Nigeria’s Budget Deficit Hits N12.95tn in 2024, Overshooting Estimates by 41%: 2025 Budget Set to Follow the Same Path

Nigeria’s budgetary deficit increased to 12.95 Billion de Nairas in 2024, exceeding the government’s projection of 41%, because income defects and the increase in expenditure expanded the budgetary difference.

This figure, captured in the quarterly economic reports of the Central Bank of Nigeria (CBN), reflects an increase of 0.77% in annual shift compared to the deficit of 11.85 Billions of Nairas recorded in 2023, strengthening the concerns concerning the deterioration of the country’s budgetary balance.

The government initially budgeted a deficit of 9.16 Billions of Nairas in 2024, but at the end of the year, this objective had exceeded considerably. Despite the efforts to fill the ditch by borrowing and budgetary adjustments, pressures on spending and the low income collection allowed the deficit to have remained persistent.

Total expenses for 2024 amounted to 21.5 Billions of Nairas, marking an increase of 12% compared to 19.19 Billion de Nairas in 2023. Despite this increase, the expenses were still 25.2% lower than those of 28.76 Billions of budgetary nairas for the year, reflecting the constraints of expenses caused by income shortages. While revenues increased significantly, from 34.8% to 8.55 Billions of Nairas against 6.34 Billions in 2023, it remained 56% lower than the objective of the government of 19.56 Billion de Nairas. These sub-performative income aggravated the budgetary difference, while spending continued to exceed income.

The CBN’s economic report of T4 2024 shows that public spending has increased in the fourth quarter due to higher personnel costs and interest payments on debt. Recurring expenses have dominated, representing 75.13% of total spending, while capital expenditure has not been 17.1%, which highlights a limited investment in infrastructure. Transfer payments were 7.77% of the total budget. The data also reveals that staff costs increased by 23.31% in the fourth quarter of 2024, while payments of interest increased by 6.98%, highlighting the increasing debt burden of Nigeria.

While the budget deficit was slightly reduced to the fourth quarter of 2024, the figures remain disturbing. According to the CBN, the primary deficit dropped by 22.62% quarter on a quarter, while the overall deficit decreased by 3.61% to 3.08 Billions of Nairas. The improvement was due to a modest increase in income that exceeded the growth in spending. However, despite this marginal improvement, the government remains considerably smuggled in the realization of its budgetary projections.

In this context, the National Assembly, in December, approved the extension of the life of the 2024 budget until June 2025, a decision to ensure the continuity of budgetary operations and the uninterrupted execution of critical government projects.

2025 budget to follow the same path

The Nigeria budget in 2025 also providing for a deficit of 14 Billions of Nairas, the concerns increased according to which the budgetary crisis will continue, especially since the assumptions underlying the budget are considered too optimistic by economic analysts.

In December 2024, President Bola Ahmed Tinubu presented a budget proposal of 49.7 Billions of Nairas to the National Assembly, emphasizing the daring economic objectives, including a spectacular reduction in inflation and stabilization of Naira.

During his speech, Tinubu provided a sharp drop in inflation of 34.6% at the time of 15% in 2025, as well as an improvement in the exchange rate of approximately 1,700 N per US dollar at 1,500 N.

“This is an ambitious budget but necessary to guarantee our future,” said Tinubu during his presentation. “The inflation of budgetary projects will go from the current rate of 34.6% to 15% next year, while the exchange rate will improve around 1,700 nairas per US dollar to 1,500 nairas, and a basic crude oil production hypothesis of 2.06 million barrels per day.”

While the government’s objectives report optimism, many economic analysts are skeptical, warning that these projections are based on unrealistic hypotheses and do not take into account the economic volatility of Nigeria.

Several key hypotheses in the 2025 budget increase the concerns that the deficit will probably exceed projections, as in 2024. Inflation was 34.6% when the budget was presented, and the government expects it to drop to 15% in one year. Given the continuous weakness of Naira, the high food prices and the increase in the cost of living, analysts believe that a rapid drop is improbable.

The budget assumes that the Nairas will appreciate 1,500 N per US dollar from level N1 700 recorded at the end of 2024. However, the foreign exchange and low -dollars’ entries poses serious challenges to achieve this objective. Continuous CBN interventions on the FX market and Nigeria’s dependence on oil profits, which have been decreasing over the years due to low oil production, could further suppress reserves.

The crude oil production hypothesis of 2.06 million barrels per day is also considered too optimistic. Nigeria is still struggling to respond to its OPEC production quota, oil production fluctuating around 1.3 to 1.5 million barrels per day in 2024 due to oil flight, pipeline vandalism and operational ineffectures. If production remains below the target, income deficits will get worse, pushing the higher deficit.

The 2024 budget deficit was partly funded by the loan, including the plans announced in November 2024 to issue $ 1.7 billion euros. Nigeria’s public debt already exceeding 97 Billions of Nairas at the end of 2024, analysts warn that excessive loans could push the country into an unbearable debt crisis.

They added that less that structural economic reforms are implemented to increase non -oil income, improve tax compliance and improve expenditure efficiency, Nigeria’s budgetary deficits are likely to persist, deepening the country’s financial challenges.