Prominent financial experts have raised concerns about Nigeria’s proposed N47.9 trillion budget for 2025, citing unrealistic assumptions, policy misalignment, and significant fiscal risks.
In an interview with THE WHISTLER, they urge the Federal Government to adopt more realistic projections and implement strategic reforms to address these challenges.
Unrealistic Exchange Rate and Oil Price Projections
Key criticisms of the budget include the exchange rate projection of N1,400 to the dollar and the $75 per barrel oil price benchmark, which analysts argue are overly optimistic.
Professor Uche Uwaleke, Nigeria’s first Professor of Capital Market, highlighted the implausibility of the exchange rate assumption within a one-year outlook. He cautioned that this projection could lead to gaps in revenue and expenditure, complicating fiscal discipline.
“The exchange rate assumption of N1,400 to the dollar is unrealistic based on FX flows. This could create vulnerabilities in the 2024 budget implementation and leave room for off-budget funds,” Uwaleke stated.
On the oil price benchmark, Uwaleke warned that geopolitical uncertainties, including tensions in the Middle East and the Ukraine war, could lead to volatile global oil prices. “The $75 benchmark could be either overly optimistic or conservative, depending on unfolding global events,” he noted.
Policy Misalignment and Economic Risks
David Adonri, Managing Director of Highcap Securities, described the budget’s assumptions as “ambitious” and warned that its expansionary stance conflicts with the Central Bank of Nigeria’s contractionary monetary policies aimed at controlling inflation.
“This misalignment could fuel inflation and exacerbate economic hardships for citizens,” Adonri stated, further criticizing the fiscal deficit likely to emerge from the proposed budget size.
Strategic Borrowing and Infrastructure Investment
Olatunde Amolegbe, Managing Director/CEO of Arthur Stevens Asset Management Limited, emphasized the necessity of an expansionary budget for infrastructure development but stressed the importance of realistic assumptions and strategic borrowing.
“While I support expansionary budgets due to our infrastructure deficit, using an exchange rate of N1,400 is unrealistic and creates funding gaps that will be challenging to bridge,” he remarked.
Amolegbe noted that although the removal of fuel subsidies and increased crude production efforts could ease budget financing, significant borrowing would still be required. “Borrowing must be strategic, targeted at productive investments that yield returns to service debt and drive growth,” he advised.
Call for Realistic Projections and Diversification
The experts collectively urged the government to adopt conservative budget assumptions and focus on diversifying the economy to reduce dependence on volatile oil revenues. They highlighted the importance of allocating funds to critical sectors such as infrastructure, healthcare, and education to maximize impact.
Uwaleke emphasized the need for fiscal discipline and alignment with economic realities. “Overambitious assumptions undermine investor confidence and hinder effective budget implementation,” he warned.
Conclusion
As Nigeria aims to bridge its infrastructure gap and stabilize its economy, experts call for prudent fiscal strategies, realistic economic assumptions, and effective implementation of the proposed 2025 budget. Addressing these concerns will be crucial to mitigating fiscal risks and achieving sustainable economic growth.
