Financial analysts have argued that key assumptions such as the exchange rate of N1,400 to the dollar, an oil output of 2.06 million barrels per day (mbpd), and oil pricing for the 2025 budget are unrealistic.
Since it was unveiled last week, the Federal Government’s ambitious N47.9 trillion budget proposal for 2025 has continued to spark widespread opinions among economic experts, who are concerned about its projections and sustainability.
Tilewa Adebajo, Chief Executive Officer of CFG Advisory, questioned the feasibility of further expansion, given the fiscal deficit’s rise from N13 trillion in 2023 to a projected N18 trillion in 2024.
On the exchange rate benchmark, Adebajowarned that N1,400 to the dollar was overly optimistic, saying inflationary pressure and deficit financing could push rates to N1,800 or beyond.
He said: “The real issue is whether we can afford what we’re budgeting for. Revenues for 2024 were projected at N17 trillion, but we consistently implemented only half the budget due to shortfalls. If you cannot fund your plans, you carry deficits forward, a cycle we’ve seen repeatedly. The budget’s effectiveness depends on realistic revenue projections.
“For example, the finance minister mentioned raising $2.2 billion in external debt financing, $1.7 billion from Eurobonds, and $500 million from the Sukuhprogramme. Yet, domestic debt has ballooned from N50 trillion to N70 trillion in just one year.
“Combined with external debt nearing $45 billion, debt sustainability is a concern. Despite recent reforms, like fuel subsidy removal and foreign exchange liberalisation, the revenue increases expected from these measures haven’t materialised. The economy is still in stagflation. We need to address the issue of fuel pricing.
“While development commissions serve critical needs, you cannot sustainably budget for initiatives you cannot finance. If you continue to do that, you are going to continue carrying deficits. The government must demonstrate the impact of these allocations. For example, oil production was targeted at 1.8 million barrels per day, yet this is not reflected in foreign reserves or the Federation Account. Transparency is lacking.”
To ease debt pressures, Adebajo proposed selling joint venture oil assets to raise $50 billion.
He said: “If the government pursued balance sheet restructuring, such as selling JV oil assets, it could raise $50 billion to reduce debt and boost efficiency.”
Key components of the budget, including an oil price target of $75 per barrel and production pegged at 2.06mbpd, face similar scepticism.
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