As analysts continue to fault the 15 per cent projected inflation rate in the proposed 2025 budget, describing it as overly ambitious, indications emerged at the weekend that the federal government may have predicated its decision on many factors, including the belief that security has improved, leading to higher oil and food production.
Although latest data from the National Bureau of Statistics (NBS) put the inflation figure at 34.6 per cent, the federal government, in the N49.7 trillion proposed 2025 budget currently before the National Assembly, based on an inflation rate of 15 per cent.
Giving a hint on why the government may have decided to predicate the inflation rate at less than half of the current rate in 2025, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun disclosed at the weekend that the recently improved national security had led to increased output by farmers as well as a boost in oil production, some of the critical factors that drive inflation.
Edun spoke during the Citizens and Stakeholders’ Engagement on the Implementation of Presidential Priorities and Ministerial Deliverables for the Fourth Quarter of 2024, in Abuja.
A top presidency official who also spoke with THISDAY on the sideline of the event, underscored government’s optimism that with improvement in security, leading to a boost in farm output next year as well as increased oil production significantly impacting government revenues positively, inflation will reduce drastically.
The official who preferred anonymity stated that enhanced security measures in 2024 were expected to lead to a bumper harvest in 2025, driving down food prices and reducing reliance on food imports.
This, he argued, would ease inflationary pressures, particularly in the food segment, which significantly influences the overall inflation rate.
He also alluded to increased local refining capacity as one of the optimistic considerations behind predicating the 2025 budget on an inflation rate of 15 per cent.
“The commencement of domestic production of refined petroleum products will reduce the demand for foreign exchange (forex) to import these products.
“Additionally, increased exports of refined products will boost foreign exchange earnings, further stabilising the currency, he said.
According to him, higher oil production and cost efficiencies will also play a critical role in driving inflation.
A projected increase in oil output, coupled with substantial reductions in upstream production costs, will enhance revenue generation and improve Nigeria’s forex reserves, he noted.
He explained that increased foreign portfolio inflows arising from improved macroeconomic stability and favourable policies were expected to attract greater foreign portfolio investments, leading to a higher supply of forex.
“This will ease pressure on the exchange rate, contributing to lower imported inflation,” he added.
While presenting the 2025 Appropriation Bill to the National Assembly, President Bola Tinubu had
stated that fiscal parameters and revenue projections in the 2025 proposed budget were based on: Reduced importation of petroleum products alongside increased export of finished petroleum products; bumper harvests, driven by enhanced security, reducing reliance on food imports; increased foreign exchange inflows through Foreign Portfolio Investments; higher crude oil output and exports, coupled with a substantial reduction in upstream oil and gas production costs.
However, while the government is upbeat about the 15 per cent inflation rate projection, some analysts and private sector players consider the figure too ambitious and unrealistic.
Ndubuisi Francis
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