2025 national budget. The proposed ₦28 trillion budget, which was recently presented by the executive, has drawn criticism for relying on what many experts describe as overly optimistic and unrealistic economic projections.
Central to the disagreement is the government’s projection of a 4.6% GDP growth rate, an inflation rate of 15.8%, and an exchange rate of ₦1,400 to the US dollar. These figures underpin the fiscal framework of the 2025 Appropriation Bill, guiding expenditure, revenue expectations, and borrowing plans. However, they sharply contrast with current economic conditions, leading to concerns from both local and international economic observers.
The World Bank, in its recent macroeconomic update on Nigeria, noted that while the country has made commendable strides in recent months—including the removal of fuel subsidies and an effort to unify the foreign exchange market—its economic fundamentals remain fragile. The Bank raised doubts about the feasibility of achieving the government’s targets without deeper structural reforms and stronger fiscal discipline.
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A major point of contention is the exchange rate. While the federal government has pegged its 2025 budget at ₦1,400 to the dollar, the actual rate on the official and parallel markets has been trading above ₦1,600 in recent weeks. The World Bank, along with several economists, has flagged this as a critical flaw in the budget’s design. According to them, the wide gap between the assumed and real exchange rates could undermine fiscal credibility, fuel speculation, and complicate the Central Bank’s efforts to stabilize the currency.
Similarly, the inflation projection has attracted scrutiny. Nigeria’s inflation rate stood at 33.88% as of October 2024, among the highest in Africa. The government’s target of bringing this figure down to 15.8% within a year is viewed as overly ambitious. Experts argue that such a drastic reduction would require far-reaching policy measures that have not yet been outlined in any concrete form.
Economic analysts have warned that this inflation assumption could lead to budget implementation challenges, particularly if rising prices continue to erode the real value of government spending and household incomes. “You cannot base a national budget on hope. The macroeconomic assumptions must be grounded in observable trends and realistic forecasts,” said Dr. Chinyere Udo, an economist with the Lagos Chamber of Commerce and Industry (LCCI).
Another major issue flagged by both the World Bank and domestic stakeholders is the rising cost of debt servicing. The proposed budget allocates more than ₦8 trillion—nearly 30% of total expenditure—to debt servicing. This, they argue, leaves limited fiscal space for investments in infrastructure, healthcare, education, and social programs. The World Bank has advised Nigeria to urgently broaden its revenue base, improve tax collection, and fully transfer the proceeds of fuel subsidy removal to the Federation Account to ensure transparency and equity.
Despite these criticisms, the federal government has defended its budget assumptions, describing them as “aspirational but achievable.” Officials argue that recent reforms are beginning to yield positive results and that the budget reflects a forward-looking vision to drive growth and reduce poverty. They insist that with improved oil production, enhanced revenue collection, and greater private sector participation, the targets can be met.
As the National Assembly begins deliberations on the 2025 budget proposal, the spotlight is now on lawmakers to rigorously review the fiscal framework and ensure that projections align more closely with economic realities. Several civil society organizations have also called for increased stakeholder engagement and transparency during the budget review process.
With Nigeria at a critical economic juncture, the debate over the 2025 budget assumptions underscores the broader challenge of balancing ambition with pragmatism. Whether the government will heed the World Bank’s cautionary stance remains to be seen, but the outcome will have significant implications for the country’s economic stability and development trajectory in the coming year.
