The Federal Executive Council (FEC) last week approved a bumper budget of N47.9 trillion for the services of the federal government in 2025. It is 60 per cent above 2024 budget.
Although the budget proposal is silent on inflation rate target, allocations for recurrent and capital expenditures, it captures most of the key economic indices. For instance, it is predicated on crude oil price of $75 per barrel.
It is also grounded on an exchange rate of N1,400 to the dollar. The federal government plans to grow the economy at a rate of 4.6 per cent in 2025, while it expects to sustain the budget with oil production of 2.06 million barrels per day. The budget has a deficit of N13.6 trillion.
The deficit in the 2025 budget proposal is 3.8 per cent of gross domestic product (GDP). Given the current low revenue in the economy, there are fears that government might have problems keeping its deficit for 2025 budget at 3.8 per cent of GDP.
Besides, if the trend in 2024 budget is any guideline, government must work very hard to raise more revenue if it must meet the deficit target set by architects of the 2025 budget.
The 2024 budget had a deficit target of 3.8 per cent of GDP. However, by the second half of the year, government deficit had risen to 7 per cent of GDP apparently due to low revenue.
There are fears that except remarkable improvements are made in revenue generation the 2025 deficit benchmark of 3.8 per cent of GDP may be yet another difficult target.
Equally ambitious is the crude oil reference price of $75 per barrel. With Donald Trump recently elected as 47th president of the United States of America (USA), there are strong indications that Russia’s humiliating war in Ukraine may end next year.
Ukraine’s President Volodymyr Zelensky said last week that during his last phone call with Trump after his electoral victory the groundwork for ending the war next year were clearly laid down.
An end to the war in Ukraine will signal the return of Russian crude oil into the international market. That development will almost certainly mount downward pressure on global crude oil prices.
Besides, Trump is poised to release U.S. reserves into the market in a desperate bid to exert downward pressure on crude oil prices. Everything points to lower crude oil prices than what the architects of the 2025 budget had in mind. A budget reference oil price of $65 appears more reasonable.
Another projection that may be difficult to meet in the budget is the daily oil production target of 2.06 million barrels. Right now, Nigerian oil production is limping along at an abysmal 1.3 million barrels per day. That is largely due to the activities of mega oil thieves.
The war against oil theft is still raging with the thieves yet to be defeated. The head of security of one of the oil production firms last week narrated his humiliating experience with oil thieves.
The thieves hacked into the company’s oil pipeline setting crude oil gushing into a farm. The company promptly moved to “clamp” the punctured pipeline.
The technicians were escorted to the broken pipeline by armed soldiers from the joint task force (JTF). At the scene of the punctured pipeline the technicians set out for work. Suddenly bandits emerged from the bush and halted the repairs.
They demanded N1.5 million before any repair on the broken pipeline is effected. The head of the JTF angrily ordered his men to attack the intruders. As the soldiers cocked their guns, the head of the oil thieves ordered his men out from the bush and they appeared with AK-47 rifles.
He spread his arms and ordered his men to shoot him. They opened fire on him for several seconds and the bullets were just falling off his muscular chest.
Apparently frightened by the man’s diabolical bullet proof prowess, the head of the JTF sneaked a call to his commander in Warri who scolded him for confronting the oil thieves. He ordered his men to drop the planned attack.
The company negotiated with the oil thieves and offered to pay the N1.5 million by electronic transfer. They rejected and insisted on cash. The company delivered the cash in a Ghana-must-go sack.
That is how potent the oil thieves are. Until their wings are effectively clipped, the oil production target of 2.06 million barrels per day remains a day dream.
Besides, Blueprint is worried that spiraling inflation, high lending rates, naira depreciation and alarming unemployment may mitigate against the attainment of 4.6 per cent economic growth rate. Architects of the 2025 budget may have to review their economic projections to suit the harsh realities on ground.