The World Bank has flagged Nigeria’s proposed 2025 federal budget as overly optimistic, warning that the Federal Government may once again resort to borrowing from the Central Bank of Nigeria (CBN) through the controversial Ways and Means facility to plug looming revenue gaps.
In its latest economic review, the Bank cautioned that excessive reliance on this direct financing tool—often criticized for bypassing legislative checks—could erode fiscal discipline and worsen inflation.
The CBN’s Ways and Means provision allows the federal government to borrow directly from the apex bank to finance budget shortfalls.
However, the practice has drawn repeated warnings over its inflationary risks and lack of transparency.
While the World Bank acknowledged Nigeria’s impressive 4.6% economic growth in Q4 2024—the fastest in over a decade—fueled by major reforms such as fuel subsidy removal, electricity subsidy cuts, and exchange rate realignment, it stressed that the proposed 2025 budget appears to overestimate revenue projections and may lead to fiscal slippage.
Thanks to recent reforms, government revenue rose by 4.5% of GDP, while the fiscal deficit narrowed from 5.4% in 2023 to 3% in 2024.
However, the Bank warned that inflation remains stubbornly high, and any further monetary or fiscal missteps could derail the fragile recovery.
“The full benefits of subsidy reforms are yet to be realized,” the report stated, adding that sustaining gains requires a realistic budget framework and unwavering policy discipline.
Echoing the Bank’s concerns, local economic analysts warned that reverting to the CBN’s overdraft window could undo the hard-earned macroeconomic stability, especially as Nigeria navigates a delicate post-reform period.
As the National Assembly prepares to review the 2025 budget proposal, all eyes are on how the government intends to reconcile its ambitious plans with Nigeria’s fiscal realities—without triggering a fresh wave of inflation. - Haruna Ishaq.
