Now that we must review the 2025 budget

The fact that Nigeria will review or adjust its 2025 budget, even before its implementation begins, underscores the reality of the uncertainty facing our national life. A review of the budget has become imperative given the recent developments in global markets induced by tariffs imposed by American President Donald Trump. Among other impacts, the new […]

The fact that Nigeria will review or adjust its 2025 budget, even before its implementation begins, underscores the reality of the uncertainty facing our national life. A review of the budget has become imperative given the recent developments in global markets induced by tariffs imposed by American President Donald Trump. Among other impacts, the new measures President Trump announced have impacted oil prices negatively and may still impact them more.

So, the N54.99 trillion 2025 budget may be significantly reduced in response to the new developments. Budget or plan reviews are not peculiar to Nigeria, but for us, they are part of the price we must pay as a nation for failing to raise the economy’s capacity through diversification.

For now, it is not clear how many adjustments will need to be made to the budget estimates. Will it take the form of a supplementary budget that spells out a new set of estimates as the developments unravel? It is not certain how far these will go. However, one thing is sure: the coming budget review will surely impact some aspects of the nation’s economy, given the centrality of oil in our budget.

The announcements by President Trump have knocked Nigeria’s budget estimates off balance, thereby making the revenue estimates irrelevant. Nigeria’s budget revenue estimates for this year were based on an oil benchmark price of $75 per barrel. In addition, production volume was estimated at an ambitious 2.06 million barrels per day.

Well, these estimates are now in danger. They may not be achieved. Last week, as the global markets reacted to what I choose to call the “Trump Effect,” asset prices, from bonds to equities and commodities, tumbled. Oil tumbled, with Brent futures on Friday of last week falling by $10.05 to $64.9 per barrel. On April 11, Nigeria’s Bonny Light, Qua Iboe, and Brass River fell to $70.03, $66.99, and $66.64, respectively, on the international oil market.

The fall in the price of oil is imperative in a global economy marked by gloom and bearish expectations. With the markets responding to the tariff challenge, virtually all players, from factory operators to auto manufacturers and commodities sellers, would immediately assume that production scales would be reduced in anticipation of lower demands.

Given such a possibility, oil demand would simply fall. Since the demand for oil as a commodity is derived from its use in factories, assembly parts and other places of mass production, demand for it will fall. So, what the fall in futures prices meant was that the market was telling oil producers that some months down the line, it anticipated a decline in the demand for oil because of expected declines in production processes.

While it is not yet certain how the unfolding drama will be resolved, there is a clear and present danger that Nigeria’s revenue estimates in the coming months may not be well. The impact could become more worrisome, given that both the price and volume could be affected. Besides, even the assumed production volume is an ambitious target far above what Nigeria has been producing.

There are a couple of possibilities arising from the potential revenue shortfall. One is a possible project rationalisation. Some projects could become victims of these developing scenarios in the sense that they would be sacrificed in place of others. How that would be done is up to the authorities who know the criteria on which the projects or programmes were included in the first place.

These developments are teaching us a lesson in economic planning and development. In 2025, Nigeria should not be predominantly dependent on crude oil exports. Successive administrations have announced elaborate programmes for the diversification of the nation’s economy to reduce its dependence on crude oil exports. Despite the fanfare with which such programmes have been conceived and launched, the country is still stuck in a precarious situation that makes it vulnerable to the type of development currently sweeping through the world.

The Trump Effect will impact the countries that America has slammed with the tariffs, even after the negotiations planned to hold over 90 days. But the effects will not be the same in all affected countries. The difference will come from their levels of development; those with strong domestic manufacturing bases will experience lower levels of disruption. Their domestic production capabilities will enable them to absorb the impacts. This is unlike in the case of Nigeria, where we will feel the pinch of reductions in our exports, which are largely raw, unprocessed commodities with low value additions.

Even in the oil and gas industry, how much progress have we made? Until the coming of the Dangote Refinery, Nigeria had relied almost exclusively on imported refined petroleum products. This is even though the country has been producing oil since 1957. Since then, successive administrations have paid lip service to the issue of developing the local oil industry to the point of it being able to refine locally on a sustainable basis. Now, we are coming face to face with the consequences of our failures.