Outlook 2025, By Uddin Ifeanyi

It is scant surprise that much of the public expectation for the domestic economy’s performance, this year, takes its cue from the federal government’s musings. After all, our governments, at the different tiers, persist in the sense that they oversee the whole shebang. At its most basic, government has a monopoly of the instruments (whether this be of the positive and violent type, or just the negative variety that governs behaviour simply because citizens are reluctant to face sanctions advertised in the laws) for compelling behaviour. Beyond these attributes, more than any player in an economy, government has a bird’s eye view of the domestic procedures and processes that drive economic growth or contraction. Accordingly, when, in putting forward its tax and spending programme for the new financial year, government proceeds to project a Panglossian outcome for the main economic indices, it is only fair that the people should take note.

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Ironic, then, that at the end of the year, when none of these targets are met, government should rankle at the popular dissent that ensues. Over the years, it has become our wont for our government to promise more than it can, or even plans, to deliver. Over the years, to, our people have learnt to describe this as indicative of government’s general incompetence. Indeed, it is in the nature of the conversation around government’s competence as a manager of the economy, that upfront we can agree a couple of things on its assumptions for this year. Of the five measures that matter, the assumptions for average crude oil price look the most reasonable. In its budget for 2024, the federal government had estimated a US$77.96 per barrel average price. In the end, prices fetched up around US$79.90 per barrel.

Now of the five measures that the federal government’s budget depends on, the crude oil price is the most exogenous – subject as it were to both external forces that Nigeria and Nigerians have no sway over, and which in their playing out are as volatile as quick silver. Include the Trump administration’s promise (“drill, baby, drill”, as the incoming US president so colourfully put it) to produce as much oil as the US can, and softening domestic demand in China in your assessment of the oil price outlook for this year, and government’s expectation of an average price per barrel this year of crude oil of US$75 is well within the market’s ballpark. Not so its estimates for crude oil production. Besides the thieving of crude oil that is now a feature of our domestic production infrastructure, a shortfall of both new investment over the years, and slacking in the maintenance of existing infrastructure have weighed on domestic oil production.

This is evident in the fact that whereas government estimated crude oil production at an average of 1.78 million barrels per day (mbpd) at the beginning of last year, we only managed to produce 1.31mbpd by end-December 2024. The production estimate for this year of 2.06mbp could only have been plucked from the ether. Assume the best-case scenario: government staunches the leakages in the sector and shoehorns the private investment that the sector has lacked over the past decade. We would still require all of 36 months before we touch gold in the sector. And because of the economy’s dependence on the sector’s foreign currency earnings, its underperformance will be ballast to the economy’s overall outcomes. Yes, government plans through reforms of the existing tax arrangement to boost its earnings. But expectations for this reform’s outcomes ought to include a lag of about 18 months between passage of the new law and when the benefits begin to accrue to the economy.

And this is before we interrogate government’s spending habits. Up until last year, the Nigerian government has not been an epitome of fiscal discipline. Commentators point to the deficit included in this year’s budget – N13.39 trillion – as further indicative of this continuing fiscal incontinence. While there is no doubt that deficits could bolster growth, ought we to be worried that in the last thirty years, the Nigerian national budget has had revenue come in more than spending in 1995 and 1996 only? Besides, how much of the responsiveness of retail money market rates to upward movements in the central bank of Nigeria’s benchmark interest rate, and of inflation to both, is the result of government continuing to spend more than we earn? Truth is that the federal budget deficit’s capacity for bolstering domestic growth is a function of the nature and quality of the spending.