Reasons the Federal Government of Nigeria projected a 15 per cent inflationary rate in the proposed 2025 budget have been revealed.
Though many analysts have described the motive of the Government as overly ambitious, the FG has remained optimistic.
According to the sources, the Federal Government may have predicated its decision on many factors. These, the sources said included the belief that security in the country has improved, leading to higher oil and food production.
Recall that the latest data from the National Bureau of Statistics, NBS, put the inflation figure at 34.6 per cent. However, the Federal Government, in the proposed 2025 Budget presented a N49.7 trillion. The Budget, which is currently before the National Assembly, is based on an inflationary rate of 15 per cent.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun at the weekend disclosed the FG’s motive for the 15 percent.
Edun pointed to the recently improved national security, which has led to increased output by farmers. As well as a boost in oil production, some of the critical factors that drive inflation.
The Minister made the disclosure during the Citizens and Stakeholders’ Engagement on the Implementation of Presidential Priorities and Ministerial Deliverables for the Fourth Quarter of 2024, in Abuja.
Also, a top presidency official who spoke with THISDAY on the sideline of the event, underscored government’s optimism. He noted the improvement in security, leading to a boost in farm output next year. As well as increased oil production significantly impacting government revenues positively. He noted that these factors that 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. It would also drive down food prices and reducing reliance on food imports.
The source argued, that these 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 stabilizing the currency, he said.
He noted that higher oil production and cost efficiencies will also play a critical role in driving inflation.
According to him, 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 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.
Recall that 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 some factors. These include, reduced importation of petroleum products alongside increased export of finished petroleum products. Bumper harvests, driven by enhanced security and reduction in reliance on food imports and 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.
source: ThisDay
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