Donald John Trump, America’s enigmatic president, has thrown spanners into the works of the architects of Nigeria’s 2025 budget.
The U.S. president disrupted the global economy on April 3, 2025, when he announced his “Liberation Day” tariff that set global capital markets crashing down at unprecedented rates.
The U.S. capital market has lost $6.6 trillion since Trump started his wild cat gamble with tariffs. On April 3, Trump rattled the world with punitive tariffs ranging from 125 per cent for arch-enemy China to a mild 14 per cent for friendly countries like Nigeria.
Nigeria’s major problem is not really with Trump’s tariff. Nigeria is among the few countries that the U.S. president strangely treated with kid gloves. He magnanimously exempted crude oil and other minerals from the punitive tariff.
That is a huge relief for Nigeria. Nigeria’s export to the U.S. in 2024 was N5.5 trillion.
Crude oil export accounted for N5.08 trillion or 92 per cent of total exports. Only eight per cent of export items will be affected by the tariff.
However, the area that Trump’s trade war will tragically hit Nigeria is the effect of the tariffs on global oil prices.
The punitive tariff on scores of countries has triggered fears about a global recession and the consequent drastic drop in crude oil demand. That phenomenon has exerted downward pressure on oil prices.
Price of West Texas Intermediate (WTI) crude tumbled to $56 per barrel, while Brent still struggles to remain at $57 per barrel.
In all, Trump’s implicit trade war has forced down crude oil prices by almost $20 per barrel. The price of Nigeria’s Bonny Light plunged to $60 per barrel under the crushing weight of the brewing trade war.
At the moment, crude oil price stands catastrophically at $15 below the 2025 budget oil reference price of $75 per barrel. However, there are fears that the southward journey of oil prices is just beginning.
The Organisation of Petroleum Exporting Countries (OPEC) and its allies have plans that would effectively bring down oil price.
Next month, OPEC will raise production by 410,000 barrels per day rather than the 150,000 earlier planned.
The oil price crisis instigated by Trump’s trade war is both good and bad news for Nigeria. The federal government is gnashing its teeth over mounting budget deficit from tumbling oil prices while Nigerian consumers of petrol and other refined products are smiling to retail outlets as tumbling oil prices cut the pump prices of refined products.
Nigeria’s bad news on 2025 budget projections is from two angles. It is tackling the budget from oil production and reference price.
Architects of the 2025 budget set an ambitious production target of 2.04 million barrels per day. Right now, the oil firms are struggling to keep production at 1.6 million barrels per day. They are battling archaic, poorly maintained pipelines and mega thieves that combine to make the 2 million barrels per day target set for the budget an impossible task.
No one knows precisely how the production target will be met. The situation is now worsened by Trump’s trade war that adds tumbling prices to the elusive production target.
Things are so bad that the federal government has set up a committee to advise it on how to balance the budget in the face of the mounting deficit from elusive oil production target and tumbling prices.
Government’s options are very few. With debts at 52 per cent of gross domestic product (GDP), Nigeria is close to the World Bank threshold for low income countries debts. Any slight addition to its mounting debts will make them no longer sustainable.
That factor limits how much could be borrowed to balance the budget. That leaves higher tax revenue from the Federal Inland Revenue Service (FIRS) and import duties from Nigeria Customs Service (NCS) as major sources of revenue to address the mounting budget deficit.
At 10 per cent of GDP, Nigeria remains one of the countries with abysmally low tax revenue. The current chairman of FIRS promised to raise tax revenue in the short term to 18 per cent of GDP. No one knows how soon that target would be met.
The federal government must get more in the country’s unwieldy informal sector into its tax net to address the deficit. Millions of millionaires in the informal sector pay no tax.
Besides, the NCS must be given realistic revenue target and compelled to meet it.
What happened in 2024 was a huge mockery of the revenue target which made it look like the NCS was improving when in essence it was deteriorating. The dollar value of what NCS remitted was lower than previous years. Naira depreciation provided cover for NCS deficiency.
The NCS must be compelled to meet a revenue target of N12 trillion for 2025. As incentive, it should be allowed to keep 15 per cent of what it collects for its expenditures.
Health workers’ retirement age
The federal government is determined to reduce the number of health workers leaving the public service for various reasons. It has addressed the low remuneration as best it can, though it cannot compete with developed economies with a massively depreciating currency.
A few months ago President Bola Ahmed Tinubu decided to tackle the problem derisively tagged “japa” by raising the retirement age of health workers from 60 to 65 years.
However, there are fears that the president’s largesse was silent on the number of years one spends in service before retirement. Consequently, health workers in their 50s are still retiring from service after reaching the mandatory 35 years of service.
That factor renders the president’s commendable gesture ineffective. Nurses who entered nursing school at 17 under government sponsorship are still retiring at 52 after attaining the mandatory 35 years of service.
For the policy to stem the loss of health workers, government must raise the number of years of service to 40 years. That is what the Senate did in the bill raising National Assembly and State Assembly workers retirement age from 60 to 65.