Experts fault govt’s 2025 budget assumptions

By Babagana Jidda

Kanempress

17 November, 2024

Economy experts have begun to fault the 2025 budget assumptions, describing some of them as too aggressive.

An analyst and Executive Vice Chairman at Highcap Securities Limited, David Adonri, said : “One thing that bothers me is the failure of Federal government to attach a report of the performance of the previous budget while seeking for approval of the new budget.

Adonri said: “Historical antecedents will let us know whether the assumptions underlying the new budget are reasonable.

“How will FGN finance the budget? Is it still a deficit budget like on previous occasions? There is nothing on ground to indicate that GDP growth rate of 4.6% is attainable in 2025,” he said.

“The omission of the forecast for inflation is questionable because the intended GDP growth may just be an inflationary growth which is akin to motion without movement,” Adonri noted.

“With Donald Trump’s agenda to release more fossil fuel from 2025, the crude oil price forecast may be misleading,” he said.

‘Finally, predicating the budget on a crude oil-driven economy shows that budgeting by FGN has not departed from past ruinous economic philosophy.

“It is too pedestrian for a country that should be inward-looking and focused on the mobilization of the idle factors of production in the country,” Adonri said.

Similarly, on his part, head of Equity Research FBNQest Securities Limited, Tunde Abidoye, said: “I think that some of the assumptions are a bit aggressive.

“The oil production benchmark of 2.06mbpd looks very ambitious given the current realized oil production level of around 1.3mbpd (ex-condensates), per NUPRC data,” Abidoye said.

“The exchange rate and GDP growth rate projections are also a bit optimistic given the current exchange rate is N1,650, and the strain on household wallets,” he said.

“However, although I think the oil price benchmark is realistic, there are potential downside risks arising from the anticipated ramp up of oil production by the US following President Trump’s victory at the polls.”

Also commenting, a Public Affairs Analyst/ Communications Expert,
Clifford Egbomeade said: “The proposed 2025 budget of N47.9 trillion, based on a $75 oil benchmark, 2.06 mbd production, and 4.6% GDP growth, sets ambitious targets given Nigeria’s economic climate.

“The oil production target assumes steady output levels, which may be impacted by infrastructure limitations. Moreso, the projected 4.6% GDP growth may be optimistic, as Nigeria continues to face high inflation, currency pressures, and unemployment,” Egbomeade said.

“The budget includes N9.22 trillion in new borrowing, raising concerns about fiscal sustainability given the nation’s current debt servicing load,” he said.

“The assumed exchange rate of N1,400 per dollar suggests continued devaluation, which could intensify inflationary pressures. Achieving this budget will require effective fiscal reforms and greater economic diversification to meet revenue and growth targets,” Egbomeade noted.

On the proposed budget, an energy analyst, Dr. Bala Zakkab in Port Harcourt said: “Oil market is very volatile and absolute caution should be taken in the process of taking the benchmark price for the 2025 budget.”

On output, Dr Zakkab said: “The federal government said it is currently producing 1.8 million barrels per day, including condensate. Like in the case of price, adequate caution should also be taken here. I strongly believe that stakeholders, including the government and investors should work harder to further increase the nation’s capacity to produce oil and gas.”

He concluded that
“The Gross Domestic Product, GDP, is all about the production of goods and services in an economy. With constant power supply disruptions, it has not been possible for households and businesses to participate in the economy. It is very doubtful if they will be able to increase investment to produce goods and services in 2025.”