The naira‘s sharp decline poses serious problems for the Nigerian government’s 2025 budget plan. The exchange rate is set at ₦1,400 to $1 in the proposed budget, which is a significant depreciation from the rate of ₦800 to $1 in the prior year.
The depreciation of the naira is reflected in this adjustment, as unofficial market rates have dropped as low as ₦1,700 to $1.
The 2025–2027 Medium-Term Expenditure Framework (MTEF), which forecasts oil prices at $75 per barrel and output levels of 2.06 million barrels per day, has drawn criticism from economists for its overly optimistic assumptions.
A more cautious forecast is provided by Fitch Ratings, which projects 1.77 million barrels of oil per day at oil prices of $70 per barrel.
The agency cautions that if deficit reduction goals are not met, economic reforms may be undermined as the naira depreciates further, inflation increases, and interest rates rise.
Numerous industries have already been affected by the devaluation, most notably the technology sector, where companies now have to deal with higher operating expenses and less foreign investment.
Analysts warn that the 2025 budget’s aggressive growth estimates could not be achievable if structural economic problems including an excessive reliance on imports and fiscal inefficiencies are not addressed.
In conclusion, the devaluation of the naira poses a serious challenge to effectively executing Nigeria’s fiscal strategy for 2025, with possible outcomes including elevated inflation, higher debt servicing expenses, and unstable economic conditions.
